All Commentary
Monday, February 1, 1965

Forty-Eight Thousand Dollars

It was a receipted bill for electri­cal service rendered in 1907 by the Edison Light and Power Com­pany to a customer in Wichita, Kansas. The bill was for $7.00, for a month’s service—for only 14 kilowatt-hours of electricity. (Col­lection must have been something of a problem in those days, because the bill specified: “Less 20 per cent if paid before the 10th of the month.”)

The bill was made out on a postal card, the other side of which bore the one-cent stamp that paid for its delivery across town.

In the 58 years since 1907, the postage rate has risen to 4 cents a card—400 per cent of what it was then; whereas, the price for electricity has steadily declined from 50 cents per kwh to 2 cents now—4 per cent of what it was then.

An average American home to­day, if fully electrified with air conditioning and heating, would use about 24,000 kwh annually, costing $480. At the 1907 rate, that cost would be $12,000; and if kwh prices had behaved as has the price for delivering a post card, the electrical bill would be $48,000 annually. Except, that no one would use electrical appliances!

One may speculate as to what those respective rates might be today had the situations been re­versed, with a government monop­oly of electrical service, and a free enterprise postal service!

How much profit was earned over the years by the Edison Light and Power Company and its suc­cessors in Wichita is unknown to us, but we do know that within a recent period of years while the Post Office was accumulating a deficit of $10 billion, its largest competitor in the communications field, the privately owned Ameri­can Telephone and Telegraph, showed $22 billion in profits—des­pite the fact that the rates it could charge for phone service were regulated and controlled by the Federal Communications Com­mission.

The comparative performance of governmental and private enter­prise, even when both are subject to price control, is further illus­trated in adjoining news items from the front page of The Wall Street Journal of November 27, 1964:

Postal rate increases for business mail may be recommended by President Johnson in his January budget message. The increases might be as much as $300 million annually. Postmaster General Gronouski said the President or­dered him to draw up proposals for rate boosts on second and third class mail. These would chiefly affect newspaper and mag­azine publishers and users of di­rect-mail advertising.

American Telephone reductions in long-distance interstate rates estimated at $100 million annu­ally were announced by the Fed­eral Communications Commis­sion. The cuts take effect in two stages on Feb. 1 and April 1. The FCC said it had moved for the re­ductions, to which AT&T indi­cated it had agreed reluctantly, after reviewing the company’s profit picture.

In view of all the talk about protecting consumers, the record suggests that private enterprise is a better caretaker than the gov­ernment.    

(Reprints available at 2 cents each.)

  • Paul L. Poirot was a long-time member of the staff of the Foundation for Economic Education and editor of its journal, The Freeman, from 1956 to 1987.