Comment by aerostable_slug | Hacker News Reader

Comment by aerostable_slug | Hacker News Reader

aerostable_slug

Something to add to the mix:

For those who don't know, capital expenditures that are funded out of a rate case make investor-owned utilities money. If you can get the relevant regulatory body (often a public utility commission) to approve raising rates to cover x dollars of grid resilience projects, the utilities will happily take the money and go forth and implement.

The trick is justifying the spend to said regulators. This is hard with black swan events and regulators that are explicitly tasked with being ratepayer advocates, guarding against the utilities unnecessarily gold-plating things to get a greater rate of return for their investors. It's not like the utilities don't want the money, or the "work" of doing it, or anything like that. Rather, if PG&E went to CPUC and asked for several billion dollars to build a hardened bunker filled with things like transformers that may never be used in the lifetime of the people signing the documents (but the profits realized by the rate of return on the CAPEX will immediately go to investors), they'll likely get laughed out of the room. This issue complicates the discussion about grid resilience, because it can seem to Jeff & Jane Ratepayer (/taxpayer if we're talking national projects) it's all just an excuse to route regular people's money to executives & investors over something that won't happen, the rich get richer, yadda yadda yadda.

Ratepayers should never be on the hook for this. We need to compare the capital expenditure of these grid resilience projects (like the spare transformers in a hardened bunker) against the costs of what if such an event happened. It's obvious that for such black swan events, FEMA will get involved and ultimately the funds to recover from this disaster will come from the federal government. So as long as the capex is reasonable, this should be funded by the government.

Out of curiosity, what do you see as the practical differences between taxpayers footing the bill compared to ratepayers given that most people pay both?

(In other words, is paying for this with higher taxes substantially better compared to paying for this with higher utility bills?)

The one major practical difference is that the bill should be doled out according to income. The second major practical difference is that (almost) everyone in the nation should share the cost, not just the customers of a specific utility in a specific geographic area.

> the bill should be doled out according to income

First, income and electricity usage are already correlated for most residential customers -- in general wealthier individuals use more electricity and therefore pay more under either approach. More importantly, making taxpayers subsidize very-high-electricity consuming businesses and manufacturing seems unfair and regressive. (For example, an aluminum smelter may use as much electricity as a large residential neighborhood but pay lower net taxes than that neighborhood.) Third, paying for the actual cost of electricity helps incentivize energy efficiency which incentivizes energy efficiency and has environmental benefits. Finally, if your goal is to prevent rate increases from burdening low-income households then using taxpayer funds to bolster targeted subsidies such as LIHEAP seems like a more direct and cost-effective approach.

> (almost) everyone in the nation should share the cost, not just the customers of a specific utility in a specific geographic area

Why? If we make it easy for utility executives to ask for handouts and grants then who among them would bother with the comparatively harder task of convincing local customers to pay the true costs of producing the service they are using? More generally, asking everyone to collectively subsidize organizations or regions that make poor, short-sighted decisions is a moral hazard that shields utilities from consequences and discourages them from planning responsibly. Sure, a government may need to be prepared to step in to take over a failing utility but that seems like it ought to be a last resort in emergencies, not a standard way of funding predictable business costs.

Or, in the case of Texas, where there are no regulators that have done so…

Government should buy insurance from a company that is then incentivised to build out mitigation and resiliency projects.

Why raise rates? It's not our fault they're taking profit and not investing in reliance.

The amount of profit a utility makes is usually regulated.

Reply on news.ycombinator.com