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Free Enterprise in Energy, Fact or Fiction?

image credit: Photo 121225622 © Valery Smirnov | Dreamstime.com

Between recovering costs, addressing unpaid bills and newly adopted legislation, utilities are facing monumental challenges.  With continued uncertainty on how to combat the current heatwave and maintain resiliency, public power companies, cooperatives and invester-owned utilities must decide what to do next.    There are many paths ahead but which ones will lead to success?  PG&E had to cancel its proposed microgrid projects and Southern California Edison (SCE) postponed similar plans to boost resiliency, citing tight deadlines and inflated costs.  Speaking of costs, utilities have suspended shut-offs for months but will soon make an effort to collect payments.  Connecticut lawmakers are working on ways to delay those plans.  “I think it’s high time we do something that really focuses on what consumers and ratepayers really need,” said Rep. Liz Linehan, D – Cheshire.  Among their ideas,  state regulators would be asked to consider an interim rate decrease. They have also proposed compensation for outages that last longer than three days where customers would receive a credit of $125 a day and up to $1,000 for lost food and medicine. To further accommodate customers in need, lawmakers would ask utility companies to set up regional service centers staffed with Connecticut-based workers.  The bill would tie the company’s performance and its profits more closely.  There have been a number of proposals brought up by political leaders that range from well-informed to some that show a misunderstanding of the facts… We do support creating a transparent, performance-based environment, that’s grounded in facts, defined metrics, and builds a better overall system for our customers,” commented a spokesperson for Eversource.  In Virginia, Gov. Ralph Northam wants Dominion Energy to cover unpaid residential electric bills with $320 million that regulators say the company previously overcharged.  Under the governor’s plan, which still has to be approved by lawmakers, customers who have bills that are more than 60 days overdue as of Sept. 30 would have them forgiven.  The governor’s proposal would require all utilities in the state to offer repayment plans for unpaid bills that don’t charge interest or late fees.  Steve Johnson, a spokesperson for the Virginia, Maryland and Delaware Association of Electric Co-ops said “Unlike Dominion or (Appalachian Power), not-for-profit utilities don’t have a whole lot of options when it comes to recovering those costs.” 

Legislators, however, have indicated that utility legislation is a low priority this session.  While they have not yet commented, Dominion Energy did expand its $13 million annual EnergyShare program contribution in Virginia by $1 million this year to help customers in need of assistance due to coronavirus.  This would provide immediate benefits to customers struggling to pay their utility bill.  But if required to waive repayment or if interest, late fees and disconnections are removed from the equation, how would it impact utility business and free enterprise in energy?  In this case, would the involvement of lawmakers be an adjunct or an obstacle to utility companies?  Either way, it will be an uphill battle back to 'business as usual.'

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Bob Meinetz's picture
Bob Meinetz on Sep 5, 2020 4:00 pm GMT

Nevelyn, whether electricity is best handled by govenments or big business is a question that's already been answered. Then un-answered.

Americans were asking the selfsame questions about electricity in 1928 as they are in 2020. Customers were asking, "Why are my rates being raised indiscriminately, at the whim my utility, when I have no other choice...pay high rates, or do without?". Legislators were asking, "How do I put reins on the spectacular success of America's largest companies - General Electric and Edison - without losing their support and my job?". Utilities were asking, "How are we supposed to run a company with the federal government looking over our shoulder, telling us what we can charge for our electricity? That's un-American!".

The answer came in the depths of the Great Depression when Congress passed the Public Utility Holding Company Act of 1935 (PUHCA). PUHCA created a public-private sector compromise that resolved these conflicts, and was arguably the most influential U.S. legislation since the Sherman Antitrust Act. Since then, PUHCA and the American regulated utility model it created have been copied around the world.

Utilities hated being restrained by PUHCA, and after seventy years finally had the Act repealed. Within years, guess what? All the problems it solved came back again.

I'm often criticized by history-starved contributors who believe I'm an anachronism, that everything has changed since then. "Wake up!," they say. "It's a bright new world!" "Ah," I say. "The fallacy of novelty: 'if it's new, it must be better'. But I was an arrogant youth myself once, in pre-millennial times. I had to learn the hard way that I wasn't as smart as I thought I was." They will, too.

Everyone on Energy Central who is not familiar with PUHCA should - no, must - read Regulation: the Fight Which Saved the Nation, an excellent overview of PUHCA published shortly before its repeal. Though it may seem we'll never find solutions to today's energy problems, the problems have already been solved.

"Those who cannot learn from history are doomed to repeat it."
- Santayana

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