In California we have the CPUC which regulates utilities. Our three biggest utilities charge around 3x the national average for electricity. The largest--PG&E--has also been setting the state on fire and blowing up neighborhoods.
For example, for PG&E, the root cause of them blowing up that neighborhood was that the money that was supposed to go to upgrading the gas lines was embezzled and they faked the repair logs for the repairs.
Now, we have no idea which lines were repaired and not. Since this started decades ago, they have to dig up and inspect a huge number of lines.
Anyway, "mismanagement/poor incentives" is leaving out a lot of details involving graft and corruption, and malicious local governments.
For an example of corrupt/malicious local regulators: the Golden Gate Bridge maintenance road they recently built in Marin cost more than the bridge (inflation adjusted) and took longer to plan + build as well.
What i dont get is that you have a private company which mis managed its assets. Caused harm to the public. And the public bails them out with no equity or upside. Total shame as the CPUC could have demanded the state or rate payers get equity/bonds in the company for the bail out.
The USA basically has one politically viable solution to every problem it faces: “handing money to corporations.” That’s all Congress and States are willing to do. Electric utility graft and corruption? Hand them money. Banking failure? Hand them money. Airplanes falling apart? Hand them money. Health Care incentives misaligned? Hand them money. Poverty? Hand money to corporations that will embezzle most of it. People out of work during COVID? Hand their employers money. Top corporations getting too big and powerful? Believe it or not, hand them money. That’s the only tool in the toolbox. It’s helpful to think of Congress as a gigantic money funnel where our tax dollars go in and they take turns aiming it at their favorite corporations.
The government itself is akin to a perfect corporation: not liable, no accountability, monopoly on taking, monopoly on force. What’s this alternative that corporations that you’re alluding to?
Somehow voting reveals this government-is-godlike thinking that a magic superpower is going to bestow greatness upon humanity and achieve all of its hopes and dreams. When we look for a single example of this in all of history, the result is a null set, and in most cases the saviors are monstrous. Nonetheless, somehow this hope persists. See it every time in the votes here.
Jesus, in my mind the first thing you do there is arrest a bunch of people and nationalize (or statenize I guess, or whatever the word would be) the company.
What seems to actually work is increasing market competitiveness. The open access rules that gave us MVNOs appear to have worked great. Texas electric customers have lots of choice and lower costs under similar rules.
These broadband subsidies might be too good, or at least too well captured by too few players. They may be a good idea generally, but it looks like it's time to revisit the details.
MVNOs share infrastructure. Nowhere has competitiveness in terms of the actual grid only on the energy production and billing sides.
The Texas grid is a massive failure in terms of both cost and reliability. Somewhere between 246 and 702 people were killed in 2021 when operators had already seen similar issues in 2011. Similarly people received bills that more than wiped out any long term savings they had received from hourly rate charging.
As a resident of texas, allow me to describe / explain how electricity works.
Consumers can select from maybe 50 "retail providers". They all have some kind of marketing deal, like "all green" or "free weekends" or "0.14 a kwh fixed for 3 years".
You pick your deal and deal with this 'company'. All of the electricity comes from the same place. All of the wiring is maintained by one company.
Your "choice" is deciding who sends your bill and collects the money.
Seems like a monopoly would be a lot cheaper. Less employees, less infrastructure, less advertising.
A monopoly would be cheaper in a perfect world with no corruption, and no profit motive/incentive. Competition seems to be the only way in our current capitalist society to reduce the prices consumers pay.
A corporation operates in their own self-interest.
A corporation that is a monopoly has no motivation to keep pricing "fair" and, in fact, has an interest in making prices as high as possible. It is never cheaper this way.
We, as a society, seek to work around the problems that naturally-occur with monopolies by regulating them.
In Ohio, most of our residents have one provider (AEP). AEP owns the local infrastructure, and they also own the transmission infrastructure, and they are pretty tightly regulated.
To help keep pricing in check, it is required by regulation that the rate at which AEP buys their electricity at is set periodically by a competitive bid process. (This is, in theory, a process that works well for consumers and provides a reasonably low price: If a supplier can buy and sell (or otherwise produce) electricity cheaper, then they can put their bid in and have an opportunity to do so.)
The problem with regulation is that it is regulates. It is inflexible.
And sometimes, this bid process goes wrong: Early in 2023, for instance, it resulted in a generation price that was set to approximately double in six months[1].
The solution to both monopolies and regulation is consumer choice in a competitive marketplace.
Obviously, we in Ohio can't usually decide whose lines and infrastructure we use -- they're monopoly-owned. There's some exceptions to this like [2][3], but broadly speaking: Of course AEP is involved, because they have to be involved.
But we do get to choose our generation supplier[4], which is probably similar in function to how folks in Texas can pick their "retail provider" (except we don't get time-dependent metering).
And that very limited aspect of consumer choice does work for me, the consumer. I was able to completely bypass the 2023 price hike by selecting a different generation supplier. In fact, my total billed price per kWh of electricity used (inclusive of distribution, transmission, and fees) was actually slightly reduced compared to what I had been paying previously.
It's not a perfect system, as there are no perfect systems. But this little sliver of competition is better than being completely beholden to either an unregulated absolute monopoly or an inflexibly-regulated absolute monopoly.
You aren’t actually buying power from different people in states where you choose a “different” provider. Those are all middlemen offering a variety of more expensive rate plans and “benefits” that appear to be cheaper but actually are more expensive than buying directly from the main utility provider. (The middle man has to make money somehow after all) In reality the power travels over the main providers’ lines so the main provider is usually cheapest.
It’s just an illusion of choice and I would rather not deal with the constant door to door utility MVNO salesmen.
