A Monopoly Does Not Need to Serve You, and the Electricity Company Proves It

For most of my life there was exactly one company in Israel from which a household could buy electricity. The Israel Electric Corporation generated it, moved it, and sold it, and if you wanted a light to come on in your kitchen you dealt with it or you sat in the dark. I want to use it as a worked example of a general claim: the quality of service you get from an organisation is set by what happens to it when it serves you badly, and to a monopoly nothing happens.

The Test Nobody Ran

Ask what the company loses when it treats a customer badly. A connection takes months. A fault is fixed when it is fixed. A bill is wrong and correcting it requires the customer's afternoon, not the company's. What is the consequence for the company?

There is none. The customer cannot leave, because there is nowhere to go. He cannot pay less, because the tariff is set elsewhere. He cannot even be a warning to other customers, because other customers have no choice either. The company has run the experiment that every business fears, treating a customer badly and watching what happens, and the answer it has learned over decades is: nothing happens.

An organisation learns from what happens to it. This one has learned that service is optional.

Not the People

I want to be clear that this is not about the people who work there. The linesman who climbs a pole in a storm is doing something genuinely difficult and doing it well. The clerk who cannot fix your bill is following a procedure he did not write.

That is the point. The people are ordinary and the outcome is bad, which tells you the outcome is not coming from the people. It is coming from the position. Put the same linesman and the same clerk into a company that loses customers when it fails them and the procedures change within a year, because the procedures are written by people who can see the customers leaving.

The Two Excuses

"Electricity is a natural monopoly." Parts of it are. There is no sense in two companies stringing parallel wires down the same street. But generation is not a natural monopoly, and retail is not, and the argument for a single wire has been used for decades to justify a single everything. The wire is the excuse; the rest of the empire is the prize.

"It is a public service, not a business." Then it should be judged as a public service, and by that standard it also fails, because a public service exists for the public and this one has, for most of its history, existed for itself: its wage agreements, its pensions, its reserved jobs, its immunity from the consequences everyone else lives with. The public-service label is invoked to excuse the absence of competition and then set aside when the public asks what it is getting.

Why It Lasted

If the diagnosis is this obvious, why did the arrangement survive for so long?

Because a monopoly is a very effective organisation for one purpose, which is preserving itself. Its workers are organised and its customers are not. Its interest in continuing is concentrated and total; the customer's interest in reform is diffuse and mild, a few shekels and a few wasted afternoons a year. The people who could reform it need its cooperation to keep the lights on during an election campaign. Every actor with power over the arrangement has a reason to leave it alone, and the only actor who wants it changed has no power at all.

This is the same asymmetry I have described for institutions in general, and the electricity company is simply an unusually clean case of it: a public that has wanted change for a generation, and a body that has outlasted the wanting.

What Reform Actually Is

Reform, where it has come, has come the only way it ever does with a monopoly: by force from outside, and slowly. Private generators were allowed in. Then a market of sorts. Then, very late, the possibility of buying from someone else.

Notice what each step does. It does not make the company nicer. It changes what happens to the company when it is not nice. That is the whole of the mechanism, and it is the reason I am suspicious of every reform proposal that talks about service standards, ombudsmen, and customer charters. Those are ways of asking a monopoly to behave as if it had competitors. The only thing that makes an organisation behave as if it had competitors is competitors.