Cities can cost effectively start their own utilities
kevin.burke.dev
kevin.burke.dev
After I moved a city council for whatever reason ended up selling. As a result the cost of electricity immediately doubled and power outages occurred regularly due to reduced maintenance. I don't know what they spent the money on that they received but it was a very poor decision that I have to believe they regret.
Our modern political economy is almost entirely focused on ensuring that everything that can be sold to private entities (read, the market) is. In this ideology the sale would be viewed as a success regardless of any practical downsides.
That said, who is to say the trend isn't reversible some day.
Also let's not forget the selling to private operators does provide benefits, not always, it's not the magic fix we pretend it is.
And then there's dark pools. Trading isn't even done on the market anymore.
This is such a non-sequitor, it undermines your entire post.
Food: - restaurants definitely compete with each other, mostly in each local area - and within that, different slices of the restaurant business more directly compete, e.g. fast food is more competing with each other than fine dining. - BUT: we have a huge problem with a lack of competition in the supply chain driving prices up for everyone, at least in the US. - Groceries are similarly impacted by supply chain monopolies
Smartphones: high end smartphones are a oligopoly: - Apple vs Samsung vs HTC and several other tech companies producing phones; Apple definitely commands quite a bit of a premium, as do some of the nicer Android phones. But on the whole, the companies really are fighting to one-up each other with better features, battery life, etc. - quality is improving, even if the price is over-charging vs the ideal competitive market. Low end phones are even more fiercely competitive
Other electronic categories seem to show decent market dynamics; headphones, earbuds, usb peripherals, keyboards, etc. all seem very commoditized; there certainly are brands that try to command a bit of a premium based on reputation / marketing, but the cheap options are often good enough and definitely have a very competitive market. Big electronics like GPUs and gaming consoles though I think it's easier to start considering market distortions due to more monopoly power.
Of course there are no shortage of monopolistic practices out there, e.g. for utilities, collusion on rent, online retail (Amazon), textbook prices, medical care & pharmaceuticals, and even more mundane things like frozen potatoes and chicken.
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The thing that bothers me most with the simplistic view that "the market will do it better" is that the whole premise of market forces giving the most efficient price assumes that (a) a commodity is being traded by (b) a large number of buyers and sellers, none of whom have any significant share of the market. Many markets either (a) aren't trading a commodity (e.g. iPhones and Android phones aren't interchangeable so Apple can command a premium price) or (b) have consolidated buying or selling to the point that they don't have the large number of independent buyers or sellers necessary to have the price be set by market dynamics rather than the monopolist or monopsonist. And the people promoting "let the market fix it" either are too dumb to realize that, or more likely are letting their rich friends make a quick buck or want to score political points by promoting smaller government.
For trains it's much harder - yes, there are two providers on the WCML, but they're not equal (one runs faster trains) and as such there's zero real competition.
So you have the government own the tracks, contract with a private company to maintain them. Then anyone can use the tracks, like anyone can use the roads. Private companies offer train service to the public. All they need is rolling stock and they can start selling tickets. You then get a market that looks like airlines, i.e. entering the market is a moderate investment (millions; buy rolling stock/planes) rather than needing billions to build the network itself. More popular routes get more suppliers, which turns into more frequent service. There is plenty of competition because rolling stock is mobile and can easily be reassigned according to customer demand.
What could be interesting is to have the local government found a co-op, i.e. they issue a bond to do the build-out and then hand the network to a co-op in exchange for a contract to pay the debt, essentially giving the co-op the backing of the government's credit rating for the initial build-out. Then the co-op board gets separately elected by its customers so they're directly accountable to the customers for any shenanigans.
All that to say, voters here do care about utilities, and the coop solution worked for about 25 years iirc but it can't work in today's "one solution fits all" regulatory context anymore, at least where i live. Things are far from that simple in practice.
The best system is a free market, if possible. But the second best system may not be close to the best system, it may be a local minima that is very different.
A classic example is that small companies and no unions is theoretically best, but monopoly unions vs monopoly companies is the second best (since there's no single monopoly, so they negotiate something close to the theoretical ideal).
Free markets are best, but if the government is going to heavily subsidise and regulate the power companies (as they are natural monoplolies, so they either get regulated or they abuse their position) then maybe it's best to just cut out the middle man.
It seems there are at least two, such as in the case of utilities: best services or best profits for the shareholders. Again in the case of utilities we see time and again that these are mutually exclusive optimums as a privatized utility makes cuts to investment, build out, maintenance, customer service, or other aspects of the business in the goals of increasing profits, to the detriment of the quality of their service.
This premise is highly questionable. Certainly for competitive markets it's entirely false. Uncompetitive markets suffer largely the same failure mode as government bureaucracies, but it's not even clear that this is actually worse, because government bureaucracies are susceptible to not only charging bloated service fees for mediocre service, they can also be captured into diverting tax dollars to private cronies. Just because the government owns the real estate doesn't mean it's manufacturing its own trucks and networking equipment and copy machines, but as soon as it isn't, it's buying that stuff from the market and you need a competitive market or you're still screwed.
So what it comes down to is, you need a competitive market.
Apologists love to complain that <insert problematic market outcome> isn't the product of a true market but that dog doesn't hunt. We have the economic system we have. We call it capitalism. It produces the above mentioned (and countless other) excerable outcomes. No excuses.
Cost disease induced by regulatory capture and a massive housing shortage induced by zoning regulations.
> Once you've cleared that hurdle your next task is justifying the current massively skewed (and worsening) income distribution in the US.
Poverty traps created by social assistance programs that put overlapping benefits phase outs on the lower middle class, causing them to incur oppressively high de facto marginal tax rates that in some cases exceed 100% of marginal income.
> Clear that bar and all that's left is justifying private equity eating everything from fast food franchises to the healthcare system.
This is regulatory capture again. Captured markets consolidate and then corporate raiders notice that the incumbents have a monopoly but aren't screwing their customers quite as hard as a monopolist can do. The underlying cause is government regulations insulating the incumbents from competition; private equity are the maggots that come to eat the corpse once the market is already dead.
Notice how there was "capitalism" in the 1950s but lower levels of corporate raiders or income inequality etc. So then you might wonder what has changed between then and now, and an interesting proxy is the number of pages in the US Code and Code of Federal Regulations.
> We have the economic system we have. We call it capitalism.
If you judge an economic system by what people call it, we called the thing that happened in 20th century Russia "Union of Soviet Socialist Republics" and the thing that happened in WWII Germany "National Socialism" and by this logic we shouldn't attempt anything called "Socialism" ever again.
But if socialism is the thing where you put the government in charge of the economy and capitalism is the thing where you limit the government from interfering with the market then socialism is the thing we've actually tried. How are you going to put e.g. the US healthcare system on "free markets" when it's the most regulated market in the US?
Ish. While regulatory capture is at the heart of most of the truly ass outcomes attributable to capitalism it's comical that an attempt would be made to assert less government oversight would in some way be beneficial. What, are we pretending the last several decades of blissfully ignored potential anti-trust cases, questionable mergers, etc. aren't the direct result of captured legislators being told to just sit on their hands?
Incidentally the "housing crisis" has nothing to do with zoning. Offshoring manufacturing and permitting AG conglomerates to bankrupt the majority of family farmers has resulted in rural communities being stripped of economic opportunities which caused a flood of economic refugees into high cost residential markets. Proof: pundits screech about a lack of affordable housing when ~8 million units sit unoccupied, many outright abandoned. In Other News: when zoning changes are made to permit the kind of multi-story mixed use structures that are hyped as a solution to the housing crisis what happens is they get built, the local market gets an influx of condos that nobody who lives in the area can afford and nearby housing increases in cost (a net reduction in affordable housing), literally the exact opposite of the effects advertised.
> How are you going to put e.g. the US healthcare system on "free markets" when it's the most regulated market in the US?
Most regulated...the what now? Private equity firms and healthcare megaconglomerates (oh I'm looking at you Duke Health) that are sweeping up private practices and hospitals all over the country. Without exception this leads to measurable decline in quality of care, and is the leading cause of rural hospital closure nationwide. This phenomenon is also driving up the cost of performing clinical trials as these outfits are savvy enough to intentionally target practices that perform trials. The resulting increase in fees to run a clinical trial are so steep they trigger fraud warnings in industry benchmarking software. Anyway, given we're the only industrialized nation who's healthcare system isn't entirely controlled by the government this claim seems pretty rich. One of several ironies here being freeish marketish healthcare produces some of the worst healthcare outcomes of any industrialized nation, at four times the cost. Wheee.
