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Regulatory Capture in Connecticut, Headed Your Way
I’ve written here before about the waaaaaay toooooo coooooozy relationship between Connecticut Governor Dan Malloy and Northeast Utilities, the Hartford-headquartered Fortune 500 company that dominates the highly regulated electricity market in New England (and which has paid mucho dinero over the years to Malloy’s close political allies).
Northeast is the parent company of Connecticut Light & Power, which serves 1.1 million people in Connecticut, including the Hennesseys. Now, from the Department of You Will Pay One Way or the Other comes this jolting bit of news about an impending electricity rate hike in the Nutmeg State:
Connecticut Light & Power is pushing a major change in how it calculates power bills to shore up sales in the face of pressure from energy efficiency, conservation and renewables like rooftop solar. . .
. . . The company’s philosophy behind rates was laid out in testimony by Charles R. Goodwin, director of rates and forecasting for Northeast Utilities Service Company. He said challenges from energy efficiency and distributed generation have caused a downward trend in billed revenue per customer.
Did you catch that? If not, let me try a translation:
Good job buying those swirly lightbulbs and conserving energy over the last few years everybody. In fact, you’re doing such a good job it’s hurting our bottom line. So, we’ve asked our friends—you know, the guys who run things in Connecticut—to see if they can’t flip a switch somewhere and help us make up the difference.
And guess what? Regulatory capture is your fate, too.
This view is ricocheting [emphasis mine] throughout the electricity industry, experts said, as energy efficiency, conservation and rooftop solar power result in lower kilowatt-hour sales at power companies, which for decades relied on growth every year.
So, American electricity consumers, here’s the deal: You can get the new lightbulbs if you want. You can do the solar panels on the roof if you want. You can turn down the thermostat if you want and limit the use of your air conditioner in the summer.
Heck, if you’re looking for ways to save money on your bill, utilities like CL&P even publish handy lists of energy savings tips.
But no matter what you do, only one thing’s for certain: you will pay. Regulators like Dan Malloy will make sure of that.
(H/T Dan Lovallo)
Published in General
They had this problem in Washington state a few years back. The fact that so many people were buying hybrids, and driving more fuel efficient cars, the state got less from the gas tax so they wanted to put a tax on fuel efficient cars to make up the difference.
But this is just great (sarc on) the libs can’t have it both ways they can’t freak out about climate change and tell everyone they have to get mercury filled light bulbs that take forever to warm up so that your laundry room is lit like the stairwell of some bureaucratic office building, and then on the flip side raise the rates because we’ve obviously been too good at saving the planet that it’s costing them money.
Like living in Connecticut isn’t expensive enough? and as if Malloy hasn’t driven enough people and business out of the state, what will this do? All I can do is pray that the feckless Republican party in this state (who want to run Foley again urghh) doesn’t mess up the easiest race in the country to win. Malloy is a disaster.
Yeah, it’s the same thing with electric/hybrid cars. We get beat bloody about the head and shoulders to buy curly bulbs, solar panels, and these cars, but get hammered on the back end by reduced revenues – taxes, or utility income – with the recipients of these monies coming up with other ways of us paying them.
And those curly bulbs don’t last as long as proponents claim, not by a long shot.
If memory serves, the DWP got away with this during the drought in LA 21 years ago. Everyone conserved just like they demanded, so they raised the rates until everyone’s bills stayed the same.
My Scottish mother, who reduced usage by 25% and was particularly proud of it, was furious.
Not a month goes by without s scandal about the DWP. They fired a guy a few years ago because of all the water main breaks, then hired him back the next week as a consultant. And paid him $4k per month. I have a friend who worked there for about 15 years. She got laid off with a golden handshake along with thousands of dollars for retaining. (She admits to spending most of her time there writing romance novels). She is now getting $2k per month in retirement pay from them while working full time as a teacher.
EDIT. The fired DWP. Exec was paid $4,000 PER WEEK.
The only way out of this is through competition. End the monopolies.
With modern power distribution and smart meters it would be easy to track how much and where you are getting your kilowatts from. Consumers could then seek out cheaper alternatives.
Power companies have fixed costs — power plants, substations, transmission lines, and the bond issues that enabled the companies to build them –that are enormous compared to their variable costs — wages, fuel, etc. When GM, for example, sees a falloff in demand for its cars, it can close plants. A power company can’t do that unless demand goes way down and stays down. That’s just the nature of the business.
It hasn’t much to do with who’s governor.
Our water company did that in a drought too. Put us on watering schedules, got usage decreased. One house got shamed on TV for his “excess” use (that he was paying for). Then, they had less money coming in and started to talk about raising rates.
The solution is to charge more after a certain point in a drought. Let me water every day if I want too, just make me pay for it. That way the $$ keeps rolling in.
“Heads we win, tails you lose.”
That there are fixed costs is understood. While I can’t speak for every utility, the DWP and its poor spending habits and ridiculous raises, retirements, etc makes me completely unsympathetic. The infrastructure in LA is horrifying, the break at UCLA is an example on a very long list. What exactly are we paying for? Generous retirements and little else.
One relatively easy and tested solution is to allow other electricity marketers into the market. Atlanta, Houston, and Toronto all have these kinds of systems. These marketers (usually arms of large utilities themselves), pay the local utility a fee to cover the local utility’s costs and then compete on the fringes by getting power to the local utility cheaply, lowering general and administrative costs (economies of scale on billing etc.), and “gasp” lowering their margin.
BTW 3rd party marketing does not fix the problem your post addresses. It just helps to mitigate it. Ultimately, utility ratemaking is a very old and well understood practice (more than 150 years easily). Regulatory oversight does provide for a high level of transparency (although it is amazingly dull). The truth is that the utility needs to cover its fixed costs regardless of throughput and so the problem you bring up is unavoidable when throughput goes down.
I will say that every year the rate base of the utility is reduced due to depreciation of the existing facilities. If you wonder why your rates do not go down, the reason is that they continue to invest money fixing things and if there is nothing to fix they gold plate things, and if everything is gold plated they buy new things, hire more people or pay their people more or some combination of those things.
Maybe if most power companies didn’t go in for Green fads that cost a fortune and produce little power, and concentrated on the cheapest, most effiecient methods of power production that would help…..