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pa_bourbon t1_ixzy0r9 wrote

Reply to comment by IrresponsibleScience in The danger of for-profit water companies such as Aqua America by [deleted]

Except all of the privately owned utilities and investor owned utilities are regulated by the PA PUC, which sets a maximum allowable return on the invested capital (fancy way to say - max profit that can be earned).

The local govt owned utilities are all so woefully behind on maintenance and upkeep since the politicians never want to raise rates (both parties guilty here). So when they are forced to sell or raise rates dramatically, prices rise as the new owners make the required investments.

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IrresponsibleScience t1_iy0ceft wrote

We’re stuck in a look of untrustworthy groups managing our infrastructure

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pa_bourbon t1_iy0d1sf wrote

All non-government owned utilities are regulated by the Pennsylvania public utilities commission, which is an arm of the state government. That’s better oversight than most industries get on fees. Your local bank can charge whatever it wants for your checking account. The free market will determine whether they’re successful or not.

Your local utility does not have that same freedom. Every rate change is scrutinized in a public rate making process the plays out in Harrisburg. As a customer you have the right to attend the hearings if you choose. I realize most won’t ever go. But it’s available. Which is more than most industries have in terms of price oversight.

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BureaucraticHotboi t1_iy11p87 wrote

It’s a cycle that only has one winner, the corporations. They invest in politicians who will pass favorable laws and will defer infrastructure improvements, which could be paid for by yknow, raising corporate taxes. Your points are correct, but to be clear this is all planned out by the corporations to manufacture a system that feeds them more and more profits by underinvestment in public resources and then having them handed over to be drained for private profit. Schools are next.

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pa_bourbon t1_iy16n65 wrote

So here is how utility rates actually work - they only raise rates when their costs increase. The model favors capital investment in infrastructure because once they are in the “rate base” they earn on the asset until it is retired. This is a public process. It’s not a back room deal where they hand “more and more profits”. And those infrastructure assets aren’t public. They are owned by the corporations that build, maintain and operate them.

Government utilities are the ones that underinvest - the politicians don’t want to raise rates until it’s way too late and things are falling apart.

And the corporations don’t win anything. Their stockholders do. And lots of utility stocks are owned in retirement funds due to the stability.

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randompittuser t1_iy1bq5l wrote

At the end of the day, there’s just not a reasonable case for privately owned utilities. You argue that the fee structure is a problem with Harrisburg. And that allocating money to improvement and maintenance was also a problem with Harrisburg. Sounds like a lot of problems with Harrisburg. Maybe we should fix Harrisburg to work for us before we hastily sell off the rights to manage our public utilities to companies that focus on profits rather than service.

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pa_bourbon t1_iy1ghe9 wrote

Never said Harrisburg was the problem. My point was that Harrisburg provides oversight and it’s a public process. All states follow similar processes under guidance provided by the FERC (Federal Energy Regulatory Commission).

It’s a public process following well defined rules. It’s not a bunch of execs in a smoke filled back room setting an agenda to screw the little guy.

Look at Pittsburgh Water and Sewer Authority for a prime example of the issues that arise from a government owned utility that refused to raise rates forever and the infrastructure is in terrible disrepair.

The real issue is that it takes hundreds of millions (billions for some bigger utilities) in investment to keep these systems running. Think about the damage that one big ice storm does to electric wires - in order to get that investment done, there has to be a way to get a return, since the investment horizon is so long.

People will argue that utilities are too critical to leave to the free market, so the bodies like the PA PUC were created to regulate it. Regulation does not mean zero profit. The capital gets paid either way - whether the utility is owned by the government or a public company. In a public company it’s dividends and stock appreciation. In a government utility the utility pays interest on its debt that it incurs to build and maintain the infrastructure.

During the pandemic, the PUC was very stingy with rate increases - some might say rightfully so. But the utilities still had maintenance to perform and improvements to make. Now they are back asking for increases as their costs have increased just like everyone else. Add that to rising commodity prices and you get a double whammy.

My electric commodity prices went up over 45% last year. It’s a straight pass through from my electric company - they don’t make any money on the electricity itself. It kind of is what it is. Costs are rising elsewhere. Look at the price of eggs? Where is the outcry about the egg conglomerates trying to artificially raise prices to screw us? Should the government take over all chicken farms too?

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Atrocious_1 t1_iy108zy wrote

The Bethlehem Water Authority seems to work pretty well, being a public utility. There are four people in my household and my bill is a bit more than OP's. Per quarter.

As for the PUC, that's just a rubber stamp operation for whenever the utilities cry they don't make enough money. That's why your electric is so high now.

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pa_bourbon t1_iy15f0o wrote

Please read what I wrote. The PUC caps the profit any given utility can make as part of the rate making process. Electric rates are high because most of our electricity is generated with natural gas. Natural gas prices, like all fossil fuel prices, have risen dramatically recently.

As I’ve stated elsewhere in this thread, utilities pass the commodity through at no markup according to state law. They make no money on the gas or the electricity itself - they pass it through at cost. Their income generating opportunity comes from fixed monthly fees and generation/transmission charges which are priced per quantity used.

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