Sicilia on Munson, _From Edison to Enron: The Business of Power and What It Means for the Future of Electricity_

[eh.net-review at eh.net]

Published by EH.NET (January 2008)

Richard Munson, _From Edison to Enron: The Business of Power and What 
It Means for the Future of Electricity_. Westport, CT: Praeger, 2005. 
v + 207 pp. $40 (cloth), ISBN: 978-0-275-98740-X.

Reviewed for EH.NET by David B Sicilia, Department of History, 
University of Maryland, College Park.


This book -- by Washington D.C.-based electric industry policy 
analyst Richard Munson -- is a hybrid. In the first half 
(approximately), the author provides a concise history, focused 
chiefly on economics and regulation, of the U.S. electric power 
industry from its beginnings to 2004. In the second half, he moves 
onto firmer ground to offer his recommendations for making the 
nation's largest industry (assets: $600 billion) more efficient and 
innovative. For Munson, the answer, in a word, is competition. Stated 
more fully, "regulators and lawmakers must challenge vested interests 
and eliminate the outmoded regulatory, financial, and environmental 
barriers to competition and entrepreneurs" (p. 132).

As a work of history, _From Edison to Enron_, although 
chronologically ambitious, is derivative. Most historical industry 
studies focus on the industry's formative decades of the 1880s 
through the 1930s, out of which emerged the dominant paradigm of 
central station, alternating current power and incandescent lighting. 
Few works span the industry's 125-year history, as this book does. 
Munson does a competent, if occasionally repetitive, job of 
summarizing this long story, yet he offers no new interpretations 
based on fresh theoretical thinking or archival research. And there 
are too few source citations and some blunders. Passage of the 
Sherman Antitrust Act was not "prompted" by price-fixing attempts by 
Charles Coffin and Henry Villard (p. 22). Samuel Insull did not 
organize the National Civic Federation (p. 56).

Munson's tour through electric power history lays the groundwork for 
his policy recommendations. In this account, lively competition among 
industry founders came to an end when "Monopolists" (the title of 
Chapter 3), especially Samuel Insull of Chicago Edison, built 
enormous regional electric supply systems and holding company empires 
and devoted considerable resources to lobbying and public relations 
in order to retain power. (Munson says nothing of Insull's great 
insight about load factor.) Government actors are the next set of 
villains, for abetting monopolization, blanketing the industry with 
stifling regulations, and building their own sluggish systems (such 
as the TVA and the Bonneville Power Administration). The nuclear 
power story carries the theme forward. Without federal government 
largess -- heavy investment in R&D, indemnification of private 
investors against risk, and generous private-sector subsidies -- 
industry would not have gone down what proved to be an economic path 
best not taken. The monopolists' heyday came to an end in the 1960s 
and 1970s, when the industry confronted serious challenges: 
"blackouts, protests, embargoes, accidents, and defaults" (p. 83). By 
this time, utility managers had lost any spark of innovation, while 
environmentalists misguidedly lobbied the state for new controls.

The hinge-point in the story was the beginning of competition. Munson 
first says that the U.S. Supreme Court's 1973 Otter Tail decision 
(which required a private utility to allow several municipals to 
transmit power over its lines without cost) "marked the onset of 
competition" (p. 89). Later, he confusingly states that lobbying by a 
New Hampshire-based cogenerator (Wheelabrator-Frye Corporation) in 
1978 -- which led to passage of the Public Utility Regulatory 
Policies Act (PURPA) that year -- represented "the opening of utility 
monopolies to limited competition" (p. 104). Munson carries the story 
through the 1992 Energy Policy Act, which deregulated further; 
through the colossal bankruptcy of the Washington Public Power Supply 
System (a.k.a. "Whoops") in 1983; and through Enron's collapse and 
the 2001 California "electricity disaster" (p. 122) it had helped 
engineer. The narrative chapters conclude on a more positive note, 
with vignettes of entrepreneurs and municipalities experimenting with 
new conservation, generation, and transmission and distribution (T&D) 
technologies.

In the policy chapters, several of Munson's recommendations seem 
reasonable and are supported by history. T&D is currently a greater 
regulatory conundrum than power plants. Electricity has long moved 
across state lines and therefore should be subject to more federal 
and less state regulation. Better system interconnection and load 
shifting would increase both efficiency and reliability. The grid 
should be opened to greater competition, although Munson is not 
specific about how original T&D owners should be compensated for 
their heavy investments. Central station utility managers (especially 
in the South) should devote more resources to innovation, and less to 
fending off the rising tide of competition.

