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Cities can cost effectively start their own utilities

kevin.burke.dev

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Re: Cities can cost effectively start their own utilities

#121

Post by jltsiren »

jncfhnb wrote: post #48
Aurornis wrote: post #46

The author estimates that electricity prices would be reduced by up to 33% (from $0.45 blended rate to $0.30), but PG&E’s profit margins are only 11%. That’s a good hint that this hypothetical is missing some important details The article hedges against someone pointing this out by admitting that Walnut Creek is an unusually optimistic location and that PG&E is also recognizing large expenses related to ongoing infra…

No, their argument is sound. It’s just missing the point of utilities. They’re saying that the cost of providing electricity to the cities, where everything is densely located and there are fewer trees and fewer overhead lines needing under grounding is lower so they should charge less to city consumers. They imply that the bulk of the cost is delivering power to the richer consumers further out because there’s a lot…

Cross subsidies like that promote inefficiency. They are one of the main reasons why living in California is so expensive.

Utilities should be legally required to serve everyone in their area, but they should also be allowed to charge the real costs for the service. If the government thinks that's unfair to people living in rural areas, it's free to use tax money for explicit subsidies. But the subsidies should only be 70% or 80% of the excess costs, to give the people in expensive areas some incentives to find more efficient solutions.

It's even worse in housing, where developers are often required to build below market rate units at their own expense. It makes new housing less profitable, and less housing gets built.

Re: Cities can cost effectively start their own utilities

#122

Post by asats »

darth_avocado wrote: post #110
dv_dt wrote: post #90

Earlier quoted context omitted.

Profit margins don't reflect how efficiently they manage costs. It could as easily be the case the PG&E mismanages resources and costs more to deliver the same power.

Profit margins are low because they need to pay $20M in opex for the CEO’s bonus.

If I'm not mistaken that's 0.08% of their revenue.

Re: Cities can cost effectively start their own utilities

#123

Post by b112 »

jeffbee wrote: post #107
fooker wrote: post #81

Earlier quoted context omitted.

> all of these people would have lived in the established towns And I assume your food would be conjured magically?

None of the people in the area to which I referred are undertaking anything productive. Food comes from farms, like always.

Which are in rural areas. Which means the lines have to go there. Which means they pass less rural area to get there.

Rural areas aren't just a farm all by itself. Farmers need schools, stores, supplies, workers, you know, rural areas.

As well, when we electrified our nations, most people lived on farms. At the start of the 20th, as an example, most Canadians lived in rural areas. The reverse is now true.

This conversation is absurd. Hydro Quebec runs power lines through areas far more rural than California, through weather more severe and wide ranging, over greater distances, with more wild land, and just as much danger of fire. It does so at the cheapest rates, shows a profit, maintaining its lines and clearing vegetation.

PG&E is a pathetic company, and if people look outside of California, you can see how cheap rural electrification is

Really, cities cost more to electrify. Burying lines is mega expensive, stringing power lines on poles os quiet cost effective. You can easily run miles of lines, for the cost of a crew digging up a street and repaving.

Lastly, rural people pay for hookups. Each house often pays thousands per pole.

Re: Cities can cost effectively start their own utilities

#124

Post by Aurornis »

gojomo wrote: post #117

PG&E's absurdly high rates are how they finance the careers of Governor Newsom & his wife, and "donations" to a giant array of other pet project "charities" for politicians & their favored cronies/causes. https://www.washingtonpost.com/business/2019/11/11/pge-helpe... https://www.sacbee.com/article251851903.html Why would any of California's uniparty establishment want to refund all that money to random utility custo…

> But over the past two decades, Newsom (D) and his wife have accepted more than $700,000 from the Pacific Gas & Electric

$700,000 over 20 years is $35,000 per year (not to mention Newsom wasn’t governor for most of that time)

PG&E revenues are $25,000,000,000 per year.

Regardless of what you think about the arrangement, it’s not why rates are high.

> In neighboring Nevada, the utility serving its major metros NV Energy has rates of 11¢/kwh for residential users & 7-9¢/kwh for small businesses

Comparing electricity costs across difference states rarely indicates much. Geographies, energy sources, and regulations are very different from state to state.

Re: Cities can cost effectively start their own utilities

#125

Post by bloomingkales »

If Star Citizen can get nearly a billion dollars, I think we can all (right here on HN) evangelize a kickstarter for this. We just need the people that know this in and out to lead.

We should be doing more really in our current world. I confess I too spend too much time trying to build little apps just for money.

This just for money thing has got me reflecting a lot lately.

Re: Cities can cost effectively start their own utilities

#126

Post by Aurornis »

kelseyfrog wrote: post #84

Of course it's cost effective for cities to start their own utilities, the economies of scale work in favor of urban and suburban electrification and maintenance. What isn't effective is electrification and maintenance of low density regions although power monopolies like PG&E are required to provide service. The urban and suburban customers are effectively subsidizing the cost of transmission and maintenance for rur…

> electrification and maintenance of low density regions although power monopolies like PG&E are required to provide service.

