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> If you are in a regulated market or are using the regulated utilities like ConEd in NYC, you'll see limited rate increases to deal with the increased cost to

by cmdli 6y ago

> If you are in a regulated market or are using the regulated utilities like ConEd in NYC, you'll see limited rate increases to deal with the increased cost to supply. These rate increases need to be approved by the state's Public Utility Commission. If deregulated suppliers are having to raise prices to cover costs, wouldn't that apply to regulated suppliers as well? Unless they have enough cash on hand to ride it out, then they will have to raise prices or go bankrupt. I would feel like the risk of bankruptcy would be higher if they have limited ability to raise prices. I'm assuming regulated and deregulated suppliers operate similarly. I don't know if regulated suppliers are required to have some sort of backup for this situation.

URSpider94 6y ago
For the most part, regulated utilities factor in cost spikes into their rates, so they’ll have some reserve built in to cover. They may not make as much profit this quarter, but they won’t go bankrupt. Additionally, keep in mind that a lot of regulated utility companies own their own generating plants. In that case, the cost of power on the open market is basically irrelevant. Heck, they may even be SELLING power into this market.
- twunde 6y ago
  Small quibble here. I'm pretty sure that most regulated companies do NOT own their own generating plants, since for a long time they were legally not allowed to be in both the distribution business and the generator business. I _think_ this was from the Public Utility Holding Company Act (https://en.wikipedia.org/wiki/Public_Utility_Holding_Company_Act_of_1935 https://en.wikipedia.org/wiki/Public_Utility_Holding_Company...) but it was ~ 15 years ago when I toured an Entergy power plant and heard the explanation so I may be wrong. I suspect that this still holds true for regulated utilities since the conflict of interest is pretty high. What has been a recent trend is generator companies purchasing supplier companies (for example Calpine purchased Champion Energy and Noble Solutions)
mleonhard 6y ago
Would you like to find out the answers to these questions and post them here?
RuggedPineapple 6y ago
As mentioned by others, in the regulated markets they're required to factor in these contingencies, amortized over the expected length of time between events of this scale.
twunde 6y ago
Regulated suppliers operate somewhat differently than deregulated suppliers. 1. Regulated suppliers have rules around how much a rate can change, and those rate changes have to be approved by their respective PUC. This limits the sticker shock. 2. Regulated suppliers do this in exchange for a guaranteed profit for their distribution side (they have a government approved local monopoly). They also tend to be the biggest supplier since they are usually the default supplier. Because of this, these companies have both more cash on hand and more ability to borrow in case of a cash crunch caused by issues like this. They also have a tendency to be better about hedging for circumstances like this. Basically the regulated suppliers will probably see some rate increases but they will be more gradual and certainly won't be as wild as rate increases by deregulated suppliers. PS deregulated supplier is a bit of a misnomer. They are still regulated by the state Public Utility Commission, but they are less regulated than the utilities that also do distribution.

by cmdli 6y ago

URSpider94 6y ago

For the most part, regulated utilities factor in cost spikes into their rates, so they’ll have some reserve built in to cover. They may not make as much profit this quarter, but they won’t go bankrupt. Additionally, keep in mind that a lot of regulated utility companies own their own generating plants. In that case, the cost of power on the open market is basically irrelevant. Heck, they may even be SELLING power into this market.

twunde 6y ago
Small quibble here. I'm pretty sure that most regulated companies do NOT own their own generating plants, since for a long time they were legally not allowed to be in both the distribution business and the generator business. I _think_ this was from the Public Utility Holding Company Act (https://en.wikipedia.org/wiki/Public_Utility_Holding_Company_Act_of_1935 https://en.wikipedia.org/wiki/Public_Utility_Holding_Company...) but it was ~ 15 years ago when I toured an Entergy power plant and heard the explanation so I may be wrong. I suspect that this still holds true for regulated utilities since the conflict of interest is pretty high. What has been a recent trend is generator companies purchasing supplier companies (for example Calpine purchased Champion Energy and Noble Solutions)

mleonhard 6y ago

Would you like to find out the answers to these questions and post them here?

RuggedPineapple 6y ago

As mentioned by others, in the regulated markets they're required to factor in these contingencies, amortized over the expected length of time between events of this scale.

twunde 6y ago

Regulated suppliers operate somewhat differently than deregulated suppliers. 1. Regulated suppliers have rules around how much a rate can change, and those rate changes have to be approved by their respective PUC. This limits the sticker shock. 2. Regulated suppliers do this in exchange for a guaranteed profit for their distribution side (they have a government approved local monopoly). They also tend to be the biggest supplier since they are usually the default supplier. Because of this, these companies have both more cash on hand and more ability to borrow in case of a cash crunch caused by issues like this. They also have a tendency to be better about hedging for circumstances like this. Basically the regulated suppliers will probably see some rate increases but they will be more gradual and certainly won't be as wild as rate increases by deregulated suppliers. PS deregulated supplier is a bit of a misnomer. They are still regulated by the state Public Utility Commission, but they are less regulated than the utilities that also do distribution.