“Boris Chinrencov, I am told you speak English.”
“Dada was translator at UN in New York, long ago.”
“I’m Bore Hire, an American utility regulation consultant. I have traveled here to learn about central planning from you.”
“What do you expect to learn from old communist apparatchik like me?”
“You see, we have begun Soviet-style central planning in America for energy. We are forcing people to use certain kinds of light bulbs and appliances. We subsidize renewable power. We now have a war on carbon to get consumers to change their ways.
You were a Commissar for tractor production for thirty years. We wish to know why your central planning failed so we can make it work better in America. We don’t have complete political control of energy yet, but we are already having problems.”
“Why failed? Dis I know much. We had no profit and loss system to tell us what to produce or how to operate. We had no idea how to price. Manager for paper plant had connections in Moscow so we valued paper more than steel – poor quality paper at that. All numbers on cost arbitrary anyway so accounting reports provide wrong management information. All decisions must consider politics. Corruption much. We punish some, but problem is system, not people. In late stages everyone is corrupt. Then system collapses.
“When we plan to build new factory we do not know if it should make big tractors or little ones or even if should build truck factory instead. We plan for big production numbers, but sometimes quality so bad tractors rust in field beside factory. Much waste but make goals. Good for me.”
“But weren’t you advised by experts who studied the situation and presented the facts to you?”
“Nyet, all facts not known and cannot be known; also facts change. Many scattered people have knowledge of thousands of facts that could not be gathered no matter how much experts study and analyze. If technical experts could make better decisions about how to use resources better than the people who created resources, world communism still be in business. Experts just making assertions about what we Commissars wish to hear.”
“Yes we are encountering that problem in America also. How do we keep political considerations out of our central planning for energy utilities?”
“Bore, central planning is politics. Some market terms used to give legitimacy to process but cannot play business when whim of authorities overrules all else. Each problem that arises calls for more government action until control is complete and disaster follows. Russia trying to get rid of central planning; things better now. Why America want to do what not work?”
“Oh, we plan to make it work. We have very good planners, some from the best universities. And our politicians are committed to doing the right thing. Many private foundations say we are doing the right thing too.
We are ready to force consumers to do what is best for them no matter what.”
“Ah, now I know I have lived too long. Rest of world tries to privatize and adopt market conditions, but haven of capitalism goes other way with energy. Dis I would not have guessed.”
A few weeks later.
“Boris Chinrencov, Bore Hire here. I have some more questions for you. Do you remember me?”
“Da. You are earnest young man from America who wishes to try to make central planning for energy so it will work.”
“Yes, and we are having trouble. We need your advice as a former Soviet central planner.
“You see we want to have our electric utilities invest in efficiency instead of power generating plants. However, the utilities and the customers game the system. The utilities don’t really want to reduce sales, they just want to get credit for efficiency improvements that are taking place naturally.
“Customer want to get rebates for energy saving measures they were going to make anyway. These energy efficiency projects are brought to the utility by contractors. When a customer engages a contractor that is pretty sure evidence the efficiency measure decision is already made. And the utility rebates are not enough to really drive equipment change-outs. The utility just wants to throw a couple of bucks into the project so it can claim the savings which were going to happen anyway. The utility charges enormous overhead and profit that are fully recovered from customers.”
“We are also mandating the use of solar and wind energy, but the corruption surrounding these favored generators is getting out of hand. Those in the renewables business either already have political connections, or they make connections when they get into the business.
“So my question to you, as an experienced planner, is how do we fix this and make central energy planning really work.”
“Young man, I do not always know the meanings of your American sayings. But there is one I think I understand. It goes something like this: You should find ten-foot limb to carry which you will use not to touch things with.”
“But, don’t we need some kind of energy policy?”
“As you say in America, there are two skins for the cat.”
“Er… not exactly…”
“One way is to have government policy; other way is for each individual and business have their own energy policies.”
“Hey, that sounds pretty good, it might work.”
“I get idea from how America used to work.”
“Planning not rational as claimed, interest groups pull ropes, mandates disrupt markets like large cow in store that sells dishes made in China, as you say in America. Results are disaster by government planning, just not as noticeable as in old Soviet Union because you have strong somewhat free economy to afford such mistakes.
“My advice: have no such programs, send proper price signals and let market work. You cannot know what is best use of each consumer’s money. Do not try.”
Excellent post. I especially agree with the comments about DSM programs. DSM programs (and energy efficiency in general) are actually even worse crony capitalist boondoggles than are wind energy and solar PV, but the DSM programs generally fly under the radar.