Disney voted itself the power to set its competitors’ utility rates
Timothy P. Carney
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A local government in Florida controlled by the Disney corporation signed an agreement in February to grant Disney the ability to set utility rates not only for Disney but for all the other businesses that operate within Disney’s realm.
You could almost call it a textbook case of self-dealing cronyism, but it’s a bit too absurd for a textbook. This is more like comic-book villain behavior.
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Disney has long enjoyed unmatched government favoritism, especially from the state of Florida. Undergirding the mountains of subsidies and protective regulations has been Disney’s unique fiefdom: the Reedy Creek Improvement District.
Reedy Creek is a local government that, until this year, was elected by the resident businesses, whose votes are weighted by the share of the land they control. That meant that Disney held a majority of the votes in this local government. In short, Florida law granted Disney governmental power. In February, the legislature stripped Disney of that extraordinary power and put Reedy Creek under the control of a state-appointed board.
But back when Disney still controlled the Reedy Creek government, it hired a utility company called Reedy Creek Energy Services to manage power, sewer, water, and other utilities. Reedy Creek Energy Services, of course, is a fully owned subsidiary of Disney. This in itself is self-dealing cronyism akin to that of Russian oligarchs. But it gets worse.
In February, when the Disney-controlled Reedy Creek government knew the legislature was about to strip Disney of control, it drafted an eleventh-hour agreement with Disney-owned Reedy Creek Energy to replace the previous one that had been signed at the end of the previous fiscal year. The new agreement, between Disney and Disney, granted Reedy Creek Energy control over the local utilities for 10 years. This includes “rate setting, revenue forecasting, capital planning … developing and negotiating energy supply agreements.”
So the Disney-controlled government granted a Disney-owned company the power to set utility rates and practices for the next 10 years. Some news accounts have described this as Disney “setting its own utility rates,” but that understates the matter. Disney, under this agreement, can, for the next 10 years, also set the utility pricing for all of its competitors and all other businesses that own land within the Reedy Creek district.
Marriott and Hilton hotels in the area, for instance, will have to pay their electric, water, and sewer bills to Disney (through its subsidiary Reedy Creek Energy Services) at whatever rate Disney sets. Local bait shops and sandwich joints will, too. Since Disney gets to set the formula for utility rates, it can easily set a formula tilted toward Disney, its own largest client, and unfavorable to other hotels or restaurants in the area.
Disney, via Reedy Creek Energy Services, also gets to charge its customers whatever it wants for the labor of operating the utilities. After all, there is no competition, since Disney, via the Reedy Creek government, granted full pricing power to Reedy Creek Energy Services.
Disney, in effect, gets to tax its competitors.
A Disney lobbyist did not return a request for comment.