Infrastructurist, Smart Grids, and Taxes

The Infrastructurist , my favorite blog for all things infrastructure, has an interview with David Leeds, an expert on smart electricity grids.  The whole interview is worth a read, but I’m highlighting because of this passage:

The government’s plan is basically to provide some seed money in a bad economy and then get out of the way. And while we can argue about the best way to do disperse the funds, this general approach is absolutely the approach we should be taking. The electric power industry has severely underinvested in infrastructure and IT in the last few decades. While we as a country have come to take this fundamental mission-critical infrastructure for granted, events such as the Northeast Blackout of 2003 serve as a powerful reminder of what’s at stake (it’s estimated the U.S. currently loses $150 billion per year due to outages). Smart grid investments will be positive NPV (net present value) projects, and ultimately the private sector will drive these investments, but in a bad economy where banks aren’t loaning, the government made the right decision stepping in.

Utilities do not operate like normal private companies: they and their rates are tightly regulated at the state level, so a failure to invest is more a story about a failure of political leadership than it is of plutocrats.  Since utilities aren’t nationalized, we couldn’t exactly raise taxes and use that to fund necessary infrastructure or build powerplants.  Instead, we have to wait for the federal government to provide seed money for critical projects like high-voltage power lines.  Because leaders have seen paying for utilities as a tax, they have refrained from raising the revenue necessary to maintain and modernize our infrastructure.  That myopic approach is how we get crumbling bridges and exploding sewers.