But on several key issues, Munson is either inaccurate or 
unpersuasive. Consider, for example, the crucial issue of economies 
of scale. While it is true that the rate of growth of central station 
thermal efficiency leveled off in the late 1960s, Munson asserts that 
thereafter "economies of scale didn't apply any longer" (p. 85), and 
again later, that central stations "lost" (p. 177) their economies of 
scale in recent decades. To read Munson's account, decentralized 
power is always more efficient than centralized generation. While it 
is true that cogeneration captures significant efficiencies through 
dual-tasking and by minimizing line losses, most residential and 
commercial electricity customers do not require enough ambient or 
manufacturing-process heat to make cogeneration less costly than 
central station power -- which continues to capture enormous 
economies of scale.

Utility regulation is another problematic topic in this book. While 
acknowledging that utilities should remain under minimal regulation, 
Munson seems quite prepared to let markets work their wonders to 
supply the nation's power needs. Enron, in this telling, was an 
unfortunate episode in an otherwise well-functioning, 
efficiency-maximizing energy market. Munson is brave enough to 
acknowledge that Enron and California's faux blackout were precisely 
the outcome predicted by critics of aggressive electric utility 
deregulation, but he's not persuaded that the securitization of 
energy introduces unacceptable levels of risk. In his view, the Enron 
debacle was separate and apart from energy trading (p. 120).

Hostile to the notion of natural monopoly, this book does not 
consider the notion that electric power is a utility "affected with a 
public interest." In the final chapter, Munson points to railroad, 
telecommunication, and airline deregulation to argue that competition 
led to greater efficiency and lower prices in each case. He does not 
mention the degradation of service that has accompanied the rate 
cuts. Airline competition hasn't led to more plane crashes, but 
service is deplorable, and the oligopoly is shrinking by the month. 
These are, of course, issues that political economists debate in 
church as well as between the covers of monographs. So to keep the 
focus on this particular industry: Would our society tolerate more 
frequent electrical outages? Munson acknowledges the greater 
financial risks that come with energy markets, but not the connection 
between financial and technological risk. This is not to say that 
deregulated electric power is less reliable than competitive power. 
But because Munson informs us that today's high-tech customers are 
damaged by services interruptions measured in the billionths of a 
second, the question deserves attention.

One hopes that the roster of energy-efficient technologies briefly 
profiled in this book -- compact fluorescent lamps, back-pressure 
steam turbines, microturbines, biomass-powered turbines, wind 
turbines, combined-cycle gas turbines, fuel cells, superconducting 
transmission lines, semiconductor-based switches, remotely readable 
meters -- will proliferate, and the sooner the better. They are 
making headway, although Munson gives inconsistent evidence about 
their progress, first deriding "the present system's virtually total 
reliance on large plants and long lines" (p. 178), then reporting 
that nearly a third of the nation's electricity comes from 
independent power producers (p. 187).

Earth Day was first observed thirty-seven years ago. We now know that 
our energy future will be powered by a variety of increasingly 
renewable sources. In that sense, this book -- by leaning so hard 
against a technology (central station power) that for much of the 
century achieved the greatest economies of scale of any industry -- 
seems overreaching. Dismantling all those giant power plants anytime 
soon is no more plausible than ending our dependence on fossil fuels 
on the near horizon. Will deregulation help us get more efficient 
energy faster? Not across the board, and even Munson acknowledges 
that regulation is needed "to enforce market rules and protect 
against abuses" (p. 174). I doubt our society is prepared to expose 
what is arguably the most essential component of the economy's 
infrastructure to the gales of creative destruction.

Which readers will find this book most useful? Business and 
technology historians won't find engagement with key concepts such as 
path dependence, technological determinism, system-building, and 
first-mover advantage. Students of economics and business could use 
the book as an industry case study to explore notions about natural 
monopoly and deregulation, although the approach would have to be 
largely anecdotal because the book lacks systematic data. Regulators 
-- accused of "having an identity crisis" (p. 162) because regulation 
is no longer warranted -- are improbable fans. Central station 
utility managers will find it too partisan. But the "hustling 
entrepreneurs" (p. 101) who are chipping away at the energy 
establishment and who are the heroes of this book are likely to 
embrace it as their version of history.


David B. Sicilia is Associate Professor in the Department of History 
at the University of Maryland, College Park. He is co-author or 
co-editor of six books and many articles, including studies of 
electrification, and is currently working on a history of post World 
War II U.S. political economy.

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