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Texas electric firm files for bankruptcy citing $1.8B in claims

reuters.com

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Re: Texas electric firm files for bankruptcy citing $1.8B in claims

#131

Post by dkersten »

refurb wrote: post #116
cies wrote: post #91

Earlier quoted context omitted.

> many investors will have bought their share in the company, and that is worthless. That's just part of the risk. We're now talking about the bill that is still on the table. If the "investors" were fully responsible for their "investments" they would not have worthless shares, but they would have to pay up for what the company still owes. That their risk stops at "shares being worthless" is exactly what I mean by t…

So you think them losing 100% of their investment is being “shielded”? I mean, they aren’t the only investors.

Shielded doesn't necessarily mean that they are protected from all losses. Limited liability means that the liability is limited by the investment that was put in: they can lose up to their investment, but no more.

Re: Texas electric firm files for bankruptcy citing $1.8B in claims

#132

Post by adrianN »

bko wrote: post #112
eqvinox wrote: post #98

Earlier quoted context omitted.

Road networks are a great example. Just assume the hypothetical position of a competitor. Where are you gonna build a competing road in, say, NYC? Each block only has 4 sides, and each of them already has a street. You could maybe compete on interstate highways or other long-area bits. Maybe. That's stretching it. Build a competing water supply network to each house? Another set of sewers? Electricity distribution? H…

I don't know if NYC infrastructure is a good example. The second avenue subway was the most expensive subway in the world on a per mile basis. Considerably more expensive than Paris or Tokyo > The estimated cost of the Long Island Rail Road project, known as “East Side Access,” has ballooned to $12 billion, or nearly $3.5 billion for each new mile of track — seven times the average elsewhere in the world Similarly, t…

I don't understand why so many people assume that public transport needs to cover cost with fares. It provides immense public utility, even to the people who don't use it. It makes perfect sense to subsidize it. And it's not like taxes on cars pay for all their externalities.

Re: Texas electric firm files for bankruptcy citing $1.8B in claims

#133

Post by clcaev »

rocqua wrote: post #121
lawnchair_larry wrote: post #72

Earlier quoted context omitted.

There is no profit. It’s a 501(c)(12).

I think that means there is still profit, just that profits are not payed out to investors. Hence they have to be re-invested or kept as savings. Salary leaves a bit of a loophole, not sure how that is regulated.

Unlike many private universities, rural electric cooperatives are controlled democratically by member-owners. In this case, it was a nested structure: the members were a dozen of local distribution cooperatives. Those distribution cooperatives have households for their member-owners. So, the power to regulate executive salary by households was there.

Re: Texas electric firm files for bankruptcy citing $1.8B in claims

#134

Post by dkersten »

baxtr wrote: post #70
jonplackett wrote: post #41

This is the side of privatisation that gets ignored. When private companies screw up, who gets left with the bill? Private companies have no incentive to be ready for really big problems because they know they’ll get bailed out, or just not have to pay. Privatise the profit, socialise the losses.

> Privatise the profit, socialise the losses. I always wondered about that. Maybe because I don’t understand what it’s trying to say. I mean profits of companies benefit many, don’t they? Through jobs, taxes, dividends in case it’s a public company and so on. What am I getting wrong here?

In the run up to the 2008 financial crash, banks, property developers, landlords and others were making a ton of money. I was a student, so was not making any money. Then in 2008 all of that came crashing down and many of these companies got bailed out using public money. I graduated and had to pay an added bailout tax.

So, while they were all benefiting and making money I didn't see any of that money (privatise the profit), sure some of it got paid out in taxes, but clearly not enough, since:

When their businesses started to fail, I, who didn't make any profits from them, had to pay extra in taxes to save these companies. (socialise the losses)

They only saw upside and no downside, I only saw downside and no upside.

Sure, they paid taxes while they were profited, but my life didn't change much before vs after the crash, in terms of what the government was providing. So the government provided the same to me when they were supposedly earning extra in taxes as they provided when they needed me to pay extra in taxes to bail out the companies. That doesn't sound like the taxes paid by the companies really made much difference (and that difference was easily wiped out by the bailouts anyway). Same goes for any jobs created: would have been cheaper to use the bailout money to pay these people directly (pre crash) than to give them job and let them wreck the economy, and then we have to bail them out anyway.

Re: Texas electric firm files for bankruptcy citing $1.8B in claims

#135

Post by SomeHacker44 »

phire wrote: post #88
jonplackett wrote: post #41

This is the side of privatisation that gets ignored. When private companies screw up, who gets left with the bill? Private companies have no incentive to be ready for really big problems because they know they’ll get bailed out, or just not have to pay. Privatise the profit, socialise the losses.

> . When private companies screw up, who gets left with the bill? In theory, the company is meant to declare bankruptcy (or seek more investment from shareholders) as soon as their books say they are insolvent. A company is Insolvent when it's liabilities are higher than it's assets, even by a single dollar. The theory is that because the company is required to declare bankruptcy as soon as possible, it should only b…

I do not think this reflects reality. Companies declare bankrupcies when their negative cash flow exceeds their cash reserves and they cannot put off creditors any further. Until then, they are a going concern. Alternatively, they declare bankrupcy when it will best help their owners. Assets and liabilities do not play much into the calculus. Just my observation from decades of startups and small companies and reading the news.

