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Isn’t this the way regulated utilities work?

danans 2y ago
It's the way investor-owned regulated utilities work. Municipal utilities are also regulated but don't have investors to pay.
- rayiner 2y ago
  > Municipal utilities are also regulated but don't have investors to pay Somebody has to pay.
  - goosedragons 2y ago
    No? Privately owned utilities with guaranteed return rates will charge more to guarantee those return rates. A publicly owned utility would be fine operating at 0% returns.
    - refurb 2y ago
      Not always. A public utility has little incentive to be efficient as like you said, they are fine with 0% returns. If a private utility gets a rate of $1.00 on $0.94 of expenses, it has an incentive to further reduce costs to increase the return, which reduces future rate growth (as higher rates won’t be approved).
      - reverendsteveii 2y ago
        >as higher rates won’t be approved Won't they, though? It seems like a rubberstamping process at this point.
        rayiner 2y ago
        Studies show the opposite is true. Nobody gets voted out of the municipal rate board for denying rate approvals and allowing maintenance and capital investment to fall by the wayside. It's one reason U.S. infrastructure is in such terrible shape.
        refurb 2y ago
        CPUC members in California aren’t voted in, they are nominated by the Governor. So CA is a unique situation where the regulator effectively controls the public utility so calling it “private” is a bit of a stretch. More like a state controlled entity that trades on the stock market.
        refurb 2y ago
        If you’re talking about California utilities the rate decisions are all on the CPUC website. Rate increases absolutely aren’t rubber stamped, the CPUC routinely denies expenditures and the comedians rate increases. But speaking more of the hypothetical, if set up correctly a regulated private utility could be incentivized to reduce costs to capture a higher profit at the same rate.
    - supertrope 2y ago
      Investor owned utilities have more access to capital. The credit union / non-profit / co-op / municipal alternative is not an automatic win for customers.
      - goosedragons 2y ago
        Might have more access to more capital. And they're not very incentivized to use it. There's no competition.
    - rayiner 2y ago
      > A publicly owned utility would be fine operating at 0% returns. A publicly owned utility running at 0% returns wouldn't be able to pay interest on the debt it would have to issue to make capital investments.
      - loeg 2y ago
        Why not? The only reasonable 0% target for public agencies would be net of expenses, including cost of capital.
  - esbranson 2y ago
    They "pay" their customers. Which makes your comment silly.
  - fenced_load 2y ago
    [dead]
  - barryrandall 2y ago
    Someone has to pay, but there's no requirement that someone gets to take a percentage as profit.
    - rayiner 2y ago
      Where do you think a rinky-dink municipality gets the money to pay for infrastructure? They turn to capital markets, who will make a profit on the bonds or whatever.
      - antasvara 2y ago
        Where does an investor owned utility get the money to pay for infrastructure? Because they're generally not cutting into profits to fund infrastructure improvements. PG&E is paying 2.4 billion dollars a year in interest expense (at least in 2023), so it's fair to wonder if that's really any better.
      - loeg 2y ago
        They also don't build transformers in-house; they pay vendors for providing goods and services. Why do you think capital is any different from other services? If a private utility issues a bond, investors in the bond will also make a profit on the bond in addition to investors in the private utility making a profit on the utility.
- robertlagrant 2y ago
  > Municipal utilities are also regulated but don't have investors to pay. They also don't keep your 401k healthy.
  - Supermancho 2y ago
    JPMorgan is responsible for that, not the private run utility.
- y33t 2y ago
  Muni utilities get treated with kid's gloves by courts though. I have direct personal experience of a muni burning nearly a quarter million acres, destroying over 500 homes and ~100K acres of timber. When it came to trial, the court capped their liability at $50m on day one. Their employees even joked about what an outrageous fire hazard all their lines were over text just a few days before it happened. The funniest part is the utility increased rates...but only for people living in the fire-affected areas.
toomuchtodo 2y ago
https://www.thebignewsletter.com/p/power-moves-how-electric-utility https://www.thebignewsletter.com/p/power-moves-how-electric-... https://kevin.burke.dev/kevin/norcal-cities-new-utility/ https://kevin.burke.dev/kevin/norcal-cities-new-utility/