Put another way yeah the government is culpable only in the sense they decided to not actually govern, thus letting The Market run rampant.
Regulatory capture isn't just industry capturing the government so they can avoid regulations. They capture the government so they can control the regulations, and then use them to exclude competitors by increasing regulatory barriers to entry.
It's pretty hard to sustain a monopoly in a market with low barriers to entry because the entry cost is lower than the prevailing prices, and new entrants don't sell to the monopolist unless they're offered more than they could make from staying in the market, which is in turn more than the cost of entry. So entering the market stays profitable because you either make money by selling to customers or you make money by getting acquired. But the monopolist doesn't actually have an unlimited supply of money for acquisitions, so new competitors keep popping up until they run out of cash and then one of them sticks, or one of them is e.g. a co-op that isn't interested in selling.
To prevent this the monopolist needs the market to have higher barriers to entry. One way of doing this is to become so vertically integrated that new entrants would have to reproduce the entire supply chain to enter the market, and this is the case where you actually need antitrust enforcement, but it also isn't the common case. And it's hard for anyone to get a vertically integrated monopoly to begin with without the common case, because it's hard to monopolize the vertical before you have a monopoly in the original market.
The common case is the monopolist gets the government to pass laws making it more expensive to enter the market until new entrants are deterred.
> Offshoring manufacturing and permitting AG conglomerates to bankrupt the majority of family farmers has resulted in rural communities being stripped of economic opportunities which caused a flood of economic refugees into high cost residential markets. Proof: pundits screech about a lack of affordable housing when ~8 million units sit unoccupied, many outright abandoned.
This is just "demand is not always in the same place as it was before", it's only a problem if you constrain supply from increasing in the places where the demand has moved. This is the same reason you can have unoccupied units and a shortage at the same time, when the units aren't in the same location as the demand. The vacancy rate in e.g. Manhattan is at record lows.
Also, the shortage is by significantly more than 8 million units.
> when zoning changes are made to permit the kind of multi-story mixed use structures that are hyped as a solution to the housing crisis what happens is they get built, the local market gets an influx of condos that nobody who lives in the area can afford and nearby housing increases in cost (a net reduction in affordable housing), literally the exact opposite of the effects advertised.
This is the "induced demand" theory, which is rubbish. There is more demand for higher density areas than there is supply, so the price is high. If you increase the density of an area, you satisfy some of the demand, not only by creating that housing but by increasing the density of that area, which makes it more attractive because it can now sustain more local shops etc., so more people also want to move into the directly adjacent existing housing.
This does decrease the cost of housing, it's just that the housing that becomes more affordable isn't the housing directly adjacent to the new housing. It's in the place people left in order to move there.
What's happening is essentially this: Suppose you have areas with density levels 1, 2 and 3. Level 3 is the most dense, most desirable and most expensive. You increase the density of a level 2 area so it becomes a level 3 area by building more housing. The price of all three density levels goes down across the region, because there are now more level 3 areas available, so you don't have to bid as high to live in one, and some people move from level 1 and 2 areas to the new level 3 area, which makes more supply available there too. But that specific neighborhood used to be level 2 and is now level 3, so it, unlike the region as a whole, can increase in price, because the new level 3 price might still be more expensive than the old level 2 price.
And even that can be solved by building enough level 3 housing across the region so that the cost of level 3 housing falls below the previous cost of level 2 housing, but for that you have to build even more.
> This phenomenon is also driving up the cost of performing clinical trials as these outfits are savvy enough to intentionally target practices that perform trials. The resulting increase in fees to run a clinical trial are so steep they trigger fraud warnings in industry benchmarking software.
To take one example, the US requires separate clinical trials from the ones already done in Europe. There is no legitimate reason to even be doing them a second time, the European ones should be accepted for approval for sale in the US, but they're not. Because the incumbents like it that way, because it reduces competition and they own the regulators.
Another solid example is the entire concept of certificate of need laws. It's quite possibly the most naked example of anti-competition legislation in existence.
> Anyway, given we're the only industrialized nation who's healthcare system isn't entirely controlled by the government this claim seems pretty rich.
There are several industrialized countries with private healthcare systems that are all more efficient than the US system. The US system is notoriously corrupt and inefficient because the incumbents use regulation to inhibit competition.
This is a pretty bad example because monopoly unions vs. monopoly companies is extraordinarily bad to the point of being a plausible worst case scenario. The company is then free to run roughshod over its customers and suppliers and use its resources to capture the government and the union not only does nothing to prevent this but actually encourages it because then they can extract more of the monopoly rents for themselves. Then the normal tendency for the public to demand antitrust enforcement when met with an abusive monopolist is blunted by the union's support for the monopoly and prevents the monopoly from being toppled.
To see some examples of this, look at the arguably social democratic Keynesian US from the fifties, and where they're at now. Similarly for the United Kingdom. Labour used to fight for social democratic policies, and since the advent of "New Labour" (Thatcher's greatest victory), they're essentially a right wing party. For a much more harrowing example, look at Allende in Chile and the US sponsored coup by Pinochet.
In general what you see is that the social democratic status of a state is an unstable one. Roughly speaking, the people who would benefit from neoliberal policies happen to have a lot of money with which they can and do influence politics. There's campaign funds, lobbying, but much more importantly owning the media[1]. Propaganda is incredibly powerful (we are not immune), and it has been used successfully time and again to get people to vote against their own interests, such as abolishing social democratic practices.
[1] In the case of Chile, and for example Indonesia, the mechanism is much more violent, but the principle the same. Capital is spent to successfully influence politics in favor of capital.
I think you mean neoliberal democracies.
In other places on earth, selling public utility requires the company to operate at similar or better level of services previously provided while retaining the cost. And those deals are mostly regulated, penalties when not meeting them.
And it used to be, may be in rare cases the people in Government making those deals actually knows what they are getting out of it, so the contract are all well written.
Now it seems they are selling because 1. They dont have money. 2. They are running it poorly. 3. They are bribed or have incentives to sell it. All with no caring of how the people they serve were getting any good value out of it.
Our railroads paid a nice 300m in divident every year then corona came, people were told to stay home. You can guess who had to pay for the lack of travelers.
The most silly are ISP's. The prices in each country depend on how much people can pay and what you get for it is rng
The one privatisation I believe the UK got right was British Telecom.
We now have a strongly regulated infrastructure side called OpenReach - the price they can charge for last mile connectivity is limited, and as such we have a load of different ISP's which either compete on tech and service (AAISP, Zen) or cost (PlusNet et al).
And then a proliferation of alternative last mile providers has also occurred - I now have the option of 900/100 FTTP from OpenReach based suppliers, 1130/104 DOCSIS from Virgin Media and 900/900 FTTP from CityFibre based suppliers.
I'm paying £40 a month for the latter.
Hopefully there will be enough push to get 1Gbps Connection to every home rather than settled on 30Mbps.
[1] EXCLUSIVE: January 2025 update on broadband availability across the UK, nations and regions
https://www.thinkbroadband.com/news/10528-exclusive-january-...
You can straightforwardly privatize things that can't be allowed to fail. Power generation is a decent example: If you have a hundred independent generating companies that all sell into a live auction market, they have to compete with each other which keeps prices down and the market as a whole remains reliable because there are many independent suppliers using different generation methods and if any one of them experiences a failure you can immediately switch to the others. The market has the incentive to be able to supply even during grid stress because the price will go up then, so suppliers with reserve capacity make back their costs for keeping it in reserve.
The problem comes when there is corruption. Instead of having a competitive market, the contract is assigned to cronies, or a lack of antitrust enforcement allows the market to consolidate until the suppliers are a cartel. Then, since competition is thing that gives privatization its advantage, the lack of competition causes the public to get screwed.
"Operating" the grid isn't the natural monopoly either. The natural monopoly is actually the physical space beneath the grid, i.e. the roads. If a storm knocks down a pole or some transmission lines need to be upgraded you could put out bids to any number of companies to come and do the work. If customers want to buy power from a generator, the grid is used to deliver it, but that doesn't mean the grid operator has to be an intermediary between the supplier and the customer instead of a vendor of the supplier paid to deliver power. It's not even obvious that they should be paying per kWh instead of funding distribution through taxes in the same way as the roads, since a well-functioning grid should never exceed peak capacity but using otherwise-idle transmission capacity has no variable cost.
And then what's the natural monopoly? Just physical ownership of the infrastructure, and some accountants to predict when demand is about to outstrip supply and bids should be put out to expand capacity.
I didn't get to bid in an auction. Providers bid until they had enough then the price was fixed based on the most expensive source.
