Most of us have heard the term, “voodoo economics” batted around in political circles, but for many of us, economics itself is a form of voodoo. One would think that the opposite would be true; that the study of buying and selling would be easy to understand. After all, the transactions involved in commerce are overwhelmingly those of addition, subtraction and division. The forty dollars I paid this weekend for pasta and tomato sauce divided by two people is greater than that same forty dollars divided by 10 frozen dinners. The frozen dinners are more “economical,” especially if you consider the bargain price you pay for multi-syllabic chemical additives, but they are certainly not as tasty as our favorite Italian restaurant, nor as healthy.
Nevertheless, though economics considers transactions involving basic math, the theories about those transactions are anything but basic. Keynesian, Post-Keynesian, Consumer Theory, Value Theory, The Austrian School and Time-Based Economics: these are but a few of the many, and in the process of explaining the simple process of buying and selling we have moved from simple math to statistical analysis and beyond, into the mystical realm of human psychology.
Yet few if any of us pause to consider whether the Keynesians or the Austrians are to blame when it takes 50 bucks to fill the gas tank or when the power company raises it rates. In fact, the recent rate hike by Blue Ridge Mountain EMC has caused quite a stir in our local communities and there is plenty of blame, most of it directed at the power company. Some of the theories as to the reasons for this rate increase would make a Keynesian blush. I took some time this weekend to examine the numbers behind this rate hike.
Looking at the power company’s own statistics, it appears that they have joined a growing number of Americans including our national government, our state government, hundreds of thousands of banks and corporations, millions of small businesses and tens of millions of American citizens in that their debt to income ratio has grown to an unsustainable level. How did this happen?
Again, the numbers tell the story, and the culprit isn’t the new facility they are building, which has been a favorite target for some. That project will add a whopping $1.49 to the average electric bill. The “culprit,” in fact, is the unplanned and unregulated growth which we have railed against in this column for years, and the story of how that happened is a familiar one to our readers.
We have a relatively low population density in our area compared to many other parts of the state. Our residents are spread out over a large area on terrain that is often difficult to access. Consider the number of trophy homes perched on steep inclines or on ridge tops that no fire truck will ever reach. Consider the house tucked away at the end of a long and winding pig trail that the county will never pave, yet the power company is required by law to provide electricity to each and every outpost in their service area. Multiply the number of pretentious perches and pig-trail palaces by the number of years we allowed, in fact encouraged, unregulated growth in this area. Factor in the often overlooked fact that it usually takes decades for a power company to recoup the costs of providing service to that floodlight we see glaring out from the top of the mountain. Can you do the math?
When it is all said and done and no matter how the numbers are presented, there will still be some who prefer to understand current events in terms of conspiracy or malfeasance. There is a simple answer to those accusations, and I found the numbers on a website provided by the Georgia Public Service Commission at http://www.psc.state.ga.us/electric/surveys/2010/allprowin10.asp. This website compares rates for all electricity providers in the state of Georgia and the most recent comparisons are for the winter of 2010. In the 1000 to 1500 KWh range, the cost of electricity in our area was the 17th cheapest in the state. There were 77 electric providers that were more expensive. If you add our recent 6% rate increase, we are still well within the top third for cheapest electric rates, and by the time the next numbers are published, many electric providers will have raised their rates as well, including a likely 10% increase by Georgia Power.
Think about that for a moment. With a lower population density over the most extreme terrain in the state, even with the rate increase our EMC provides power at a rate that is cheaper than what most Georgian’s pay. According to the math I learned in school, this means that they are doing their job more efficiently than most of their peers. Look at the numbers for yourself, and if you still want to punish the power company, you might try turning off those floodlights.
