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Profit margins don't reflect how efficiently they manage costs. It could as easily be the case the PG&E mismanages resources and costs more to deliver the same
by dv_dt 2y ago
Profit margins don't reflect how efficiently they manage costs. It could as easily be the case the PG&E mismanages resources and costs more to deliver the same power.
- darth_avocado 2y agoProfit margins are low because they need to pay $20M in opex for the CEO’s bonus.
- asats 2y agoIf I'm not mistaken that's 0.08% of their revenue.
- ceejayoz 2y agoHe won’t be the only person getting a bonus. Or a fancy office conference table. Or offsite team building exercises in Hawaii.
- gruez 2y ago>Or a fancy office conference table Even smaller order of magnitude than executive comp >offsite team building exercises in Hawaii. Source this actually happens to an extent that would materially affect the balance sheet?
- ceejayoz 2y agoThey add up. Private plane: https://www.sfgate.com/business/article/executives-at-pg-e-hoping-to-fly-in-style-2535959.php https://www.sfgate.com/business/article/executives-at-pg-e-h... You hire your buddy’s company as a consultant or contractor, too. At a sweet rate.
- simoncion 2y agoOr larger-than-they-should-be-due-to-neglecting-essential-maintenance dividends to investors.
- toomuchtodo 2y agoWaste is waste. Squeeze it all out. Excessive management comp, share buybacks, dividends that could’ve been spent on infrastructure.
- s1artibartfast 2y agoProfit margins are set by the state utility control board. The board says 11% profit Max, so that is what all of the major utilities make. The challenge is that with a fixed profit percent, they have a heavy incentive to maximize open. You can spend $10 and make $1.1 or spend $100 and make $11. It's a very problem to the healthcare market. Health insurance also has fixed profit, therefore there is a huge incentive to drive up costs. Better to make 15% on a $10,000 drug then 15% on a $10 one.
- porridgeraisin 2y agoThis is the exact reason for the jacked up prices in many things.
- MichaelZuo 2y agoIs there any evidence for how they’re wasting such a huge amount of money year after year?
- sb057 2y agoThe fact that they charge significantly more money than virtually every other utility company in the country (and indeed, within California) with comparable margins is pretty good evidence I feel.
- MichaelZuo 2y agoHow is that evidence? The expectations, regulations, and imposed demands, are not 100% identical across all utilities. So any combination of factors could lead to higher prices.
- _heimdall 2y agoMaybe I'm naive here, but isn't any company at a similar scale regularly finding ways to reduce profits on paper? Taxes add up fast when you don't have expenses to write off, and my understanding was that most effective ways to reduce tax liability would also reduce profit margins.
- MichaelZuo 2y agoWhy are you asking me when their financial statements are available online for you to read? I don’t have some special insider scoop to know whether the numbers listed in the statements are real or fake.
- _heimdall 2y agoWell to be clear, my question there was more broad than any one company's financial statements. I was asking a general question of the motivation for large corporations to avoid having profits on paper. I asked the question rather than claiming it as a statement because I am less confident in the details and want to raise the issue without presuming that I know exactly what I'm talking about on the topic.
- wisty 2y agoPossibly due to overregulation. The power company wants to cut corners. The government wants to prevent that. So there is constant lawfare between governments and highly regulated companies, with neither really caring if it leaves the customer out of pocket (since regulators can blame the bills on the company). The company outsmarts the regulators so the regulators carpet bomb them with so much regulation that they hope it will plug all the loopholes. The incentives between them are simply too far apart. And with inbuilt market failures (due to it being a monoppoly) you don't have effective market mechanisms that allow the government to just set basic safety standards and get out of the way. It's closer to the USSR than social democracy. http://highered.blogspot.com/2009/01/well-intentioned-commissar.html http://highered.blogspot.com/2009/01/well-intentioned-commis... See also, healthcare.
- heylook 2y ago[flagged]
- imajoredinecon 2y agoFor what it’s worth, I just took the parent comment’s wording as metaphor.
- zmgsabst 2y agohttps://en.wikipedia.org/wiki/Lawfare https://en.wikipedia.org/wiki/Lawfare
- dang 2y agoPlease don't cross into personal attack in HN threads. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- dv_dt 2y agoIf you look a recent regulations that affect homeowner solar rates, it's quite the opposite, with the California Public Utility Commission being quite beholden to private utility wishes to the point of making home solar arrays much less cost effective so that utilities can be the only source of solar from larger grid installs. Large utility solar installs are inherently more cost efficient anyway, but the finger on inhibiting home solar was completely unnecessary yet still eagerly passed by the PUC.