We also designated a windy chunk of government land next to my city to private wind energy. Besides land it needed a bit of subsidee to spin them up.
Big turbines happened that provide enough power to run the city.
Not that the city didn't have the money to do it themselves. Its dwellers could also easily afford it. That's just not how things work around here.
Mysterious actors blew up some pipeline some place in the north and the highest bit went up dramatically.
It didn't fail, people just couldn't pay their bills anymore.
The market was very good at increasing profit when demand was larger than supply.
One could imagine worse circumstances with a larger effect.
That's what it's supposed to do. Then in the absence of regulatory barriers to entry, new suppliers enter the market to capture those profits, until the profits aren't so big anymore because there are more suppliers.
One of the things that messes people up here is that they want consistency but don't want to pay for it. You have a competitive market which is providing low prices until there is a supply disruption. Then prices are temporarily high. If you wanted to you could have bought insurance or futures etc. so that you would always pay a consistent price, but then you'd be paying a higher price than the market on the days when supply is good so that you could pay a lower price when supply is low. People then complain about that too, but those are your options; if you pick the "don't buy insurance" one then you're exposed to events, but you should be the one who gets to choose.
And maybe if you're poor you don't want the insurance, what you want is to have the lower price most of the time and cut back your usage when the price is high. But either way, that should be something you get to decide instead of something somebody decides for you.
My gut says it is like needing for example a car. You could rent or lease or you could buy one in cash on on credit. Each choice makes sense to someone. If it is to be a collective choice/deal it should be cheaper and I see no reason why it can't offer the same options. We have this weird tendency to shove all collective arrangements in governments boots where we know the outcome will be something stupid, turn into something ridiculous or both.
I really want to see gov processes strictly defined. Then we can have the government set up entirely independent bodies that strictly follow their charter. Ideally it pays no taxes, no one works there, no one owns it. I might even like blockchain for this purpose. We want 1234 new lease contracts for 2026, any company may bid, customers press accept. The one most accepted gets to provide the [proverbial] cars.
It seems doable.
What are some examples of successfully privatized utilities?
So the only way to have a true market is to count on the opposite of human greed.
Well hopefully that works out.
They possibly even managed to buy a luxury car in the years that followed. Or went on holiday more often. Or somehow unexpectedly landed a nice and cush job at said energy company.
I'd guess what happened is this small town generated power and let its people buy it at a reduced rate. GP just didn't get into that level of detail.
The town must have either been in huge financial trouble or on a privatization kick.
The town may also have been putting other revenues towards the electric utility (so losing money on the service and billing).
It was probably just a mistake though.
My town charges about $0.11 per kwh, with a fixed monthly service fee making the effective rate for a small user closer to $0.20.
Selling to a larger company who hopefully has the capital to fix them seems like a bargain when compared to the cost of replacing a hydro dam (or even replacing it with a non-electric generating dam).
Of course, that does come at a cost, and it's probably spread across all rate payers.
As an outside observer, the fact that PG&E can lie to the state and request money for maintenance, subsequently sending that money to shareholders, looks like a likely candidate for many of the problems.
It's especially annoying that it's the lowest quality power while it's working (compared to a pure sine signal), has the highest count of days with some power blip, the highest number of full days without power each year, it's 2.5x more expensive than anywhere else I've lived, and they don't even have snow or ice or the same levels of wind and rain as the other places with better power. Plus they're servicing more people per square mile. It ought to be more efficient.
Maybe CA really is special somehow, but it looks like ordinary corruption.
I’d guess the problem is more endemic to their political system.
Berlin for example had a massive bank collapse in 2001 under the Conservative government that ended up placing the state of Berlin into billions of euros worth of debt and financial risk. The succeeding SD/Left/Green triplet coalitions had to fire-sell off many state-held assets like the water utility (that ended up a disaster on its own [2]) and especially a huge amount of residential real estate, which is now contributing to the insane rent explosions in Berlin.
To this day, Berlin hasn't recovered from all the penny-pinching of the last decades.
[1] https://de.wikipedia.org/wiki/Berliner_Bankenskandal
[2] https://de.wikipedia.org/wiki/Berliner_Wasserbetriebe#Streit...
We have not had anything on the scale of what the GP describes of a city going billions into debt - even Birmingham is orders of magnitude less bad.
The government sold assets, but not at fire sale prices. I do not think selling utilities was a great idea, but its not as bad as either what GP describes, nor the "small town in Michigan" example at the top of this thread (when did you last experience a blackout in the UK?).
They organized and succeeded.
Where was the opposition? Is the entire German environmental movement beholden to the Green Party?
And even it they don't seem to have memory now of doing so, I applaud them for this specific decision back then.
Power bills increased after switching to community generated power.
As a selfish comparison point, the average residential rate for Finland, an EU country known for its recent nuclear developments (great!), is ~$0.25 per kWh, about 25% higher. France, well known for its pro-nuke approach, seems to average ~$0.28 per kWh, or about 40% higher. Germany, which has... Not done so, is around $0.40 per kWh, or about twice as high. Even Iceland, famed for its "almost free" geothermal power, seems to average $0.16-0.18 kWh for an ordinary residential connection - one must assume aluminum plants, etc can cut much better deals with the geothermal plants, through strategies like close colocation, of course.
These are very important factors to keep in mind, even if the absolute numbers seem small. Expensive electricity makes everything else more expensive as well. It touches every facet of our lives in a way not even food does. And making electricity cheaper probably benefits human welfare en masse in a huge way. It's a shame power management doesn't seem to be very attractive to recent EE grads like myself since it pays much worse and requires much more credentialing to break into compared to, say, WordPress development.
It has to be noted that in most EU countries electricity for business is quite cheaper than for households.
https://ec.europa.eu/eurostat/statistics-explained/index.php...
Making the fundamental power generation cheaper is probably still the best lever a private actor can push.
Huh? More like 11-17c/kWh.
- Average spot price for 2024 was less than 6c/kwh https://www.nodesk.fi/sahkon-keskihinta-2024/
- Transmission costs are around 2-6c/kwh https://sahkokuningas.fi/sahkon-siirtohinta/
- Taxes bit less than 3c/kWh
Even if you add all those up, you only get max 15c/kWh.
As of today, you can get 2 year fixed price for less than 8c/kWh, even with that it only adds up to 17c/kWh, with most expensive transmission costs, taxes rounded up and energy price rounded up.
Nuclear energy has contributed to the cheap price, but so has wind power https://www.talouselama.fi/uutiset/te/bfe4f5f4-0329-4cfe-989...
I currently pay a flat ~8c/kWh. I could save by using spot price electricity but as I don't use much, this keeps the monthly cost predictable.
Even though the UK will be £311bn worse off by 2035 because of it [1].
A decision that can't be blamed on the rich but instead is owned by the ordinary voter. Who then demands the same quality of life they had previously with the same taxation levels. It's delusional thinking and unfortunately no one has the political capital nor guts to correct them on it.
And it's a very different story here in Australia where none of what you/Gary said is true. The state governments are under financial strain because of huge investments in public transport infrastructure owned by the people.
[1] https://news.sky.com/story/brexit-new-report-suggests-uk-311...
The money for these projects is provided by the wealthy through the purchase of government bonds.
Brexit is a problem sure, nobody denies that, but QE of around £1tn since COVID, most of which ended up with the richest (see asset price increases and cash holdings and world stock markets at all time record levels) is even more of a problem as it makes normal people and tax income relatively even smaller so borrowing and taxes need to be increased. And of course we don't tax the people whose assets have gone up enormously until they sell those assets. Quite often rich people borrow money against those assets instead of realising a capital gains tax event or various other loopholes.
I don't know too much about the specific case of transport infrastructure in Australia, but if the government owned them outright without attached debts clearly they would be assets rather than liabilities.
We can argue about the reasoning behind that, but that seems to be what most Brits who voted for Brexit wanted
A healthy debt to GDP ratio (like what the USA has) is integral for a growing economy. Choke on it Austrians.
The economists who argue for this, only slightly paraphrased.
The argument is generally that private companies are more productive than public services due to productivity improvements that are forced via competition. There's no such forcing function for a government-provided service, enabling (potential) waste and bloat, depending on governmental competence and oversight.
The correct counter-argument is that there needs to be competition for that to happen. If you have only one electric utility for customers to choose from, the argument is totally invalidated.
Underproductive though is certainly simpler but my understanding is that it was inefficient because the asset owner charging an equilibrium price should in theory lead to higher overall production (obviously lack of competition hurts this).
[1] https://www.parliament.nsw.gov.au/researchpapers/Documents/e...
