When Consumer Regulation is Anti-Consumer

Frequently, so-called consumer regulation is coopted by large corporations to limit the ways competitors can try to unseat them.  For example, limo services will get laws passed that all limos have to have certain features.  Ostensibly, this is so consumers will be protected from having a limo without a wet bar, or whatever, but in fact its to prevent upstart competitors from taking them on with a different kind of business model potentially using different kinds of vehicles.

I find that this is frequently the case with regulated utilities.  Utilities are able to get all kinds of crazy laws passed to protect business practices that would never survive the marketplace.  Just today I was trying to open a business account with Duck River Electric in Tennessee.  We are attempting to reopen a TVA campground that has been closed for several years.  The campground is tiny, so I was flabberghasted when the utility told me that we had to put down a permanent deposit of $4100.  I found this to be shockingly high.  Apparently, it is based on the highest two months demand in the highest year (several years ago) in history.  Since the campground is only open for five months, it means that we have to give the utility an indefinite interest free loan equal to half the annual business we do with them.

This is simply insane.  Name one reasonably competitive business where one has to put down anywhere near this kind of advanced deposit to become a regular customer.  If there was any sort of competition in this business, the sales people for the other company would have a field day with this.  Sure, vendors often do a credit check on us, and a very few times (mostly early in our history) we had to pay COD for orders.  But this is absurd.

PS-  The only vendors we work with that are even close to this for abusiveness are the state authorities from whom we buy fishing licenses for resale.  Many of these agencies require expensive payment bonds not required by any of our other (private) vendors.  Arizona Game and Fish even forces us in January to accept an inventory of many products we do not sell (e.g. hunting stamps) and cannot sell by the terms of our lease.  We have to keep these in the safe for a year and if we lose any and are unable to return them at the end of the year, we have to pay for them.  Imagine Amazon.com sent you a bunch of crap you did not want and required you to hold them for a year, and then pay the expenses of returning them, and then pay for any item you might have lost.   Anyone like myself who was dumb enough to fall into the Columbia House records thing will know the danger of this.


  1. Angus S-F:

    Would it be cost-effective to generate your own power, perhaps by using Tennessee-subsidized "alternative power sources" [grin]? I think that would an amusing way to deal with this issue.

  2. M:

    In most jurisdictions, commercial and industrial utility rates are set such that they subsidize residential customers. Since state utility commissions set customer deposits and utility rates, you're at the mercy of whatever byzantine formula a bunch of JD's developed.

    If you think Tennessee is bad, try California. Electricity rates are progressive based on usage, similar to the U.S. federal income tax.

  3. Mark:

    Columbia house records and BMG were not so bad. I got into the club, and if I didn't want the selection I could always send it back. I think you only had to buy one at regular price all year, and then I would wait for the buy one get two for half price. The amount I paid for the CD's was less than the low price leader Tower Records at the time. This was some 25 years ago thought. I was pretty satisfied. Would never do that now, because there are plenty of outlets where you can get discount music. Plus, being older, I have kind of lost interest in buying music.

  4. GoneWithTheWind:

    I have noticed that the towns which place restrictions on Walmart to not allow a camper or motorhome to park overnight have a campground in town. No doubt the campground owner resents someone staying in a Walmart parking lot for free and whispers into the ear of a town councilman or mayor and suddenly Walmart's friendly gesture is illegal. I don't actually know if it helps the campground because once I discover the limitation at the Walmart I move on. So I suspect it doesn't do a lot for the campgrounds bottom line and probably hurts other businesses as we retired people move on to friendlier cities to spend our money in.

  5. marco73:

    Just check out the crazy deposits for hotels at spring break. Had to go to a family event in a major Florida East Coast hot spot a couple years back. Even though I am a gray haired old guy, I had to lay down an additional 2 night's "damage" deposit.
    It took the hotel 2 months to finally refund the deposit to my credit card.

  6. frankania:

    Agree with Angus; generate your own electricity. We have a $3k system here in Veracruz, Mexico and it powers our small house just fine. Put in a $30k or $40k solar electric array, and have free power for 25 years for 10 or 12 campers. AND, you deny the bureaucrat-criminals the $.