CONSUMER SAVINGS: $3.6 BILLION/YEAR

However, the EIC proposal is not a federal pork barrel. It could be economically attractive to both utilities and process-steam producers, with substantial benefits to the consumer. Utilities throughout the country face enormous problems in raising capital. They must finance some $300 billion of new construction over the next decade, but are shackled by heavily politicized regulatory commissions whose popularity depends on low rates now, even if the power runs out later. The utilities would welcome help with additional generating capacity.

For the 43% of the process steam producers where by-product power generation is economically feasible, the savings achieved by electrical self-sufficiency alone would be in the area of 20% return on investment; in addition, they could sell surplus power to the utilities.

Due to the savings in both capital and operating costs, residential rates could be from 5 to 8% lower, and when the savings via lower rates in the commercial and industrial sectors are considered, the total consumer saving would amount to $3.6 billion a year.

And finally, what to many readers will be the punchline of the entire study: The system would introduce substantially increased competition into electric power generation. Independently owned power sources would, of course, produce power at lower cost than utilities saddled with regulators. In many cases, they could choose to sell to this or that utility, and in all cases, a utility could choose to buy from this or that producer and the rest is the old story of how the profit motive ultimately protects the consumer, while the regulator damages him by protecting inefficiency.

There is, in fact, only one obvious loser, and that is the regulatory bureaucracy; it may safely be assumed that they will fight the scheme tooth and nail.

Is all this a utopian hallucination by a bunch of demented professors?

Hardly. The report is the work of many people, supervised by a committee of economists and experts from both utilities and industry, under the chairmanship of P.W. McCracken, a former presidential adviser. The economic work was done, among others, by Alan Greenspan (before he left for the White House), and the Director of the NEP, Prof. E.J. Mitchell of the U. of Michigan, a free marketeer well known to our readers (AtE Dec.74).

A 32-page brochure summarizing the EIC Study, Toward Economy in Electric Power by E.J. Mitchell and P.R. Chaffetz, is just out. $2 from AEI, 1150 17th St. N.W., Washington, DC 20036.