5 ms·

Serious question - how can you hold such companies accountable when fines would be passed directly to consumers? What sane mechanisms exists for this?

alasdair_ 8y ago
>Serious question - how can you hold such companies accountable when fines would be passed directly to consumers? You wipe out the equity holders at a minimum. And possibly break the company up Ma Bell style.
- cronix 8y ago
  > And possibly break the company up Ma Bell style. So PG&E is split into, let's say, 5 different equal, smaller companies. And Company C caused this fire. Now you have a company 1/5th the size and revenue having to pay the full load. How would that work?
  - CydeWeys 8y ago
    The fine obviously wouldn't be imposed on only one of the small subsidiaries when the problem was caused when they were still unified. You'd impose the fine on the unified company before cutting it up.
    - cronix 8y ago
      I was meaning if this same fire happened after PG&E was already broken up into 5 smaller companies, and one of those smaller companies caused it.
      - abakker 8y ago
        Insurance pays some, and the rest is paid back by bond. I.e. the state government just give PGE an installment plan and they have 30 years to pay it back. In theory, the government has time to wait.
        Ntrails 8y ago
        Where do you think the money to pay it back over 30 years comes from if not the consumer? Breaking up the company doesn't achieve a damned thing beyond employing more people doing the same job. Wiping out equity changes nothing beyond bankrupting the company. The mind boggles. You cannot change behaviours/regulate infrastructure maintenance or safety through fines to shareholders (and, by proxy, consumers).
        reissbaker 8y ago
        With infrastructure you have a few options for managing risk: 1. Stiff regulation for "natural monopolies," or for effectively state-monopolies. The state legislature then prevents the company from raising rates in order to pay back loans or pay off fines. Negligent behavior is punished by the state. 2. Competition, e.g. the Ma Bell breakup. Break up PG&E and have its small companies compete with each other. Any one company can't raise rates to pay off negligent behavior, because they'll lose out to their competition. Negligent behavior is punished by the market. 3. Ajit Pai yourself into a few monopolies with no regulation, and rejoice as you live with whatever Comcast deigns to give you. Actively malicious behavior goes unpunished, or is even rewarded.
        abakker 8y ago
        it is entirely possible to pay back money without raising prices. Yes, money flows from the consumer, but, you can: a) reduce profitability b) issue more equity and use the proceeds to pay back debt c) increase efficiency/lower cost to deliver services.
  - davidw 8y ago
    Now the ratepayers have a lot of skin in the game in terms of wanting the company to act properly.
    - mertd 8y ago
      What leverage do they have against a monopoly? Turn off their fridge?
      - davidw 8y ago
        Monopolies have a decent amount of government oversight - more or less depending on the locale, but probably more in a place like California. This is something people can influence.
  - tedivm 8y ago
    Or we just force the company to go bankrupt by not approving a fee hike and then have the state purchase the assets and run the company directly.
    - stickfigure 8y ago
      What does that really change? When the electrical grid burns down a city next time, the taxpayers pay for it?
      - nradov 8y ago
        That wouldn't be any worse than what we have now, and there would at least be some indirect accountability to voters.
  - dredmorbius 8y ago
    Insurance. This distributes the risk over the companies (useful financially, bad for risk mitigation), but also creates an incentive for the insurer to audit policies, practices, and procedures to minimise risks. Insurance is a pretty powerful business invention, and is unique amongst virtually all businesses in that it seeks out risks (and then tries to manage them). There are smaller power companies within California (most of them are municipality-owned utilities), and they tend to be fairly accountable to their individual market-owners.
