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Sunday, November 11, 2012

So you want to become socialist?

All you Americans who voted to go socialist, listen up. This is the sort of thing to which you can look forward.

Meet the Israel Electric Company. The Israel Electric Company is our national utility - nearly everyone gets their electricity from Israel Electric. It's a 'government company,' which means that the government is the largest shareholder in it. In the case of the Electric Company, the government owns 99.85%.

Israel Electric has two distinguishing factors: First, its employees are among the highest paid in the country, with an average monthly salary of NIS 24,025, or a bit more than $6,000 per month (not counting benefits) at today's exchange rate. Second, in addition to its relatively high salaries, Israel Electric gives another huge benefit: free electricity. No, not 1,000 kilowatt hours per month free or something like that, but totally free, unlimited electricity. So no gas or oil in those people's houses. All 12,489 of them.

And there's a third distinguishing factor: They're going broke (link in Hebrew). With an existing debt of NIS 65 billion, it seems that Israel Electric has negative cash flow of NIS 1.4 billion, and is demanding that the government - which has allowed Israel Electric to raise its rates by 30% this year - kick in NIS 1-1.5 billion to 'fix' its balance sheet. And no, they're not willing to give up anything in return. Not even the free electricity for all 12,489 employees or any part of it. So the Finance Ministry is refusing to bail them out.

Back in the 1940's, George Orwell wrote a book called Animal Farm, in which the animals did fine being equal until some decided they wanted to be more equal than the others. That's when things fell apart.

Here in Israel, some animals have been more equal than the others for a long time, and that's why many of us have been fighting to get rid of the vestiges of socialism. Israel Electric Company is now an anomaly in our economy. Most of the other government companies were privatized, at least to some extent, a long time ago.

But by 2016, there may be lots of Israel Electric Company's in the US economy, with thousands of employees who believe that they are more equal than everyone else. And then you can pay tax rates like ours too - we are consistently the last, or one of the last, countries to reach Tax Freedom Day each year.

What could go wrong?

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At 5:55 AM, Blogger aif said...

In the US bulk of electric utilities are "regulated monopolies" which are market traded but operate essentially at the same level of efficiency as IEC. Majority is unionized and provide good benefits to employees, including some having free electricity. In the utility I work for the union has 50% free electricity. So your example wouldn't surprise Americans.
Also, note that "natural monopolies" like electric utilities are operated as "regulated "monopolies in all developed countries: hope you are familiar with PUCs and what they do. So my advice to you - please stop talking about things that you don't have sufficient expertise, as IEC.

At 3:13 PM, Blogger Empress Trudy said...

In France not only are many industries nationalized but they're handed over to specific political parties to run as they see fit. For years the French Communists have run the electric company and low and behold, even with their much vaunted wide scale use of nuclear power, French customers pay about 3x the median rate in Europe.

At 3:27 PM, Blogger Sunlight said...

Well, the people who get their paycheck and "benefits" from these public utilities actually support the ruling group that wants "natural" monopolies (nothing "natural" about them... just the dictators delegitimizing competitive enterprise)... they will publicly attack the individuals who want a more competitive system... attack them personally, rather than actually addressing the issue.

At 1:21 AM, Blogger aif said...

Sunlight: again, you also speculate without knowledge. "Natural monopoly" IS a justified definition regarding energy providers: due to the centralized nature of today's electric grids it is difficult to impossible to properly privitize them and create energy market - that's why so far these attempts in England, US and other places first resulted in huge rate increases to customers and then, as a consequence, return to a centralized utility structure.
What neither you nor Carl understand is the government and enviro's meddling in energy, with their stupid activist push for "green energy" etc. - and this really costs a lot of money and causes inefficiencies.

At 3:34 AM, Blogger Sunlight said...

Here's how the "natural monopoly" works. I worked with a company once that had figured out how to install natural gas generators next to manufacturing plants for UPS and to cut back on peak expenses. We found a bunch of customers and some generators were installed, some were pending on the schedule. Several investors who wanted to do manufacturing in small, poverty stricken areas (jobs! rather than govt welfare check$!) designed the "cogeneration" (as it was called back then) into their business plan and started construction. When the "natural monopoly" electric company realized what was happening, they went to the utility commission with a plan to "acquire" the gas company. The commission approved it and forced the gas company to accept it. The minute the acquisition was finalized, the "gas and electric" company raised the price of the gas to where it busted the business model of the manufacturers using cogeneration. Several of them went out of business. The remote ones were cancelled (allowing the govt to OWN those people out there with no jobs). The energy sales went down, not up, and the customer base's rates went through the roof to make up for the busted businesses not buying energy. I'd rather take my chances with subscriptions, local special assessment districts, etc. than to have the monster masterminds picking winners and losers, rewarding the "in crowd", and oppressing the poor. And that doesn't even touch on the issues Israel has with Unions on top of all these other kinds of machinations. It's WAY more than just the Green Slush issue. It is rot at the roots. The term "Natural Monopoly" is a dictator term.

At 7:17 AM, Blogger mrzee said...

I've also heard that the IEC effectively provides free electricity to the PA. It isn't supposed to be free but the PA just never pays


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