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Isnt this a common tactic, to declare bankruptcy in face of large liabilities?
by kumarvvr 6y ago
Isnt this a common tactic, to declare bankruptcy in face of large liabilities?
- Thorncorona 6y agoPrivatize the profits and socialize the losses
- refurb 6y agoThat's not what bankruptcy is? Unless you consider creditors and equity holders "society".
- jaimex2 6y agoMassive bonuses would have been paid out already while the liability burdened company will need to be bailed out.
- refurb 6y agoThe article says nothing about a "bailout".
- madaxe_again 6y agoThey won’t just leave a utility lying dead by the roadside. Going by the last few decades of precedent, its assets will be acquired by a consortium of the current principals, most likely using state provided grants or loans to get things running again. The argument is essential infrastructure, expertise, etc. - I mean, it works for banks, and surely a utility provider is actually essential infrastructure.
- bilekas 6y agoSurely if they do get a bailout from the Gov, lets say Federal in this case, they would be subject to some actual regulation ? Might not be the worst, all things considered.
- gonzo41 6y agoWell the electric grid falls in that category of service, like the military where the market is potentially a bad solution. So in this regard. The electric company was able to be negligent to their personal benefit of 1.8 billion dollars of unfunded liability it created. And then they call bankruptcy and that's the end of that chapter.
- refurb 6y agoThat’s a massive stretch for “socialize the losses”. By that logic any time a business fails and it impacts a lot of people the losses have “been socialized”. And CA is far from a free market. The PUC has PG&E on a short leash and the results have been a disaster. Edit: Replying - No, bankruptcy is actually the exact opposite of socializing losses.
- fwsgonzo 6y agoHow do you think the bankrupt utility will start up again? Hint: Socialized costs.
- refurb 6y agoAnother energy company will likely buy them. How is that socializing costs? People throw that term around without actually knowing what it means
- ceejayoz 6y agoCalifornia was the first state to try deregulation of the energy market. https://en.wikipedia.org/wiki/2000–01_California_electricity_crisis#Effects_of_partial_deregulation https://en.wikipedia.org/wiki/2000–01_California_electricity...
- refurb 6y agoYeah and the regulations put in place around the market were terrible.
- 6y ago
- smt88 6y agoLots of companies are literally owned by the public and go bankrupt due to debts to consumers, so it's fair to say "society" in those cases.
- realitysballs 6y agoNo question about that. The novelty is that a single snow/ice weather event could push a large utility operator into bankruptcy
- teruakohatu 6y agoOr like California is it that deferring costs (winterizing in TX and fire prevention and forest clearing in CA) makes executives look good while kicking problems down the road, maybe even decades down the road. Here in New Zealand the line network operator in the city of Dunedin has underinvested in the city line network, so instead of replacing power poles, they have simply changed the rules so that 2,500+ unserviceable old decaying power poles are suddenly within spec [1]... Meanwhile they are raising prices [2] I have little doubt that when a major storm hits knocking out 100s or 1000s of power poles, they will simply blame climate change. Yes, the climate is changing, but the reason they will have failed is terrible, terrible management. [1] https://www.rnz.co.nz/news/national/366398/thousands-of-power-poles-suddenly-become-serviceable https://www.rnz.co.nz/news/national/366398/thousands-of-powe... [2] https://www.stuff.co.nz/business/industries/124391663/aurora-energy-announces-price-hike-for-all-otago-customers-highest-in-central-otago-and-wnaka https://www.stuff.co.nz/business/industries/124391663/aurora...
- mbreese 6y ago> makes executives look good while kicking problems down the road Nobody wants to pay for things like preventative maintenance. So unless you have a regulator that is going to force you to do so, paying for things like winterizing equipment in TX isn’t going to happen. This is especially true when you can just change providers to whomever is going to give you the absolute lowest rate. So instead of being prepared for a once in a decade storm, a provider is more likely to not be ready and just fold of things get bad. You never see the results of what happens when you are successfully prepared for that rare event, only what happens when things go horribly wrong. So people (consumers included) don’t want to pay for things like maintenance. And regulators (who often answer to the public in some way) don’t want to be seen as being the cause of raising peoples’ bills.
- 6y ago
- dragonwriter 6y agoThat's kind of what bankruptcy is for, overtly. It's not like some kind of clever hack.
- madaxe_again 6y agoI do find it troubling, however, that it’s more often than not used to clear down the ledger of a going concern, and then continue business as usual, same everything, just a new incorporation. You can bet your bottom dollar that they’ll be buying their own assets back on cents on the dollar, reincorporating, putting everyone back in the same positions, and paying some nice fat bonuses out of the capital they’ll be given as part of their dynamic chapter 11 restructure. I’ve been a creditor on receiverships like this and it’s painful - in my view, if you run a business into the ground, you, your agents, and entities controlled by you or in which you have a substantial interest should be disbarred from operating an enterprise for at least five years. You definitely shouldn’t be permitted to continue in the same enterprise.
- cmeacham98 6y ago> You can bet your bottom dollar that they’ll be buying their own assets back on cents on the dollar, reincorporating, putting everyone back in the same positions, and paying some nice fat bonuses out of the capital they’ll be given as part of their dynamic chapter 11 restructure. [citation very much needed]
- falcor84 6y agoWhat exactly are you looking for a citation for? The GP was stating their strong belief regarding a future event and (I assume) facetiously saying you should bet on it.
- cmeacham98 6y agoThe GP makes the claim in such a way that implies most if not all chapter 11 bankruptcies end this way. I was facetiously asking for some evidence from other bankruptcies to support this claim.
- _pmf_ 6y agoPrivatizing profits and socializing losses. A staple of modern entrepreneurship.