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I will piggy back off of your comment because I was going to say a very similar thing. In my state, electric utilities are guaranteed a rate of return on invest
by glenstein 7mo ago
I will piggy back off of your comment because I was going to say a very similar thing. In my state, electric utilities are guaranteed a rate of return on investment of approximately 12%, if I remember correctly. And so there's a lot of incentive for build out and maintenance that's high in total dollar amount and high in volume of work done. In some ways it's the system working as designed but the "cap" can incentivize erroneous build out, as you noted in the jet fighter example.
- pixl97 7mo agoSo you have an excessively built out electrical system... sounds like a win to me.
- CGMthrowaway 7mo agoI'm sure it sounds good to you as long as it's OPM https://en.wikipedia.org/wiki/Averch%E2%80%93Johnson_effect https://en.wikipedia.org/wiki/Averch%E2%80%93Johnson_effect
- toomuchtodo 7mo agoThey said excessively expensive, not excessively robust. There is a difference.
- glenstein 7mo agoThere's not necessarily a difference because they overlap on the venn diagram. The returns to the shareholders go up the more you build out, the benefits and performance face diminishing returns. Different utilities around the country get different scores for reliability and infrastructure integrity, because a dollar spent by one utility on one grid doesn't necessarily have the same impact as a dollar spent by another.
- adgjlsfhk1 7mo agoAbsolutely not. The way to spend as much money as possible is to do intentionally inefficient repairs (e.g. last minute/reactive). The providers gain from grid unreliability since by causing problems, they get to justify spending money to "fix" them.
- glenstein 7mo agoExcept for the cost to the ratepayers.
- phil21 7mo agoDepends on if the investments were in the right stuff or not. Overbuilt sounds great, so long as it’s overbuilt in capacity and reliability. If those were malinvestments instead it’s simply throwing money away for not even a theoretical “someday” return. Plenty of ways to look busy while spending massive amounts of capital. Generally agreed in principle though. Investment in the grid is pathetic almost everywhere in the US and has been for generations.
- Manuel_D 7mo agoIt's about threading the needle between a well funded grid, and an over engineered grid. There's a point where diminishing returns makes investment greater than that threshold wasteful relative to opportunity cost of spending that tax money on different public services.