Unfortunately, I'm sure the folks that signed that deal were long gone before the problems started setting in
The article hedges against someone pointing this out by admitting that Walnut Creek is an unusually optimistic location and that PG&E is also recognizing large expenses related to ongoing infrastructure buildouts, but no solutions are offered for these caveats.
The hidden problem with projects like this is that once you roll these utilities into the city’s budget it’s too tempting to start dipping into taxpayer funds for needed improvements rather than raising electricity rates. When problems arise, politicians try to kick it down the road so it becomes their successor’s problem, or they try to offload the expense onto a growing debt load because that delays the problem to the next generation. It becomes easier to keep the highly visible rate down, but taxes might go up to cover the infrastructure costs instead.
So I’m skeptical. If there was an analysis that showed a drop in rates that was not 3X higher than the profit margins of the private utility I’d be more open to the idea, but as presented this feels like back of the envelope math that generates savings by ignoring all the details that didn’t make their way onto the envelope.
PG&E customers are paying very large amounts for the consequences of bad infrastructure causing wildfires and other legal costs which are being paid for with higher rates.
Example:
https://www.ewg.org/news-insights/news-release/2022/12/pge-a...
They just get blended into the tax bill.
Their costs get shouldered by their customers and their stock price. (they really should issue shares to pay their bills to dilute their stock price and cause their existing investors to lose money). In any case it's not going to get very willingly picked up by the government.
PG&E's liabilities aren't going to be put into taxes.
It's not the state government taking over PG&E, it's individual municipalities leaving the PG&E network and forming their own utility to buy wholesale electricity (or make some of their own) and distribute it to their citizens... resulting in a large reduction in cost in no small part because they no longer have to pay for PG&E's liabilities.
They’re saying that the cost of providing electricity to the cities, where everything is densely located and there are fewer trees and fewer overhead lines needing under grounding is lower so they should charge less to city consumers.
They imply that the bulk of the cost is delivering power to the richer consumers further out because there’s a lot of line miles that need under grounding. That’s probably accurate.
But utilities are restricted from pricing like that because you don’t want utilities triaging customers that are less profitable. The article here makes the argument that the far away and expensive customers are rich, therefore fuck ‘em. I’m not familiar with California but I doubt this is true across the board. There are surely notably rich communities far from the city but surely there are also poorer areas further from the city that are relatively cheaper because the commute is worse.
And I assume your food would be conjured magically?
Rural areas aren't just a farm all by itself. Farmers need schools, stores, supplies, workers, you know, rural areas.
As well, when we electrified our nations, most people lived on farms. At the start of the 20th, as an example, most Canadians lived in rural areas. The reverse is now true.
This conversation is absurd. Hydro Quebec runs power lines through areas far more rural than California, through weather more severe and wide ranging, over greater distances, with more wild land, and just as much danger of fire. It does so at the cheapest rates, shows a profit, maintaining its lines and clearing vegetation.
PG&E is a pathetic company, and if people look outside of California, you can see how cheap rural electrification is
Really, cities cost more to electrify. Burying lines is mega expensive, stringing power lines on poles os quiet cost effective. You can easily run miles of lines, for the cost of a crew digging up a street and repaving.
Lastly, rural people pay for hookups. Each house often pays thousands per pole.
It also has massive snowstorms, ice storms, which bring down vegetation, and ranges from -40F up to 100F yearly, depending.
We can nitpick on specifics, but by no means is California more rural, or more forested. Quebec is also far less populous, and has a far more hostile environment.
Hydro Quebec does well, because vegetation is cleared, maintenance is performed, and corners aren't cut.
Unlike PG&E.
Isn't this my point? It is practical to punch transmission lines through any place. It is much more difficult, risky, and costly to maintain a fractal distribution network to individual customers in certain places due to geography and climate. If you parachute randomly into Quebec you'd be walking for a month before you met anyone. Same is not true in California.
Less populous can also mean more rural, and that was my point.
You talk about houses in the middle of no-where, and Quebec has that in spades. And it's not expensive, it doesn't cost, it's revenue generating, and not part of the problem.
If Quebec can do it, generate massive profits, and have mega-low rates, and do rural far better than California, then "rural" isn't the issue.
https://cwfis.cfs.nrcan.gc.ca/maps/fw?type=fdr&year=2024&mon...
Don’t make shit up. Quebec fire risk is much, much lower than California. Both companies have to maintain vegetation around the lines. HQ’s risk of vegetation outages is outages for some customers on a feeder. California’s is the state burns down. It’s just not remotely the same.
I’m willing to believe HQ does it better but the challenges ahead of them are wayyyy different
Because of this clustering - I live in a pretty rural area - but have natural gas and cable internet (only one option, so not that awesome).
But, I also have a well and a septic system. And I'm very thankful. As I was moving back to the US after 2 decades in a city, I did a winter with no high speed internet (used a mofi router with a SIM card as Starlink was overprescribed in the area) and propane for heat. It was a small house but heating with propane is crazy expensive.
The Rural Electrification Act not only brought power to rural areas, but also jobs to Americans when they were most needed, and countless follow-on benefits: increased farm productivity, longer lifespans and higher quality of life, etc.
It’s also not that subsidized compared to many other industries; the entire point of co-ops is purchasing something in bulk, with no one taking the profits. They get loans, yes, but the default rate on them is absurdly low.
And on that point, electric co-ops consistently produce reliable power at a lower cost than privately-owned utilities. I’ve experienced both, in multiple areas of the country, and by far co-ops beat everyone else.
This doesn’t even touch on the fact that the infrastructure enabled by the REA is also the only reason high speed internet ever made it to rural areas. Fiber everywhere should absolutely be a goal.
It’s funnier if we alter it a little, is it more or less true this way?
>> It's also clear that rural voting was a huge error. People should live in clusters of at least a handful of structures where it's practical and affordable to provision government (and telecommunications), or they should be off the grid altogether. What we built in the 20th century was the worst possible thing: dispersed houses. This should never have been built and we should not perpetuate it with subsidies.
US suburbs have problems due to single-use areas and forced low density. But you will aleays have some area that don't pay a lot of taxes.
I recently extended a line about 1000 feet. For this, I paid $13000 -- primary transmission, poles, anchors, electricians, transformers, all at full rates. And it was a required donation, as in the power coop owns everything and it goes on public easement on to the next guy when they extend from mine. When they finished, I worked myself silly digging secondary transmission to where I was used on the property.
It is the other way around, rural people shoulder the costs of massive mileage of the grid extension that aid intercity networking. The costs are privatized but the benefits are socialized.
If I underpaid the coop defrauded the other members by charging them instead.
Much / all of this is arguably necessary for national security viz. food production, but I dislike when people in red states (not saying you’ve done this, just making a tangential point) make comments like, “let’s see how long the city lasts if we stop exporting food.” Uhhh how long do you think you’d last without practically every aspect of your life being subsidized?
We need both groups in the country, and we need to support each other as each needs, but part of that dynamic being healthy means acknowledging that we’re receiving help.
1: https://www.google.com/maps/@39.4301203,-122.0649005,3a,60y,...
2: https://www.google.com/maps/@38.3962909,-120.5056754,3a,75y,...
The same is true for all infrastructure in that it gets less expensive per user as density increases. The cost to hook up an apartment building to the grid is a few houses in a suburb but services 10x the people at the same revenue per person. The cost to service a single home in a rural area might wipe the revenue out from a dozen apartments.
Frankly, I’m sick of subsidizing the rural welfare crowd. Let them pay the market price for their roads and utilities if they want to cosplay as Galt gulchers.
This works amazing as taxes and subsidies are basically zero. You pay for what you use.
Utilities should be legally required to serve everyone in their area, but they should also be allowed to charge the real costs for the service. If the government thinks that's unfair to people living in rural areas, it's free to use tax money for explicit subsidies. But the subsidies should only be 70% or 80% of the excess costs, to give the people in expensive areas some incentives to find more efficient solutions.
It's even worse in housing, where developers are often required to build below market rate units at their own expense. It makes new housing less profitable, and less housing gets built.
“The people” in expensive areas have literally no agency in finding an efficient solution. They don’t have any say about the utilities grid investments. In most parts of the country “these people” are also poorer.
If grid power is artificially expensive in urban areas, people will install solar panels and batteries in situations where it doesn't really make sense. And if grid power is artificially cheap in rural areas, people will not install solar panels and batteries in situations where it makes sense. Thus incorrect pricing leads to inefficient investments.