    - chongli 8y ago
      Insurance against wildfires doesn't really work. You get one big event and it wipes everything out. It doesn't make any sense for the insurance company to take that bet, unless they're shady and they discharge all of the claims in bankruptcy.
      - dredmorbius 8y ago
        State of California says otherwise to the tune of $12 billion. California statewide wildfire insurance claims nearly $12 billion For Release: January 31, 2018 LOS ANGELES, Calif. — Insurance Commissioner Dave Jones today announced that insurers have received nearly 45,000 insurance claims totaling more than $11.79 billion in losses from the devastating wildfires that burned across the state in October and December 2017 damaging and destroying more than 32,000 homes, 4,300 businesses, more than 8,200 vehicles, watercraft, farm vehicles, and other equipment....* https://www.insurance.ca.gov/0400-news/0100-press-releases/2018/release013-18.cfm https://www.insurance.ca.gov/0400-news/0100-press-releases/2... Again, insurance companies internalise rather than externalise risks. They also manage risks. This can mean changes to construction, landscaping, fire response, utilities operation, activities restrictions (including legal sanctions, e.g., restrictions on mowing or tilling during high-fire season), hydrants, and more. There are of course limitations to what can be done. A wonderful concept comes from the field of marine navigation and seamanship: "The Art of ship handling involves the effective use of forces under control to overcome the effect of forces not under control." -- Charles H. Cotter That is the essence of all engineering. California has extensive experience with major catastrophic fires which have strongly influenced its insurance landscape. The morning of 18 April in 19 and 6 comes to mind.
- dd36 8y ago
  It should cost the customers more thereby allowing market forces to work. That’s how we get better solutions.
  - sitharus 8y ago
    I would love to agree with you, but in this case we're talking about electricity distribution. It's almost impossible to start up a second independent distribution network - the towers alone will cost millions, not to mention the costs of getting permission from all the landowners along the way and fighting all the communities who don't want even more towers over the landscape. And after all the capital and political fighting your goal is to make less money than the incumbent.
    - dd36 8y ago
      Batteries. If suddenly you must pay 20c/kWh and previously it was 8c/kWh, new avenues opportunities are created. Maybe then it makes sense to go full rooftop solar and use a big battery.
empath75 8y ago
If the costs are passed to consumers wouldn’t that be a matter of properly accounting for externalities? It means they’re paying the true cost of the power.
- bpicolo 8y ago
  The point is that it does nothing to improve accountability of the electricity company.
dragonwriter 8y ago
> Serious question - how can you hold such companies accountable when fines would be passed directly to consumers? PG&E rates have to be justified to and approved by regulators; liability costs for wrongfully causing widespread devastation maybe shouldn't be considered a valid basis for rate increases.
- dmix 8y ago
  So a regulatory agency gets to decide which price increases are "valid" or not based on the fact the price increase followed a court ruling in favour of another regulatory agency which showed negligence by the company? Or does that also include civil tort cases showing negligence? What exactly is the deciding factor which proves a price increase is not "valid"?
  - crc32 8y ago
    Perhaps free markets for public goods are illusory!