> PG&E doesn't want their most profitable customer base[cities] to have public utilities because if enough do, their company becomes unprofitable and implodes.

If the state forces PG&E to electrify expensive areas at the expense of higher costs in cities, their objections are reasonable.

If California forced a private company to electrify rural areas as part of the deal and then tried to change the rules to have the government take over the cheap areas, there would be easy lawsuits on the table.

Re: Cities can cost effectively start their own utilities

#127

Post by Aurornis »

colechristensen wrote: post #47
Aurornis wrote: post #46

The author estimates that electricity prices would be reduced by up to 33% (from $0.45 blended rate to $0.30), but PG&E’s profit margins are only 11%. That’s a good hint that this hypothetical is missing some important details The article hedges against someone pointing this out by admitting that Walnut Creek is an unusually optimistic location and that PG&E is also recognizing large expenses related to ongoing infra…

>The author estimates that electricity prices would be reduced by up to 33% (from $0.45 blended rate to $0.30), but PG&E’s profit margins are only 11%. That’s a good hint that this hypothetical is missing some important details PG&E customers are paying very large amounts for the consequences of bad infrastructure causing wildfires and other legal costs which are being paid for with higher rates. Example: https://www…

Right, but that’s my point: You can’t assume these costs disappear if the government takes over.

They just get blended into the tax bill.

Re: Cities can cost effectively start their own utilities

#128

Post by xienze »

AnotherGoodName wrote: post #71
bitmasher9 wrote: post #50

This is absolutely a no-brainer for municipalities. The private companies are charging a premium that they return to shareholders and give to executives. Municipalities have excellent access to credit at rates significantly lower than the premium charged by utility companies. The residents get cheaper access and more influence in how the utility is ran. The number of people that pay for-profit companies for natural g…

Yep you literally get half price power if your city does it - https://www.cityofpaloalto.org/files/assets/public/v/5/utili... I’m lucky enough to be in such an area. Note the city takes a bit of the above as profit too. Not that that’s a bad thing but it just goes to show how beneficial it is and how much more you’re paying by not doing it. Every city should do it asap.

Yeah it might be easy for municipal electricity to win on price when the bar is set at $0.42/kWh. Out here our evil private company is charging $0.11/kWh. I have serious doubts any municipality anywhere could deliver power for half that.

Re: Cities can cost effectively start their own utilities

#129

Post by ghaff »

Nimitz14 wrote: post #85
jeffbee wrote: post #69

Earlier quoted context omitted.

Maybe, but it's also clear that rural electrification was a huge error. People should live in clusters of at least a handful of structures where it's practical and affordable to provision electric lines (and telecommunications), or they should be off the grid altogether. What we built in the 20th century was the worst possible thing: mile after mile of transmission and distribution equipment serving dispersed houses…

Interesting perspective. I guess even in very rural areas it would have pushed people to build villages. On the other hand people already were living far apart and lack of electricity meant they had to do massively more work. LBJ's biography has a section on this, explaining that life on west texas farms was incredibly hard without electricity (and as congressman LBJ worked very hard to expand that to rural people).

It sort of has. Lots of people you think of as living in fairly rural locations are still in small towns rather than the middle of nowhere.

Re: Cities can cost effectively start their own utilities

#130

Post by theptip »

Aurornis wrote: post #46

The author estimates that electricity prices would be reduced by up to 33% (from $0.45 blended rate to $0.30), but PG&E’s profit margins are only 11%. That’s a good hint that this hypothetical is missing some important details The article hedges against someone pointing this out by admitting that Walnut Creek is an unusually optimistic location and that PG&E is also recognizing large expenses related to ongoing infra…

> prices would be reduced by up to 33% (from $0.45 blended rate to $0.30), but PG&E’s profit margins are only 11%.

This is addressed right at the beginning of the article. The argument is not that PG&E is skimming off huge profits, rather that it is structurally inefficient:

> Distribution: How much to get the power from your local substation to your house over local power lines. In PG&E's rate chart, they charge 20 cents per kilowatt hour for this. That just does not match up with how much it actually costs them to transmit power over local lines and keep the lines maintained.

> Everything else: Operations, maintenance, profit. This is where PG&E is actually seeing large expenses, because their coverage area is massive, it costs a lot of money to deliver power to rural customers, and they are also undertaking a massive project to underground utility lines in fire-prone areas.

The backstory here is that PG&E underfunded maintenance for decades while paying out substantial dividends to shareholders, and now that fires are killing lots of people, they have to go back and properly maintain their network.

Now, you can make the case that CA as a whole might not be better off if cities leave PG&E and the state has to subsidize rural power delivery even further, but I think the article is correct on the question that it tackles.

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