Many economists even argue that the most efficient form of subsidies is cash that can be used for any purpose. Instead of getting cheaper power in rural areas, you should simply receive $X/month for living there. But the assumptions needed to make that claim are a bit too restrictive for many real situations.
Solar panel and battery investments reduce your demand for power from the grid, and in many rate cases will reduce your energy bill, but they _won’t_ reduce the costs of maintaining the distribution grid assets connecting you to the grid that need to exist even if you only use them 0.1% of the time. People with solar panels are the worst offenders as they can end up paying nothing, or perhaps even net receive money, despite still requiring investment from the utility.
Accurate pricing of power is very very difficult. Whose energy should cost more? The 10k residents with 5 miles of overhead lines being undergrounded this year? Or the 1k with 15 miles of overhead lines that won’t be under grounded for 5 years? Are you prepared to impose a $50M capital investment cost solely on the consumers that use it? Uh oh. Turns out customers oppose an huge hike in their energy bills and are demanding you DONT underground their lines. Are you going to charge consumers extra because a car ran into a pole that’s specifically on their feeder? The risks of something like a forest fire affect everyone, even if it’s on a line that serves just one person.
This stuff is very complicated. The elephant in the room is that under grounding distribution networks in places like California is simply far too expensive for the kind of budgets they have.
The issue is generally that American grids have WAY MORE overhead line miles than European grids
Exactly. The cherry picked example in the article was chosen to ignore areas with higher expenses.
> For another, corporations are often okay overspending on executive compensation
PG&E had $25 billion revenue last year. How much do you think they spent on lavish executive compensation? Even if you could eliminate $100 million in compensation (doubtful) that’s still less than 0.1% of revenues. People overestimate the impact of executive compensation in large companies by orders of magnitude.
> and other lavish business expenses for tax purposes.
Again, you’re not going to find dramatic savings anywhere in the budget by cutting lavish business expenses at this scale. It’s noise. There’s also a persistent myth that companies can spend their way into saving money via tax write-offs, but for some reason my accountant tells me that’s not how taxes work.
Or in other words, companies aren't overspending on exec compensation for tax purposes. They're doing so because the board is not exercising proper financial control over the company.
I do agree with your sentiment that city bureaucrats may be tempted to raid the energy business to pay for pet projects and other things. This can be protected against by segmenting the energy business into its own protected organization.
Administrative and legal costs don’t disappear when the city runs it, so why does it matter? When the city runs a utility, nearly all of the costs associated with running a utility still exist.
If your mental model of a city-owned utility is that they’re going to generate power and sell it at cost with no administrative overhead, you’re really just assuming that administrative overhead will be covered by taxpayers.
Electricity rates down, tax rates up.
> How is other states like Texas or Colorado are delivering at 10-12c/kwh ?
Texas produces the most crude oil, natural gas, and also wind generated electricity. A quarter of the entire country’s wind energy generation happens in Texas.
Comparing electricity prices across regions is meaningless. Everything is too different.
It is stereotyping, but it sounds like the sort of state that has a strong regulatory regime that would be quite controlling about what people can actually do. I note the irony that when Texas had a power outage everyone wanted much more regulation to force changes to grid maintenance, but when California spends 4x as much and PG&E skips on grid maintenance everyone throws their hands up because they can't call for more regulation and are out of ideas. The regulation doesn't seem to have dodged the maintenance problems but I'd bet it drives the cost up.
About half the price of PG&E. This is in an otherwise PG&E area. People should be demanding their city handle power. It leads to half the price.
My power is significantly cheaper than yours but it comes from a private company.
Picking random cities doesn’t tell us anything at all about costs or efficiency. Different areas have different costs and expenses.
You have to compare apples to apples.
Stanford endured lengthy PG&E power outages while the municipal utility continued to operate. However, the university probably has negotiated rates that are lower than what regular PG&E customers pay in Palo Alto.
The expectations, regulations, and imposed demands, are not 100% identical across all utilities. So any combination of factors could lead to higher prices.
I don’t have some special insider scoop to know whether the numbers listed in the statements are real or fake.
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.
That is assuming you’ve taken the effort to read the filings.
If your lookkng for easy generalizations that applies to all public companies then no it doesn’t exist. You have to put in the effort to read each individual statement.
Its worth noting that reading financials still doesn't make me an expert in the area and I'd still be making a mistake to assume that means I understand well enough the games or motivations behind the numbers on a page.
It makes no sense to forego $0.80 in your pocket because you do not want the government to get $0.20.
I’m far from expert here, but is that too simplistic?
Where does perceived future value come into this? I’m thinking of companies like Amazon, which kept profit margins low while obviously having their shit together.
https://companiesmarketcap.com/
Amazon clearly has a mix of a high profit margin business (AWS and other services) with a low profit margin business (retail).
You will notice that most the top businesses are pretty much high profit margin tech and pharmaceutical businesses. Some oil and finance after that. And there are a few lower profit margin, but still large profit since the business is so large, but obviously, high profit margins and high profit is better than low profit margin and high profit.
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?
Private plane: 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.
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.
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-commis...
See also, healthcare.
https://www.alamedamp.com/DocumentCenter/View/1268/FY25-Rate...
Edit: Oh, this utility runs at a profit and has for decades. The profits have been going into undergrounding transmission lines
Maybe you just mean to tack on the idea that we could benefit from having better language to separate shrewd and incompetent investments, in which case I'm ~fine with some language to retcon the difference between merely lighting investments on fire and using them to drive an engine back on to those investments once we know the difference.
But if you mean to suggest that it's pointless for us to bother discriminating between profit-taken and investment-(effective|ineffective) just because we don't know whether the cat is dead or alive yet, then I suspect I disagree to the death.
(Edit: In case I'm being obtuse, I at least think I agree that "investing" surplus in hiring and retaining great employees is a surplus-invested, and not a profit-taken.)
So the executive compensation packages that many people hate on then are just a mechanism to reduce the profits of the company. And it’s not clear to me that Apple saving up profits so they can make larger investments without taking out loans is a strategy we want to disincentivize either.
My point is that designing top-down incentives at market scale are very difficult and while attractive are basically the central failure of central planning. Even setting aside the challenge of figuring out how to word the incentives correctly in a way that maximizes gain and minimizes gaming of the system (basically impossible) in a political system you also have to get buy in from people who don’t see it your way which muddles your ideal solution regardless of you being right or wrong. I’m highlighting that’s how and why we have the current tax system - it’s many many people trying to tweak and optimize incentives and curtail problems over a long period of time.
I wouldn't say surplus held to be invested, even for many years to support a large capital project, is profit-taken. The surplus isn't being taken. (But, as before, I do still think it may be worth discriminating between related/unrelated, because this is somewhat relative. A large for-profit utility could extract surplus from most of its regional markets and plow it all into supreme resiliency for the city its headquarters is in...)
Designing good incentives or tax policy are very different problems than having slightly better vernacular for average people to use to distinguish between patterns of organizational behavior that throw surplus in a bin for a truck to take away and those that toss it in a compost pile for on-site use.
Accountants and auditors can classify inflows and outflows however they like--but I think specific problems like good incentives are more tractable when common people can leverage simple language to build the understanding and support that policy wonks will need to dial in incentives or tax policy.
The payout ratio is the percentage of net income actually paid out to equity investors.
For utilities it's around 50% of net income, though it obviously depends
And yet somehow Americans will never see this and think "If only it were government-owned so the profit could be returned to the people"
https://www.siliconvalleypower.com/residents/rates-and-fees
PG&E has an 11% margin on those rates because they keep burning the state down and having to pay for it. Municipal utilities don't have to worry about that.
The only thing that could be seriously considered a downside is that Santa Clara, CA is now absolutely jam-packed with data centers that have low employment per sqft.
This is addressed right at the beginning of the article. The argument is not that PG&E is skimming off huge profits, rather that it is structurally inefficient:
> Distribution: How much to get the power from your local substation to your house over local power lines. In PG&E's rate chart, they charge 20 cents per kilowatt hour for this. That just does not match up with how much it actually costs them to transmit power over local lines and keep the lines maintained.
> Everything else: Operations, maintenance, profit. This is where PG&E is actually seeing large expenses, because their coverage area is massive, it costs a lot of money to deliver power to rural customers, and they are also undertaking a massive project to underground utility lines in fire-prone areas.
The backstory here is that PG&E underfunded maintenance for decades while paying out substantial dividends to shareholders, and now that fires are killing lots of people, they have to go back and properly maintain their network.
Now, you can make the case that CA as a whole might not be better off if cities leave PG&E and the state has to subsidize rural power delivery even further, but I think the article is correct on the question that it tackles.
