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Comment by Thorncorona | Hacker News Reader

Privatize the profits and socialize the losses

That's not what bankruptcy is? Unless you consider creditors and equity holders "society".

Well 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.

Calling that personal benefit when they were hit by a massive surge in supply pricing is shifting the blame a bit, no?

Realistically, since the creditors are probably private and the customers, which would otherwise face the loss, are the community, it's actually somewhat the reverse - privatized losses to the benefit of the community (which would otherwise need to pay off the surge in electricity pricing).

> Calling that personal benefit when they were hit by a massive surge in supply pricing is shifting the blame a bit, no?

How is it not personal benefit? This company was essentially acting in the same role as an insurance company for retail customers. They charge a fixed fee for electricity that is above the average price of electricity. When electricity costs less than they charge they make money. When it costs more they lose money. They should have maintained cash reserves from profitable times to handle unprofitable ones. In an extreme situation like the current one in Texas they could seek a loan or already have lines of credit in place to cover any shortfall from their cash reserves. The profit they made went somewhere and it obviously didn't go into a rainy day fund.

As a 501(c)(12), they provided services at cost to all “customers” (members), as legally required.

It is incredible that such a fund is not mandatory

If a customer owes money to an electricity company which goes bankrupt, that doesn’t cancel the customer debt. The insolvency firm will sell the debt on for what they can get in order to repay some of the company’s creditors.

Pity, I feel like that would be the most equitable way to handle this sort of situation. Provider failed, so the client wins.

But they were benefiting. They have had years of not winterizing their systems, which helped them earn quarter after quarter of profits. Those profits were paid to executives and shareholders, who will not help make up the shortfall now.

No, they were not. Did you look at their financials? Maybe you should see how much this was very much not the case before saying more on the topic.

That’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.

How do you think the bankrupt utility will start up again?

Hint: Socialized costs.

Another energy company will likely buy them. How is that socializing costs?

People throw that term around without actually knowing what it means

California was the first state to try deregulation of the energy market. https://en.wikipedia.org/wiki/2000–01_California_electricity...

Yeah and the regulations put in place around the market were terrible.

Massive bonuses would have been paid out already while the liability burdened company will need to be bailed out.

The article says nothing about a "bailout".

They 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.

Surely 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.

Lots 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.

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