Re: Texas electric firm files for bankruptcy citing $1.8B in claims

#136

Post by refurb »

rocqua wrote: post #127
refurb wrote: post #116

Earlier quoted context omitted.

So you think them losing 100% of their investment is being “shielded”? I mean, they aren’t the only investors.

If they invested $100 made decisions that cost $150 and now lost their entire $100 investment, they are shielded against the $50. Hence, anything that has real costs higher than their invested stake has effective costs for them at their invested stake. They are shielded to some extent. Especially for low probability high cost events. This is exactly the point of a limited liability company, but it comes with slightly…

When was the last time a shareholder made decisions like what led to this bankruptcy?

Re: Texas electric firm files for bankruptcy citing $1.8B in claims

#137

Post by eqvinox »

rocqua wrote: post #120
bko wrote: post #112

Earlier quoted context omitted.

I don't know if NYC infrastructure is a good example. The second avenue subway was the most expensive subway in the world on a per mile basis. Considerably more expensive than Paris or Tokyo > The estimated cost of the Long Island Rail Road project, known as “East Side Access,” has ballooned to $12 billion, or nearly $3.5 billion for each new mile of track — seven times the average elsewhere in the world Similarly, t…

Its an interesting example, subways seem to have some minor room for competition, so the argument against privatization based on "there cannot be competition" does not quite apply. Even here though, there is a coordination problem to ensure various companies remain mutually compatible.

Competition on public transport is limited by the fact that you often need a cohesive network to get from A to B via C & D. If multiple companies cooperate on crossover ticketing and align their schedules, yes, it can work. Even more likely to work is a model where a central authority opens tenders for specific services, and transport companies can compete on that.

Then again, I don't think it's viable to build subway tracks and tunnels to compete. Even if you have space under the earth, there may not be space for more stations, and good station locations are important too.

Re: Texas electric firm files for bankruptcy citing $1.8B in claims

#138

Post by dkersten »

meepmorp wrote: post #89
volta83 wrote: post #73

Earlier quoted context omitted.

> . When private companies screw up, who gets left with the bill? The share holders (which often includes the leadership). Their shares drop relatively quickly to close zero. I think, however, that this is not enough. Share holders of a company should be liable as individuals for the damages the company causes in case the company cannot pay. This would strongly encourage share holders to pressure the CEO (which is al…

Do we prosecute the janitors, too? What about the admin staff? I'm fine with burning HR at the stake, but some fairer minded folks might point out their general lack of involvement in business decisions that affect the public, as a reason to spare them. The kindest thing I could think to call your idea is naive and poorly conceived.

Do the janitors and admin staff hold shares? Ie do they benefit from the companies profits and do they have power over the board and executive teams?

If not the shareholders, someone in control of the company should be held accountable to avoid a "company in trouble? oh well, just shut it down, debt go poof, start again elsewhere, pocket the profits" situation or a situation where the company does something like damaging the environment. Too often do companies also get gutted to avoid paying out in lawsuits. There should always be people to go after. Probably it should be the board and executive team, rather than "I bought a single share" people. Ideally someone with skin in the game (so either being a shareholder, or maybe high salaries are sufficient too).

Re: Texas electric firm files for bankruptcy citing $1.8B in claims

#139

Post by eqvinox »

ethanbond wrote: post #100
eqvinox wrote: post #98

Earlier quoted context omitted.

Road networks are a great example. Just assume the hypothetical position of a competitor. Where are you gonna build a competing road in, say, NYC? Each block only has 4 sides, and each of them already has a street. You could maybe compete on interstate highways or other long-area bits. Maybe. That's stretching it. Build a competing water supply network to each house? Another set of sewers? Electricity distribution? H…

What about housing itself? There is only one building that can exist at 100 1st Ave, and its location is entirely unique/entirely monopolized.

The fact that it's unique/monopolized doesn't mean that competition is hampered. The building (or land parcel) at 100 1st Ave does not provide a service that is ubiquitously needed by almost the entire populace.

If anything, this strengthens the argument. You can buy/rent/... a different parcel nearby, and this only affects you and your planned use of the building. But you can't switch to a different road network, and this affects everyone in their daily life.

That said, I also agree with the sibling post that this is also a problem, just of a different kind.

Re: Texas electric firm files for bankruptcy citing $1.8B in claims

#140

Post by grumple »

diveanon wrote: post #19
A12-B wrote: post #13

Elon Musk making the move to Texas specifically to avoid the regulation that would have helped stop this from happening, would be kicking himself right now if he was in any way affected by this or consistent in his beliefs.

Elon Musk is another Trump in the making. Only difference is Elon Musk is smart enough not to foot gun himself when he actually asserts his power.

I suspect he is not actually that smart - his interview with 60 minutes, for example, made him seem childish and foolish. These incidents just haven't been widely publicized. But the way Musk's name gets casually mentioned in tv shows reminds me of Trump.
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