This is why Santa Clara, Palo Alto and Alameda's power companies can deliver power for half of what PG&E can. You can just copy their cost structure.
Optimizing for factors other than universal service is completely valid, but I’m guessing each of those municipal power systems pre-dated rural electrification and thereby get to somewhat free ride on the system more than anyone would reasonably allow Walnut Creek to do in the year 2025.
A $100 million project to bury the lines to 1000 houses is $100k per house which just ain't worth it. Not saying this is a real number but it could easily be if it's costing $0.20/kWh to do distribution.
There is also a huge moral hazard problem where we make it cheaper than it should be to live in fire zones by subsidizing electricity and insurance. So people build a lot of houses in fire territory that burn down.
In the meantime we make it more expensive to live in the safe places. We should stop doing that
This is very similar to how Africa will leapfrog the legacy model with cheap solar and batteries.
In Australia, they have a model of colocating stationary battery storage in neighborhoods to balance buffer solar production locally for time shifting purposes (vs shipping that power far only to bring it back in the evening).
The local solution to solve local problem absolutely works, but that is not what you are describing.
Africa is not going to substitute a continental scale grid with solar and batteries. That's just pie-in-the-sky levels of delusion.
Without them the grid is like a bunch of dominoes where a failure can cascade unless grid operators, or automated systems, react fast enough. Battery systems are like power firewalls; if the main grid goes down, the battery keeps right on chugging.
If circuit protection devices or an equipment failure happens on a main transmission line, the utility has hours to fix it, and meanwhile everyone has power. Ditto for maintenance. Need to replace that big huge switch that feeds part of the county? No problem, just...shut it off. Long as you're done before the battery bank runs out, everything's fine.
Right now you can end up with situations where a power plant will "trip" and go offline, such as when a large amount of load is disconnected due to a transmission line failure or substation failure. The grid frequency goes up if the power plants on the grid can't throttle back fast enough, and instead, to keep the grid from going over-frequency, the plant goes offline entirely.
If a lot of areas are on battery - those systems can be commanded to start charging to stop the plants from speeding up. If the grid goes dead, it's not nearly as big a deal, because the grid operators have more time to do things like sequence the re-connection of all those areas.
I'd imagine that with a bunch of battery systems distributed around a grid, they could potentially be able help black-start a plant if needed.
Battery systems also reduce the need for a transmission line upgrade; when demand is higher than the line's capacity, the battery system steps in. When demand is below the line capacity, the battery system charges.
All the microgrids you describe provide basic needs. None power serious industry anywhere.
Batteries are a good solution for certain situations, not as a fix-all. All the batteries in the world can power a large power system like California or Quebec for minutes. That's right - minutes.
https://www.undp.org/energy/africa-minigrids-program
https://www.worldbank.org/en/news/press-release/2023/02/26/s...
https://www.esmap.org/mini_grids_for_half_a_billion_people_t...
https://www.nrel.gov/reopt/projects/case-study-sub-saharan-a...
The real benefit is that the people who don't have any reason to actually be rural, say remote software developers, will now have to either cover their costs rather than externalising them, or move to the city.
Boulder CO tried municipalization with Xcel and the gap between the city offer and Xcel position was very large. How do your figures look if you double the price and/or add in a decade tail of having to pay 25% of billing to PG&E?
The small munis you mention are in the same position as PG&E with respect to owning decades old poles and conductors with decades of life remaining. The incumbent has all the cards in this negotiation. An existing muni can do it cheaper for the obvious reasons you stated - legacy network, all the customers are close together. Buying the most profitable bits of the PG&E network at a price they would agree to would not be profitable.
Financing at 4% interest is not the expensive part though. Even if the price was $1 billion it would be 6 cents per kWh.
I agree it would be bad if they had to fight in court for a decade! But you have to start somewhere and as I mentioned you might get a good outcome just from threatening to do it. My hope is the CPUC would force them to accept some offer.
Density including the towns is about 3.2 people per square km.
Looks like people end up paying close to $0.30 per kwh. There's probably some cross subsidies coming from the state, I don't know.
Ideally, rural areas pay up. Good forcing functions for change. Maybe people move closer together (similar to European villages) or they become energy-independent (solar panels).
If that's politically untenable, then I'd like to see the cost reflected as a city2rural subsidy. Cities get enough hate in the US. I'd like explicit recognition of their generosity.
As well as Palo Alto's utility financial statement which is linked in the post.
PG&E's current rate structure has urban rate payers subsidize rural rate payers and people who live in wildfire zones in e.g. the Orinda Hills, who need substantial investment in order to receive power without sparking wildfires. This is bad policy - instead of subsidizing fire zones, it should be cheap to live in safe places and more expensive to live in dangerous places. Lower cost of electricity would reverse these trends.Sacramento with SMUD is another success story. But there are some differences with economies of scale
One detail is that PG&E is a heavily and (IMO) incompetently regulated utility, and their profit margins are more or less set by regulation. So they inflate costs to drive up profits, and one should not assume that the only room for savings is removing their profit margin.
That's possibly because of a strong underestimation of the actual indirect inefficiencies that come with shareholder profit-oriented companies. Every investment is seen not as a way to maximise profit in the long run, but as a direct decrease in shareholder profit, and should therefore be avoided at all cost (ha!) or postponed for as long as possible.
Strong counterexamples, admittedly not from energy companies, can be found in the remunicipalisation of the water supplies in Berlin and in some districts of Paris. Both came with drastic decrease of user costs, better water quality and a decrease of outages.
The number of people that pay for-profit companies for natural gas (heat), electricity, and water in North America is absolutely bonkers. There is a specific concern about foreign corporations purchasing water rights in the American west.
I’m lucky enough to be in such an area. Note the city takes a bit of the above as profit too. Not that that’s a bad thing but it just goes to show how beneficial it is and how much more you’re paying by not doing it. Every city should do it asap.
Of course, none of this is exclusive to one or the other.
And private utility companies are?
What isn't effective is electrification and maintenance of low density regions although power monopolies like PG&E are required to provide service. The urban and suburban customers are effectively subsidizing the cost of transmission and maintenance for rural customers.
PG&E doesn't want their most profitable customer base[cities] to have public utilities because if enough do, their company becomes unprofitable and implodes.
This is exactly the reason we should do it.
I left California last century but seem to recall the PUC(?) has a pretty tight reign on what PG&E does and doesn't do.
Hopefully no one manages them and that forces residents to move out and stop being a drain on society.
> PG&E doesn't want their most profitable customer base[cities] to have public utilities because if enough do, their company becomes unprofitable and implodes.
If the state forces PG&E to electrify expensive areas at the expense of higher costs in cities, their objections are reasonable.
If California forced a private company to electrify rural areas as part of the deal and then tried to change the rules to have the government take over the cheap areas, there would be easy lawsuits on the table.
To put numbers on it: for a 12 kW system in Chico, CA (a location at ~40 degrees N I chose arbitrarily) the NREL calculator at https://pvwatts.nrel.gov/pvwatts.php gives annual generation of 18500 kWh (40 degree inclination). For a lifespan of 20 years at $0.34/kWh this is $125800 worth of electricity. A 12 kW + 16 kWh LFP battery system costs something like $36K (+ installation and financing).
The most significant is that modernity comes with immense demands on reliability and capacity. The solar estimates are based on averages. There will absolutely be times when your solar and battery system runs out of power. What then? What if you decide to buy an EV? Can you depend solely on solar?
You cannot replace the grid, no matter what the simulations tell you. The whole reason the electricity grid was created in the first place was to solve problems of local resource constraints.
Urban development subsidizes everything.
Go watch some Strong Towns.
Fuck suburbs, unless they were built around a streetcar.
> PG&E continues to demand huge payments on routine power grid connections. For example, the cost to comply with PG&E’s latest requirements for the City to use public power to connect streetlights, traffic signals and other small loads would exceed $1 billion.
https://www.publicpowersf.org/en/faq
I think either we need the political will to use eminent domain to take the grid back (i.e. set the price through a legal proceeding), or we'd need to build a duplicate distribution grid and then abandon PG&E.
I don't think the CPUC will let them get away with "we won't sell at any price" - I think the regulators would force them to sell at some price.
Has the CPUC forced such a sale before? Functionally, if PG&E can just safely gauge what's likely to be out of reach for each city, they can name a price detached from reality and be confident of maintaining their stranglehold.
Instead, slowly build out, in parallel, the upgraded – which is to say, underground – infrastructure that PG&E refuses to build.
A community could do this opportunistically on a schedule that tracks the normal repaving of roads.
