Corruption, and the rule of unintended consequences


Compos Mentis

This column is to create a forum for ideas, passions and perspectives on our industry that are controversial, provocative and energising. The views expressed here may be unpopular, politically incorrect, heretical or simply humorous. They may be ideas that all of us have had but didn’t care (or dare) to articulate. The opinions expressed are those of the author alone, but are probably shared by many who have yet to say so.

By Compos Mentis

Corrupt influence is itself the perennial spring of all prodigality, and of all disorder; it loads us more than millions of debt; takes away vigour from our arms, wisdom from our councils, and every shadow of authority and credit from the most venerable parts of our constitution. – Edmund Burke (1729-1797), Irish orator, philosopher and politician

Money corrupts! Well, not quite. More accurately, it is the prospect of getting easy money that corrupts. One has only to look at bank robbers, corrupt politicians, corrupt police, corrupt judges and corrupt utilities to see that. Corrupt utilities you say? Please explain that!

OK. Consider corrupt police, politician and judges. Easy money has caused them to do something different to what they would have done if there had not been the prospect of easy money, something that distorts their value to the society they are pledged to serve. It alters their normal, natural and correct behaviour.

Similarly, can easy money cause utilities to act differently to what they would have done if there had there not been the prospect of easy money? Yes… and it is! Just look at the reaction of utilities in the US to the prospect of the US government giving out billions of dollars in “stimulus” money!

There is a stampede in Washington, DC. Each of almost 3,000 electric utilities is looking for some way to get their “piece of the pie”. Pilot programmes, demonstration projects, smart grid initiatives, strategic plans, are all being polished up, re-done, dusted off or reinvented in some way so that these plans and programmes can be submitted to receive government funding. In this way they will appear to be more responsive to a hastily contrived government vision of what utilities should be doing, and thus more likely to be funded. Paint it purple – if purple sells. Call it “smart something” and it will sell better.

I do have some sympathy for this. After all, how do I, if I am a utility, explain to my customers, my shareholders, or my Board of Directors that while the US federal government was giving away billions of dollars I did nothing to get any? What if I didn’t go after my “piece of the pie?” No, politically speaking, I have to go after the money so I can at least say, “I tried”. I must stop what I was doing, recast my planning and budgeting, and go stand in line for a government handout. If I do get the government grant money I must then fit my programme to meet government requirements, and follow government reporting and audit guidelines. If I don’t get money I at least do get some credit for trying. But to do nothing is politically unacceptable.

Speak to any AMI system vendor about the effect of stimulus money. Is it speeding up the smart grid? Is it creating new jobs? Or is it actually slowing things down, in a massively expensive distraction? Many vendors will tell you that the unintended consequence of the federal money give-away has been to significantly delay some AMI and smart grid projects that otherwise would be much farther along by now. The possibility of government subsidy has brought many projects to a screeching halt while the utility tries to figure out how to reshape the project to appeal to the government. That is the corruption I referred to… the corruption of high momentum, well designed AMI projects. The goal changes. It now becomes manipulating these otherwise well-conceived efforts as part of a pervasive financial feeding frenzy, the corrupting quest for easy money.

Do I blame the utilities for chasing the money? No. If the money is there, it is hard to offer a good reason for not going after it. But we saw Ford decide not to accept US government money, even as General Motors and Chrysler sold their souls in accepting bailout money. Were they corrupted by the easy money? That money may come with a huge cost in unintended consequences! History will show.

Do I have a better idea? Well, only that it might be better if the government would stay out of the utilities’ business and would instead concentrate on ensuring a business and investment climate in which utilities can make well conceived long range investments and reliably secure recovery through rates. The industry can and should fund its own technology development and demonstration independently, through EPRI, in various utility trade associations having R&D arms, by cooperative developments between utilities and collaborations with suppliers. This is very touchy politically, but the camel’s nose (government) keeps sliding further under the wall of the tent (our industry). Pretty soon the whole camel is in the tent, asleep next to us, and it may roll over… or it may get up and walk away, dragging the tent with it.