Is Texas electric a good example? It seems like a lot of people in Texas were swindled into buying variable rate plans that caused rate spikes resulting in $5,000 electric bills.
It’s a swindle because of the marketing of the plans and the exorbitantly high maximum rate caps. Every person who has knocked on my door to sell variable rate plans emphasizes the upside of the deal: why pay more than the current rate? You’re wasting your money on paying for the fixed rate that’s mostly higher than the going rate.
Like you said, most of the time you save a good amount of money. The salespeople and marketing pamphlets emphasize that. Do you really believe that the executives at these utilities are ignorant to the fact that most of their customers don’t fully understand the implications? I think they sell the plans specifically because customers don’t understand them.
Worse for Texas, their system’s market pricing setup incentivizes power utilities to minimize their overhead capacity. The closer their supply is to demand, the higher the price they can get. But it leaves very little wiggle room for emergency situations (99% Invisible has a good episode about this). Therefore, their grid is more prone to spikes in variable rate pricing than other states.
Like financial instruments such as options trading, financial games like this make sense for the wealthy who have a cushion of risk tolerance. I can make more money faster with options trading compared to an index fund!
But for the median and below wage earner, sudden bill surprises shouldn’t be something that the government enables for basic necessities like utilities.
So the median person signing up for that plan has to be ready to liquidate half their cash on an electric bill. If you’re below the median you’re even more screwed.
And I'm sure to all this you'll say "I made an informed choice and I should have that choice," but I think that's a highly debatable concept that depends a lot on the details – one of those critical details is the maximum rate.
But if we use the numbers above, that person is also saving $800 per year in a typical year. So even with the emergency liquidation, I'm not convinced they're worse off when we measure them across 5 or 10 years.
I can save a bunch of money on mortgage interest by buying a house in cash, too.
But of course that option isn’t realistic for the vast majority of people.
The piece of data I’m missing is how often a huge spike in costs like the one described happens. It’s unpredictable, it could happen any day for any reason.
Like I’ve said a couple of times, I’m doubtful that most people with these variable plans sincerely knew that a spike that high was even possible. If you bought a variable rate mortgage to save money you wouldn’t expect it to ever be adjusted to 200% APR.
And the truth of the matter is that a $2,000+ electric bill isn’t reflecting anything close to the actual cost of generating the electricity, just like paying $50 for a roll of toilet paper during the pandemic wouldn’t reflect the real cost of producing the item plus a reasonable profit margin.
That’s another good analogy because everywhere else in our society, price gouging due to emergencies is illegal.
> But of course that option isn’t realistic for the vast majority of people.
Your own numbers had it as doable but unpleasant. Should I not use those?
> I’m doubtful that most people with these variable plans sincerely knew that a spike that high was even possible.
That's a problem but it's a separate issue from whether they're better off financially.
> If you bought a variable rate mortgage to save money you wouldn’t expect it to ever be adjusted to 200% APR.
That would be pretty surprising, yeah, but if it was only affecting the payment for one month then it could still be a better deal overall.
> And the truth of the matter is that a $2,000+ electric bill isn’t reflecting anything close to the actual cost of generating the electricity, just like paying $50 for a roll of toilet paper during the pandemic wouldn’t reflect the real cost of producing the item plus a reasonable profit margin.
That's not true at all. It's not gouging.
The underlying principle of the Texas grid is that power plants that are almost never used get 0 dollars for months or years on end, and then they make all their money in a short window. The reason wholesale prices are allowed to go that high is to encourage those power plants to exist, because otherwise those power plants would not be built. That huge price is paying for years of maintenance and deprecation.
I'm going to assume, based on this statement, that you have an education that allows you to forecast and do cost-benefit analysis. Most people do not, and just hear "you will pay less". When you knowingly do this to people, it's a swindle.
Yes, we do need to protect some people from bad choices, and yes, that will limit the economic freedom of the very well-educated to some small degree. That's society, baby.
The average price paid for a KWh is very different than what a median customer pays for a marginal KWh. There are myriad small utilities that drag down the average price paid for a KWh in CA, but the three big IOUs cover the majority of accounts. And they all use the same transmission network.
I'm not sure how the US average residential retail number is weighted, but let's take it at face value at $0.1619/KWh. [1]
Baseline allocations are very small (around San Francisco--territory T--you get 177 KWh/mo in the summer and 234 KWh/mo in the winter). Marginal consumption is almost guaranteed to be in the second tier. Under the old default E-1 plan, that means your marginal rate is currently $0.5257/KWh. [2] This is in excess of 3x the national retail average.
But E-1 isn't the default plan any more. These days that's TOU-C. It's more difficult to come up with clean comparisons with a time-of-use plan. To keep it simple, I'll just average the rates together. The variation across time and season is not huge, so it should be good-enough approximation. Under that plan your marginal rate is around $0.5388/KWh. [3] This is also in excess of 3x the national retail average.
What about at the other end of the state? I don't know as much about baselines around San Diego since I don't live there. If we use the same assumptions for SDG&E as we did for PG&E, the marginal KWh there comes out to $0.4833/KWh. [4] This is almost exactly 3x the national average retail rate.
And if you're somewhere between these two utilities and on SCE? The same assumptions put you at $0.43/KWh. [5] So you're just barely under 3x the national average.
Are you saying the price capping model doesn't work? If so I don't follow the thought process: you're comparing California (price capped) against the national average (also mostly price capped to some degree)
The comparison is more to cellular providers where there's open access to the same underlying infrastructure, and we have consistently good pricing nationwide thanks to competition.
The point in referencing national averages is to show that the electric utility model can result in sclerotic and under-performant regions that are impossible to fix.
It doesn't seem like this model works either.