[1] https://www.a2gov.org/sustainability-innovations-home/sustai...
https://www.cpr.org/2020/11/20/boulder-ends-decade-long-purs...
It's similar to public transportation. Most cities don't design a system, they order it from a catalog - and they pay private consultants (similar to Oracle consultants) to tell them what to do. There is so much corruption and privatization there, but unlike power there is no business case that would make it attractive outside of public funding.
"PacifiCorp Was Grossly Negligent in Oregon’s 2020 Wildfires. Now It’s Asking Lawmakers for Protection."
https://news.ycombinator.com/item?id=42971311
Because of regulation, they can gouge consumers who are captive to the damage, literally and financially.
Seems like they're actively trying to fix it.
Are there any germane examples of your “These formerly ‘public utilities’ are now often owned by PE or Berkshire Hathaway” claim or is it just a complete non-sequitur?
And, I did put public in quotes because these utilities, while privately owned, do benefit from regulatory capture that seems out of place with a privately held company. And they often operate on or over public lands.
And, having lived through the fires in Oregon and seeing the trauma first hand, I'm still angry.
That's my takeaway from the article but I'm willing to listen and learn. Your points are valid and show how mistaken some (or all) of my conclusions are based on false connections.
Rochelle's municipal utility system also provides water and sewer, and fiber-optic internet. https://www.rmu.net/
Austin Energy earns no profits and pays no federal income taxes. All revenues benefit the customers of Austin Energy and the residents of the City of Austin. The primary financial benefit to the City of Austin is Austin Energy’s transfer to the General Fund, which is set by policy and allocated by elected City Council members to municipal purposes such as fire and parks.
Inexpensive, reliable, and heavily litigated (just how I like my local utility).
People hate it and there has been a big effort from activists to turn it over to public hands. The local politicians are on board for the most part, but the company is of course fighting tooth and nail.
Utilities (generally) have a universal service obligation.
If someone can cherry-pick just the denser areas with lower distribution costs, of course they could "undercut" the utility with the requirement to serve everyone.
(I'm not saying that PG&E couldn't be better managed. I'm saying that there's a much, much deeper policy issue at stake here.)
I grew up in the Bay Area, lived in 'rural' Humboldt and Placer counties, and can say I would never move back to the bay no matter how much the technocrats would desire it.
Pretty happy with my ~30k town nowhere near California TBH...
Smud was very helpful and had a simple process while PGE wanted proof of business usage amongst other stuff (heard this all second hand though)
It's perverse that people who live in safe, urban areas are subsidizing people who live in wildfire zones. The savings come largely from not doing that anymore.
If we stop subsidizing the foothills by creating urban utility districts it would solve the PG&E problem.
We would have a new problem of causing a ton of people to be unable to continue living in those areas without some kind of off-grid program.
Long term I think this is the only sane way forward though.
But people in those areas are likely to be able to benefit from solar, so maybe being "off the grid" in the sense of not having long runs of power lines surrounded by trees to your house in the country is reasonable, and perhaps also cheaper for those rural residents anyway?
That sounds like more of a solution than a problem: those places are going to burn, so it's better that people stop living there.
- Urban customers should have an incentive to use electricity over gas, which they would if rates were reasonable.
- Urban customers should not pay per kWh even if one thinks they should subsidize rural customers. It should be some kind of tax with reasonable allocation.
- Undercharging rural customers for provision of service and overcharging per kWh messes up incentives, too. If suburban or rural communities faced the actual cost of transmission to their area and distribution within it, they could make real decisions, for example:
# Technologies exist to reduce the risk that a power line fault starts a fire. Search for “ground fault neutralizer” or “REFCL.” Similarly common reclosers take a very YOLO approach to deal with a faulted line, and other approaches exist. PG&E, of course, doesn’t want to use these because the ridiculous CPUC rules let them make more profit by spending more money trimming trees.
# Communities could maintain their own lines and have actual locally enforced codes about vegetation.
# Communities could install batteries at their end of transmission lines to help ride through public safety power shutdowns and to level out their own loads. And they could even build small wind turbines optimized for operation in high winds (which are rather strongly correlated with those shutdowns) to generate a few MW and keep those batteries charged. Heck, this could be automated: de-energize the line when the wind is high automatically, and there won’t even be a substantial inrush when re-energizing when the wind stops because the batteries can reduce load to zero.
# A community could decide the cost isn’t worth it and build its own mini grid. This might spur interesting investment into things like small modular reactors :)
- The ownership and regulatory structure right now sucks, amplifying all the problems above and the lack of real solutions.
It's not exactly fair to treat those rural residents as burdens to the urban areas when they provide the means for the urban areas to exist.
Unless you’re referring to farmers I don’t understand this point. As of right now it is the other way around.
There's a difference between people that are in farming/ranching and industry vs. people that are rural to afford a more lavish home in the woods or on the hills.
Even still, a system that doesn't appropriately price and apportion risk will always be under pressure.
Very well stated, I am stealing this. Also in agreement with rural resource types vs rich rural.
Again I think it is more complex than just apportioning power costs. CA effectively has a state policy of not maintaining its forest/rural land (ditto feds and their land). My parents live adjacent to national forest and have fire evacuations nearly every year.
There is nothing that the rural residents in their area can do to mitigate risk, even at their own cost. So we're asking them to bear the cost of the state/fed policy decisions. This is exactly the problem you describe of inappropriate price/risk apportionment.
They mitigate by building fireproof homes and leaving when the fire comes. Or just not living there.
- we get rid of nimby enabling laws
- don’t subsidize rural customers
- automate farming
I don't think so. Not currently.
"nor shall private property be taken for public use, without just compensation"
That's federal law. Supposedly, that applies to the states through the Fourteenth Amendment. All of the sudden, once the Fourteenth Amendment is passed, the Constitution applies to state governments, not just the federal government.
So if that's the case, no. You can't just "scoop up the assets for free" because you can't take private property for public use without compensation. I'm kinda a little bit suspicious that it makes sense to interpret the Fourteenth Amendment that way. Sounds like a power grab. If you want to try and turn that around, I know just the guys to do it.
That's not the question under consideration.
The question under consideration is if it constitutional for the government to "impose prohibitive fire prevention liabilities on utility companies, bankrupt them, and scoop up the assets for free".
Under my understanding of the law, no you can't do that, due to the takings clause and it's incorporation under the 14th amendment.
I think the law should be different, I don't agree with incorporation doctrine. But I still don't think the government should impose prohibitive fire prevention liabilities on utility companies, bankrupt them, and scoop up the assets for free.
Hopefully that clears everything up for you.
This is how public transit companies were generally acquired, but on the way to bankruptcy firms would defer maintenance to stave it off, which led to the sorry state of most mass transit systems today.
But what people forget is that the CA state doesn't want PG&E.
The state already exerts significant control over PG&E operations through the CPUC (members nominated by Gavin Newsom). CPUC approves/rejects all capital spending down to new fences for electrical substations. You can read about all the decisions in the 931 page rate decision, which is public.
https://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M520/K...
But what about executive compensation? Well, a separate CA state agency approves that as well.
https://energysafety.ca.gov/what-we-do/electrical-infrastruc...
So at this point the CA state government basically runs PG&E. But if they purchased it, they'd be exposing themselves to all the political risk when things go bad.
But right now, they get political air cover. Despite the tight level of control over how PG&E is run, the CA state government gets none of the blowback.
It's the optimal setup from a political perspective.
We should be doing more really in our current world. I confess I too spend too much time trying to build little apps just for money.
This just for money thing has got me reflecting a lot lately.
Everytime there is a natural disaster in the US the press report xxxx houses without power. US leccy firms pride the bear minimum service, always. Profit comes first. Delivery second priority at best.
This doesn't ofter happen in Europe because they dont profit cream and builds reliable redundant grid for almost everone. The grid even extends beyond countries boundaries, with neighbouring countries supporting each other.
Some folk out in the sticks, who you might think don't matter, provide useful services to the city folk. Eg farmers.
I.e. Cost the grid not the city.
You probably are being ripped off in the US, but that's a different story to the one being told imho.
Careful what you wish for.
I agree residential electric infrastructure in the US is not nearly as good as it could be. Buried power lines in suburban environments alone could probably cut outage numbers at least by half; but as one of the first countries in the world to electrify, doing that is a lot more expensive than in developing countries. Sometimes there is such a thing as a first-mover disadvantage!
If you see something you disagree with here please treat it as "I implemented notepad.exe in elisp" level of not even wrong.
Yes you can start it, but should we bow to political pressure to put off maintaining infrastructure? No. There's a real cost to maintain this stuff. But a political force doesn't want to raise prices so it gets depayed.