alasdair_ 8y ago

>Serious question - how can you hold such companies accountable when fines would be passed directly to consumers? You wipe out the equity holders at a minimum. And possibly break the company up Ma Bell style.

cronix 8y ago
> And possibly break the company up Ma Bell style. So PG&E is split into, let's say, 5 different equal, smaller companies. And Company C caused this fire. Now you have a company 1/5th the size and revenue having to pay the full load. How would that work?
- CydeWeys 8y ago
  The fine obviously wouldn't be imposed on only one of the small subsidiaries when the problem was caused when they were still unified. You'd impose the fine on the unified company before cutting it up.
  - cronix 8y ago
    I was meaning if this same fire happened after PG&E was already broken up into 5 smaller companies, and one of those smaller companies caused it.
    - abakker 8y ago
      Insurance pays some, and the rest is paid back by bond. I.e. the state government just give PGE an installment plan and they have 30 years to pay it back. In theory, the government has time to wait.
      - Ntrails 8y ago
        Where do you think the money to pay it back over 30 years comes from if not the consumer? Breaking up the company doesn't achieve a damned thing beyond employing more people doing the same job. Wiping out equity changes nothing beyond bankrupting the company. The mind boggles. You cannot change behaviours/regulate infrastructure maintenance or safety through fines to shareholders (and, by proxy, consumers).
        reissbaker 8y ago
        With infrastructure you have a few options for managing risk: 1. Stiff regulation for "natural monopolies," or for effectively state-monopolies. The state legislature then prevents the company from raising rates in order to pay back loans or pay off fines. Negligent behavior is punished by the state. 2. Competition, e.g. the Ma Bell breakup. Break up PG&E and have its small companies compete with each other. Any one company can't raise rates to pay off negligent behavior, because they'll lose out to their competition. Negligent behavior is punished by the market. 3. Ajit Pai yourself into a few monopolies with no regulation, and rejoice as you live with whatever Comcast deigns to give you. Actively malicious behavior goes unpunished, or is even rewarded.
        abakker 8y ago
        it is entirely possible to pay back money without raising prices. Yes, money flows from the consumer, but, you can: a) reduce profitability b) issue more equity and use the proceeds to pay back debt c) increase efficiency/lower cost to deliver services.
- davidw 8y ago
  Now the ratepayers have a lot of skin in the game in terms of wanting the company to act properly.
  - mertd 8y ago
    What leverage do they have against a monopoly? Turn off their fridge?
    - davidw 8y ago
      Monopolies have a decent amount of government oversight - more or less depending on the locale, but probably more in a place like California. This is something people can influence.
- tedivm 8y ago
  Or we just force the company to go bankrupt by not approving a fee hike and then have the state purchase the assets and run the company directly.
  - stickfigure 8y ago
    What does that really change? When the electrical grid burns down a city next time, the taxpayers pay for it?
    - nradov 8y ago
      That wouldn't be any worse than what we have now, and there would at least be some indirect accountability to voters.
- dredmorbius 8y ago
  Insurance. This distributes the risk over the companies (useful financially, bad for risk mitigation), but also creates an incentive for the insurer to audit policies, practices, and procedures to minimise risks. Insurance is a pretty powerful business invention, and is unique amongst virtually all businesses in that it seeks out risks (and then tries to manage them). There are smaller power companies within California (most of them are municipality-owned utilities), and they tend to be fairly accountable to their individual market-owners.
  - chongli 8y ago
    Insurance against wildfires doesn't really work. You get one big event and it wipes everything out. It doesn't make any sense for the insurance company to take that bet, unless they're shady and they discharge all of the claims in bankruptcy.
    - dredmorbius 8y ago
      State of California says otherwise to the tune of $12 billion. California statewide wildfire insurance claims nearly $12 billion For Release: January 31, 2018 LOS ANGELES, Calif. — Insurance Commissioner Dave Jones today announced that insurers have received nearly 45,000 insurance claims totaling more than $11.79 billion in losses from the devastating wildfires that burned across the state in October and December 2017 damaging and destroying more than 32,000 homes, 4,300 businesses, more than 8,200 vehicles, watercraft, farm vehicles, and other equipment....* https://www.insurance.ca.gov/0400-news/0100-press-releases/2018/release013-18.cfm https://www.insurance.ca.gov/0400-news/0100-press-releases/2... Again, insurance companies internalise rather than externalise risks. They also manage risks. This can mean changes to construction, landscaping, fire response, utilities operation, activities restrictions (including legal sanctions, e.g., restrictions on mowing or tilling during high-fire season), hydrants, and more. There are of course limitations to what can be done. A wonderful concept comes from the field of marine navigation and seamanship: "The Art of ship handling involves the effective use of forces under control to overcome the effect of forces not under control." -- Charles H. Cotter That is the essence of all engineering. California has extensive experience with major catastrophic fires which have strongly influenced its insurance landscape. The morning of 18 April in 19 and 6 comes to mind.
dd36 8y ago
It should cost the customers more thereby allowing market forces to work. That’s how we get better solutions.
- sitharus 8y ago
  I would love to agree with you, but in this case we're talking about electricity distribution. It's almost impossible to start up a second independent distribution network - the towers alone will cost millions, not to mention the costs of getting permission from all the landowners along the way and fighting all the communities who don't want even more towers over the landscape. And after all the capital and political fighting your goal is to make less money than the incumbent.
  - dd36 8y ago
    Batteries. If suddenly you must pay 20c/kWh and previously it was 8c/kWh, new avenues opportunities are created. Maybe then it makes sense to go full rooftop solar and use a big battery.

empath75 8y ago

If the costs are passed to consumers wouldn’t that be a matter of properly accounting for externalities? It means they’re paying the true cost of the power.

bpicolo 8y ago
The point is that it does nothing to improve accountability of the electricity company.

dragonwriter 8y ago

> Serious question - how can you hold such companies accountable when fines would be passed directly to consumers? PG&E rates have to be justified to and approved by regulators; liability costs for wrongfully causing widespread devastation maybe shouldn't be considered a valid basis for rate increases.

dmix 8y ago
So a regulatory agency gets to decide which price increases are "valid" or not based on the fact the price increase followed a court ruling in favour of another regulatory agency which showed negligence by the company? Or does that also include civil tort cases showing negligence? What exactly is the deciding factor which proves a price increase is not "valid"?
- crc32 8y ago
  Perhaps free markets for public goods are illusory!