September 19, 2011 4:06PM

Electric Power in Montgomery County: Spot the Fallacy

Some politicians in Montgomery County, Md. want the county government to take over the provision of electric power from the private Potomac Electric Power Co. (Pepco). One councilman quoted in the D.C. Examiner seems to think the killer argument is that money laid out by the county government has no opportunity cost:

“Pepco pays out … $200 million in dividends,” said Councilman Marc Elrich, D‐​at large. “If I’m not paying shareholders dividends, I have $200 million I can invest in infrastructure.”

Surely Councilman Elrich’s insight is too profound to confine to the utility business alone. It suggests that the government — enjoying, it seems, the power to lay out taxpayer dollars with Greece‐​like insouciance about boring old concepts like “return on investment” — could do better than dividend‐​paying corporations at almost any business. Why not have it take over the running of fast‐​food restaurants and dry cleaners too?

As it happens, Pepco has been the target of consumer anger in recent years in considerable part because windstorms in its service area have resulted in prolonged and costly outages. And in the suburbanized Northeast, at least, one of the single most important predictors of severe windstorm outages is the extent to which utilities trim back trees near power lines: well‐​off counties like Montgomery that prize a leafier, more natural tree canopy pay the price in occasional electric interruption, a phenomenon likewise seen in places like Greenwich, Ct.

So who’s led the opposition in the past when Pepco has tried to accelerate cutting? You guessed it:

Councilman Marc Elrich (D‐​at large) says he is considering legislation to stop widespread tree‐​cutting by Pepco.

There is perhaps no single right way of resolving the trade‐​offs here, but demagoguing the issue up one side of the street and down the other is almost certainly the wrong way.