It's the way investor-owned regulated utilities work. Municipal utilities are also regulated but don't have investors to pay.

rayiner 2y ago
> Municipal utilities are also regulated but don't have investors to pay Somebody has to pay.
- goosedragons 2y ago
  No? Privately owned utilities with guaranteed return rates will charge more to guarantee those return rates. A publicly owned utility would be fine operating at 0% returns.
  - refurb 2y ago
    Not always. A public utility has little incentive to be efficient as like you said, they are fine with 0% returns. If a private utility gets a rate of $1.00 on $0.94 of expenses, it has an incentive to further reduce costs to increase the return, which reduces future rate growth (as higher rates won’t be approved).
    - reverendsteveii 2y ago
      >as higher rates won’t be approved Won't they, though? It seems like a rubberstamping process at this point.
      - rayiner 2y ago
        Studies show the opposite is true. Nobody gets voted out of the municipal rate board for denying rate approvals and allowing maintenance and capital investment to fall by the wayside. It's one reason U.S. infrastructure is in such terrible shape.
        refurb 2y ago
        CPUC members in California aren’t voted in, they are nominated by the Governor. So CA is a unique situation where the regulator effectively controls the public utility so calling it “private” is a bit of a stretch. More like a state controlled entity that trades on the stock market.
      - refurb 2y ago
        If you’re talking about California utilities the rate decisions are all on the CPUC website. Rate increases absolutely aren’t rubber stamped, the CPUC routinely denies expenditures and the comedians rate increases. But speaking more of the hypothetical, if set up correctly a regulated private utility could be incentivized to reduce costs to capture a higher profit at the same rate.
  - supertrope 2y ago
    Investor owned utilities have more access to capital. The credit union / non-profit / co-op / municipal alternative is not an automatic win for customers.
    - goosedragons 2y ago
      Might have more access to more capital. And they're not very incentivized to use it. There's no competition.
  - rayiner 2y ago
    > A publicly owned utility would be fine operating at 0% returns. A publicly owned utility running at 0% returns wouldn't be able to pay interest on the debt it would have to issue to make capital investments.
    - loeg 2y ago
      Why not? The only reasonable 0% target for public agencies would be net of expenses, including cost of capital.
- esbranson 2y ago
  They "pay" their customers. Which makes your comment silly.
- fenced_load 2y ago
  [dead]
- barryrandall 2y ago
  Someone has to pay, but there's no requirement that someone gets to take a percentage as profit.
  - rayiner 2y ago
    Where do you think a rinky-dink municipality gets the money to pay for infrastructure? They turn to capital markets, who will make a profit on the bonds or whatever.
    - antasvara 2y ago
      Where does an investor owned utility get the money to pay for infrastructure? Because they're generally not cutting into profits to fund infrastructure improvements. PG&E is paying 2.4 billion dollars a year in interest expense (at least in 2023), so it's fair to wonder if that's really any better.
    - loeg 2y ago
      They also don't build transformers in-house; they pay vendors for providing goods and services. Why do you think capital is any different from other services? If a private utility issues a bond, investors in the bond will also make a profit on the bond in addition to investors in the private utility making a profit on the utility.
robertlagrant 2y ago
> Municipal utilities are also regulated but don't have investors to pay. They also don't keep your 401k healthy.
- Supermancho 2y ago
  JPMorgan is responsible for that, not the private run utility.
y33t 2y ago
Muni utilities get treated with kid's gloves by courts though. I have direct personal experience of a muni burning nearly a quarter million acres, destroying over 500 homes and ~100K acres of timber. When it came to trial, the court capped their liability at $50m on day one. Their employees even joked about what an outrageous fire hazard all their lines were over text just a few days before it happened. The funniest part is the utility increased rates...but only for people living in the fire-affected areas.

toomuchtodo 2y ago

https://www.thebignewsletter.com/p/power-moves-how-electric-utility https://www.thebignewsletter.com/p/power-moves-how-electric-... https://kevin.burke.dev/kevin/norcal-cities-new-utility/ https://kevin.burke.dev/kevin/norcal-cities-new-utility/