Sounds like an argument for ABAG to expand its energy related services into a full utility (at least on the electricity side): https://abag.ca.gov/our-work/energy-infrastructure
I think that reflects the broader public. If you can get people in one or the other mode, they will forget what they knew 24 hours ago.
Personally, I think private ownership and public ownership are two tools in the toolchest, good for different tasks. In many cases, privatization is a capitalist who notices a large, reliable cash flow, such as public utility revenue, and wants a cut of it. Public ownership can suffer from a lack of innovation - perhaps that matters less for mature technologies.
In our area, they handed over all school bus services to a private firm. The number of drivers, buses, and routes do not change. How was it supposed to save costs without degrading the service? The answer is, it did not. But administrations were diluted that they could take it off their liabilities.
Our governments should provide these services to Citizens at no cost to them.
We already pay for the maintenance costs and infrastructure is already built out.
Charge the companies for the services, and give them to the populace.
But, but, but, that's socialism! Taxes are socialism. Take from the many, use that spending power to benefit the people.
An enterprise, like providing a utility, has revenues and it has costs. The difference between the two can be called the "surplus labor value". What happens to that depends on the economic system.
In capitalism, capital owners own that enterprise (utility) and they siphon off profits raising the costs. Put another way, capital owners own the means of production, not the residents of the city or the city itself. This is rent-seeking behavior.
In a socialist organization of the economy, the residents either directly or through the city itself, would own the utility. Any profits would go back into the utility or be extra revenue for the city but there's really no incentive to increase prices on the citizens who own the utility (unlike the unquenchable thirst for increasing profits for capital owners).
I have to constantly point out that capitalism isn't markets (market existed thousands of years before it and exist in every economic system). Capitalism simply supplanted feudalism by replacing kings with billionaires. That's it.
We have abundant examples of how the latter is a substantially better system. Just compare EPB Internet (Chattanooga, TN and surrounds) vs Verizon, AT&T, Comcast or Spectrum. Municipal broadband, without exception, is substantially better than any national ISP. The only thing that keeps national ISPs in business is more rent-seeking behavior such as lobbying for legislation to ban municipal broadband.
Given this is the Superbowl weekend, it's worth adding that the Packers are owned by Green Bay (an arrangement the NFL now bans for any other franchise). What do we see in other cities? Teams extorating massive tax breaks from cities, counties and states to build massive stadiums at taxpayer expense without the team having to give up anything. The KC Chiefs are rumbling about leaving because the city didn't pass a sales tax increase to pay for upgrades to Arrowhead Stadium.
I don't know why anyone is surprised by any of this anymore.
> Usenet
That is FOSS and P2P collaberative (at least on the server level). Is that somehow connected with government?
It was the whole model that was doomed. Basically to set up a service on Minitel, you had to ask permission from France Telecom. You had to go to the old guys who ran the system, and who knew absolutely nothing about innovation. "It meant that nothing new could ever happen. Basically, Minitel innovated from 1978 to 1982, and then it stopped," he says. But others are less critical. Valerie Schafer, Thierry's co-author, says "the way Minitel is now fobbed off as risible and old-fashioned" is unfair. "People forget that many of the ideas that helped form the internet were first of all tried out on Minitel. Think of the payment system, not so different from the Apple app-store. "Think of the forums, the user-generated content. Many of today's web entrepreneurs and thinkers cut their teeth on Minitel," she says. "The world did not begin with the internet."
Overall it reads like any other socialist argument for nationalizing (in this case "municipalizing") companies, which does not work both on theoretical grounds and based on historical experience. The claim "Walnut Creek could borrow from its utility in recessions, and loan money during booms" is laughable. We know how that ends: the city would finance its deficits with utility money until the company is bankrupt.
You could literally have half the power bill tomorrow if CA would stop taxing it.
With usage based bills, people with solar pay less than their fair share for the maintenance component of a utility's cost, which means that this cost is larger for the other rate payers. On top of this California has huge subsidies to early rooftop solar adopters. This structure hurts lower income people more since lower income people are more likely to rent and apartments don't have as much space for / not as interested in rooftop solar.
So the CPUC started exploring different models for adding a bigger fixed charge to the bill and lowering the per-kwh cost. Of course the rooftop solar installers hated this as did the different "equity groups." Which is where you got the idea to adjust the fixed charge based on income.
I don't think it's a great idea but I at least understand where the CPUC is coming from. We probably need more innovation in utility pricing models.
The issue I have with this idea is that it basically punishes initiative or people who invested in energy efficient products. What’s the point if you can just wait and juice the other guy? Is the climate change a deadly serious issue or not?
Similarly, the part about taxation is self-inflicted wound, where they could have came up with a subsidy, that would have much less complains.
https://www.sfchronicle.com/california/article/pge-electrici...
It is best as it is today: a consumption tax, like the gasoline tax. What justification is there for charging a higher income bracket more for electricity? You could make the "infrastructure maintenance burden" argument about anything: food, movie tickets, etc.
Half of 50c even if I believe you is 25c still higher than 17c.
So even if half is tax, it’s still a lot more. And, half of Santa Clara’s would also be tax.
Or some kind of production / workshop / datacentre / business usage.
My heat (for both air and water) is provided by the building's boiler and is included in the rent, rather than the utility bill. My stove and oven burn natural gas. My air conditioning is "open the windows and hope it's not 95F outside".
I could totally see someone who had to do electric heating and cooling having a far larger bill than I do (especially if they're living in a place that's large than a shoebox).
Even yours is weird. I don't have a desktop computer running but we cook or bake with electricity every other day. I do realize we spend a lot less than other people, every time I check the prices and estimates if I want to switch the companies estimate 2500kwh for two people. So there's that.
Weird. Looking at my past several bills, my monthly usage is fairly constant; ~450kWh per month. So, (if my math is correct) that puts my annual usage at ~5400kWh.
> I can't see it, even with heating, as it's California.
I've no idea where OP is, but there are inland parts of the state that get dangerously hot in the summer. Cooling could be a big concern. Plus, rental housing in the state is often poorly maintained, so all that lovely conditioned air could very well be leaking out all over the damn place.
That’s really quite a lot if you don’t have electric heating and cooling. It’d be worth trying to figure out where it’s going.
Every couple of years I look around a bit for something suitable, but have been unable to find anything that fits the bill, looks like it's not totally garbage, and isn't priced in the neighborhood of lab-grade measurement equipment.
https://www.washingtonpost.com/business/2019/11/11/pge-helpe...
https://www.sacbee.com/article251851903.html
Why would any of California's uniparty establishment want to refund all that money to random utility customers – who might not even be reliable party footsoldiers?
PG&E's lowest overnight rates are 30¢/kwh, surging during peak hours to rates ranging from 39¢/kwh to 72¢/kwh.
In neighboring Nevada, the utility serving its major metros NV Energy has rates of 11¢/kwh for residential users & 7-9¢/kwh for small businesses.
$700,000 over 20 years is $35,000 per year (not to mention Newsom wasn’t governor for most of that time)
PG&E revenues are $25,000,000,000 per year.
Regardless of what you think about the arrangement, it’s not why rates are high.
> In neighboring Nevada, the utility serving its major metros NV Energy has rates of 11¢/kwh for residential users & 7-9¢/kwh for small businesses
Comparing electricity costs across difference states rarely indicates much. Geographies, energy sources, and regulations are very different from state to state.
It's the tens of millions in political contributions to not just Newsom at every stage if his career but also his allies & ilk.
Plus tens of millions more in donations to favored "charitable" projects of family & cronies of politicians like Newsom & his allies.
Plus harder-to-tally overpriced jobs & contracts steered to the "right" (regime-aligned) consultants, firms, & unions. (Did you notice how the glowing character reference in the Wapo article, about how immune to influence Newsom is, comes from a former Newsom advisor – & member of his wife's nonprofit board – who currently has PG&E as a paying client of his PR firm?)
All the cash & favors are then topped off with a showy cheerfulness to "accept the responsibility" of extra costs from those state-idiosyncratic "regulations" you mention.
But of course that's the quid pro quo of their monopoly remaining unchallenged, & all costs more-than-passed-on to ratepayers – so the ruling machine including Newsom can keep getting their beaks wet in all PG&E's spending & donation fountains.
To look at only the formal campaign contributions against revenues, & accept as excuse a cover-story for extra corrupt expenditures ("regulations are very different"), & then conclude "no problem" is exactly why milking ratepayers this way, spreading the loot widely, is such a enduringly great racket.