Decolonization Series: “Upcharge: Hidden Costs of Monopoly Utilities” Report
by Lauren Ballesteros-Watanabe, Chapter Organizer | Reading time: 4.5 minutes
For over a century, Hawaiʻi has been at the mercy of a virtual monopoly utility, with a legacy of dirty and clean energy projects in low-income and working class communities—disproportionately impacting indigenous and people of color. While improvements, such as performance-based incentives, aim to reduce the influence of profit-driven motives, these changes have only been achieved through regulation and advocacy. Despite these efforts, the corporate-owned model persists, resulting in consistently high energy costs and the imposition of centralized, industrial-scale renewable energy projects creating a preventable tension between our energy needs and natural resources. As the climate crisis intensifies, the need to move away from fossil fuels towards a localized clean energy future has never been more urgent.
Recently, the tech research nonprofit Institute for Local Self-Reliance (ILSR) issued "Upcharge: Hidden Costs of Electric Utility Monopoly Power." The report highlights the hidden costs of electric utility monopoly power and proposes a path forward that aligns with our ongoing work to put justice and equity at the center of the energy transition. Having an investor-owned utility controlling our energy future continues to make this an uphill battle.
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ISLR’s report offers a deep dive into the problems associated with the 100-year-old model that grants private companies exclusive power over the public resource of electricity—and calls for structural reforms to restore competition and equilibrium to the sector. The following is a summary:
Electric utilities in the United States operate under a platform monopoly, where private, investor-owned companies are granted exclusive rights to distribute electricity within specific geographic areas. These monopolies have caused significant harm to the climate, driven up consumer costs, and undermined the democratic process.
The report uproots the historical context of these monopolies, tracing their roots back to the early 20th century when electricity was deemed a natural monopoly due to the high costs and inefficiencies of competing grids. However, as technology and societal needs have evolved, the justification for these monopolies has eroded, leaving behind a system rife with abuse and inefficiency.
Highlights:
Utilities Slow Climate Progress: Monopoly utilities have stymied the growth of clean energy, which threatens their market share and profits. By blocking or delaying the adoption of renewable energy sources, utilities have contributed to ongoing climate damage. They have used their political influence to resist state-level clean energy policies and have actively funded campaigns that sow doubt about climate science.
Inflated Energy Costs: The monopoly model allows utilities to overcharge customers, inflating energy costs by as much as $20 billion per year. This overcharging is facilitated by a "cost plus" regulatory model that rewards utilities for capital investments, regardless of their necessity or efficiency. As a result, utilities often prefer expensive, large-scale infrastructure projects over more cost-effective solutions like distributed energy resources.
Health and Environmental Impacts: The reliance on fossil fuels by these utilities has severe health consequences, particularly for communities of color and low-income households. The report estimates that the health costs associated with fossil fuel pollution are on par with the total cost of electricity in the US each year, contributing to premature deaths, respiratory illnesses, and other health issues.
Political Corruption and Regulatory Capture: Utilities have used their vast financial resources to corrupt the political process, engaging in unethical and often illegal activities to maintain their monopolies. From bribery scandals to influencing state and federal regulators, utilities have prioritized their profits over public welfare. The revolving door between regulators and the industry exacerbates this problem, leading to lax oversight and accountability.
Disproportionate Impact on Vulnerable Communities: The report highlights how utilities underinvest in infrastructure in low-income and non-white communities, leading to more frequent and prolonged power outages. These communities also face higher energy burdens, as utilities are more likely to cut off service to customers who struggle to pay their bills. The systemic nature of these issues is rooted in historical injustices, such as redlining and discriminatory housing practices.
Recommendations:
The report calls for a three-step restructuring of the electricity sector to address these problems:
Mandate Competition: Introduce competition in all parts of the electricity system that are not natural monopolies, such as power generation and ancillary services. This would include enforcing antitrust laws to break up monopoly utility companies.
Operate the Grid as a Commons: Shift the operation of transmission and distribution infrastructure to public, non-profit, or cooperative entities that are accountable to the public, not shareholders. This would prevent the current abuse of the grid as a tool to hinder competition.
Repair Historic Harms: Prioritize justice by ensuring that communities historically harmed by the monopoly utility model, particularly Black, Indigenous, and low-income communities, receive targeted investments and support. This includes financing for clean energy projects that reduce energy costs and improve resilience.
Hawaiʻi stands at a critical juncture. The continued dominance of a for-profit utility monopoly threatens not only the state's environmental and economic future but also the place-based cultural values in our natural resources that have sustained its people for generations. By embracing the recommendations outlined in the Upcharge report, we can reclaim control of its energy system and chart a course toward a more equitable and sustainable future. Like all of the grassroots transformation that we do, this change will require courage, collective action, and a deep commitment to the principles of aloha ʻāina, but the rewards—a cleaner, fairer, and more resilient Hawaiʻi—are well worth the effort.
Credit: Energy Democracy Project "Reimagining Energy for Our Communities" zine.