It is a travesty that when it comes to power and water services, the Guam Power Authority and Guam Waterworks Authority do not allow competition. Monopolies, mandated by law, stifle innovation and creativity in anything – including salaries and benefits – and thus increase prices. We never stop to realize that it is the lowest guy on the totem pole who gets hit disproportionately harder wherever there is a mandated monopoly.
In a prior gubernatorial administration, on Guam, the prime vendor/base operating services contractor for the Navy had been given the responsibility to replace all the water and sewer pipes on the island – their price was $400 million over time and could start in less than a year. But the government of Guam could not stand to have someone else solve our problems and our elected officials said that we can do it ourselves just as quickly. Say what? How many times have water/sewer costs gone up since then and we still have a lot of leaky pipes?
Today, I was looking at home security systems and the thought occurred to me: “What if the government was the sole source?” There would be little, if any, creativity. Thank goodness there is no monopoly on home security systems and today we have numerous suppliers with a plan for just about every pocketbook.
GTA is also a good example of why a monopoly is never a good thing for ratepayers and customers. When it was owned and operated by the government, it was a broken-down antiquated system with no parts because they did not make the equipment any longer. And then the former Guam Telephone Authority was privatized and look what happened – we now have a plethora of services and suppliers.
The total cost of the new power plant, as I read in the newspaper, is $400 million but could cost another $200 million, making the total cost $600 million, for the plant to handle liquefied natural gas as an alternative fuel.
For sure, it will be much cheaper if the private sector competes in an open market. The private sector has developed many efficiencies over the last 20-30 years and each of those entrepreneurs and their creative upgrades wants to prove they can produce “faster, cheaper, better” – one or all three of those – in order to sell their new invention. But logically it would seem like an independent analysis would be in order as to how much it will save and when those savings will be passed on to the ratepayers. Why? Because the government is infamous for quoting one thing and then the real prices are quite another.
If we take a $600 million investment today, then amortize it over 25 years at a little over 6.5% in interest before taxes, you will need $3 billion in income to pay off the debt.
Carl Peterson is a certified financial planner and longtime leader of the Guam business community.