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A shocking electric utility decision

Source: 
NUVO

I salute the unexpected bravery of the IURC (Indiana Utilities Regulatory Commission). Knowing the lobbying to come, on June 29th the IURC rejected a request made by a gaggle of Indiana electric utilities to charge customers for power not used because of the virus sequestration.

Now, to get this straight, think of your favorite restaurant. It has been closed for a while. Its revenues are down from what they might have been because you and other customers were not there.

Today, they are open, and their prices might be increased to make up for the revenue they did not get while they were closed. You could be charged for the meal and the beer you did not consume. Or you could go elsewhere.

Who should bear that loss? You? The restaurant workers? The suppliers? The owners? In the case of these monopolies, these utilities, it's no different. Except the customers are stuck. There is no convenient substitute today for electric service.

Batteries, solar power, wind power, a diesel generator? None of them is ready to be the full-time supplier to most homes or businesses. The restaurant has competition. Your electric company is yours, regulated by people picked by people you elected. You don't like it? What can you do about it?

Who's going to pay the electric company for the power they did not sell? The customers, workers, shareholders? No! That loss belongs to management, that web of obfuscation, that cabal wearing the buttons: "Pass the buck."

"Why management?" you'll ask.

Because they did not insure against the COVID-19 virus or similar hits to revenue.

If a tornado brings down power lines, are you asked to pay for power not used during an outage? No. You're obligated to pay for the power you use as shown on your meter, and the ordinary costs of getting that power to you.

Management knows tornadoes are a possibility and can insure against the costs of restoring power. Or they can self-insure by having retained earnings to use if a storm strikes. That temporarily may reduce payouts to stockholders, but only if the funds are needed. It an understood risk of holding stock.

True, the COVID-19 virus was not anticipated. But that's the idea of insurance: to cover expenses or lost revenue incurred from unexpected, yet possible events.

You'll say, "Oh, but there's no experience with an epidemic like this. How could they insure against it?"

That's why insurance exists. I've never been in a serious auto accident, but I carry insurance against the costs I might have.

"Yes, but auto accidents happen often and make it easier to set insurance rates," you'll object.

Well, epidemics happen too and regulated gamblers (insurance companies) can provide odds and make money on covering those odds.

"So, how can revenue losses be recovered from negligent management?"

Ah. Now that's a question!

Discussions

Rafael Herzberg's picture
Rafael Herzberg on Jul 9, 2020 11:54 am GMT

Very intersting analysis!

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