When it comes to maximizing surplus, monopolies are NOT the way to go. Because they can restrict quality or quantity, they frequently supply less stuff at higher prices, and consumers suffer.

It is thus suspicious that the Los Angeles Department of Water and Power wants to get into the solar business, not just by building generating capacity but also by cornering the market for installing rooftop solar. One civic group calls attention to this “power grab” [pun!]:

Measure B would authorize [LADWP] to build 400 megawatts’ worth of solar photovoltaics on land and rooftops inside the city. That is enough energy to power 240,000 homes, and the solar panels would cover about 900 acres of warehouse rooftops, parking lots and unused rights of way.

Is utility-owned solar generation a good idea? Utilities are large players in the electricity world, and having them involved can potentially bring enormous economies of scale to the solar industry. Organized labor’s support for Measure B brings a powerful political constituency to help make solar happen in DWP territory, where it has long been delayed. But many worry that utilities can assert monopolistic control over wires and leverage their enormous market power to crowd out smaller solar installers and ultimately stifle the industry. In the case of Measure B, some believe that private solar companies, with deep expertise honed in a competitive environment, can provide the same solar service more cheaply than the DWP.

As it happens, several other utilities across the country have already announced programs similar to Measure B. My organization has intervened in several of the proceedings with a clear remedy: Allow utility-owned solar generation, but only on the conditions that markets are kept open for competition from private developers and customers are free to go solar on their own. The best way to mitigate the potential downsides of utilities getting into the solar business is to ensure that markets stay open for all business models.

Note the interesting twist. LADWP has union support for their plan because LADWP is going to give a piece of the action to the unions. (I know someone involved on the Measure B PR campaign; the unions have bent over backwards to provide free labor, smooth permits, etc.)

It appears that voters have rejected Measure B by a narrow margin. Bravo!

Bottom Line: The power grab by LADWP and the unions will result in less solar installed at higher prices. Too bad for consumers, too bad for the environment.