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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

#211

Post by refurb »

rangestransform wrote: post #3

Can the CA govt just impose prohibitive fire prevention liabilities on utility companies, bankrupt them, and scoop up the assets for free?

Absolutely, barring the company bringing them to court for violating the "taking withouy compensation".

But what people forget is that the CA state doesn't want PG&E.

The state already exerts significant control over PG&E operations through the CPUC (members nominated by Gavin Newsom). CPUC approves/rejects all capital spending down to new fences for electrical substations. You can read about all the decisions in the 931 page rate decision, which is public.

https://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M520/K...

But what about executive compensation? Well, a separate CA state agency approves that as well.

https://energysafety.ca.gov/what-we-do/electrical-infrastruc...

So at this point the CA state government basically runs PG&E. But if they purchased it, they'd be exposing themselves to all the political risk when things go bad.

But right now, they get political air cover. Despite the tight level of control over how PG&E is run, the CA state government gets none of the blowback.

It's the optimal setup from a political perspective.

Re: Cities can cost effectively start their own utilities

#212

Post by b112 »

jeffbee wrote: post #131
b112 wrote: post #123

Earlier quoted context omitted.

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 conver…

Out of context Canadians are ... out of context. We are discussing utilities in California. California and Quebec could not be more different in terms of climate and fire risk. I can't wait for you to justify the claim that fire risk is the same in California and Quebec. Every place in Quebec can generally expect precipitation every other day on average and the normal number of consecutive dry days in California ever…

Quebec is 4x as large as California, has far more forested land, and is often very dry in late summer.

It also has massive snowstorms, ice storms, which bring down vegetation, and ranges from -40F up to 100F yearly, depending.

We can nitpick on specifics, but by no means is California more rural, or more forested. Quebec is also far less populous, and has a far more hostile environment.

Hydro Quebec does well, because vegetation is cleared, maintenance is performed, and corners aren't cut.

Unlike PG&E.

Re: Cities can cost effectively start their own utilities

#213

Post by toomuchtodo »

nocoiner wrote: post #188
kevinburke wrote: post #177

Earlier quoted context omitted.

I'm the author here. The cost savings come from not having people who live in cities pay for undergrounding lines and maintaining power lines in rural areas. Maintaining the city networks is much cheaper. This is why Santa Clara, Palo Alto and Alameda's power companies can deliver power for half of what PG&E can. You can just copy their cost structure.

Cool. Now you’ve just undone 70 years of rural electrification in the United States. Optimizing for factors other than universal service is completely valid, but I’m guessing each of those municipal power systems pre-dated rural electrification and thereby get to somewhat free ride on the system more than anyone would reasonably allow Walnut Creek to do in the year 2025.

Rural electrification was needed at the time. In many cases, it no longer is (distributed generation, microgrids, etc vs large, distant generators having to transport power to residential load centers).

This is very similar to how Africa will leapfrog the legacy model with cheap solar and batteries.

In Australia, they have a model of colocating stationary battery storage in neighborhoods to balance buffer solar production locally for time shifting purposes (vs shipping that power far only to bring it back in the evening).

Re: Cities can cost effectively start their own utilities

#214

Post by toomuchtodo »

asats wrote: post #122
darth_avocado wrote: post #110

Earlier quoted context omitted.

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.

Waste is waste. Squeeze it all out. Excessive management comp, share buybacks, dividends that could’ve been spent on infrastructure.

Re: Cities can cost effectively start their own utilities

#215

Post by gnopgnip »

rmason wrote: post #86

I used to live in a small town in Michigan which had city provided power using a dam. It was inexpensive and highly reliable. But every couple of years the big power company in the state would try and get the city to sell them the utility. After I moved a city council for whatever reason ended up selling. As a result the cost of electricity immediately doubled and power outages occurred regularly due to reduced maint…

Alameda had municipal internet. In the 2009 financial collapse the city was facing bankruptcy and sold off the internet and cable to comcast. The alternatives weren’t great, the cost of borrowing at the time was high and cutting services is unpopular. The residents benefited from having the infrastructure either way. And this let the city keep municipal power, around half the cost of pg&e.

Re: Cities can cost effectively start their own utilities

#216

Post by bunabhucan »

kevinburke wrote: post #177
theptip wrote: post #130

Earlier quoted context omitted.

> 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…

I'm the author here. The cost savings come from not having people who live in cities pay for undergrounding lines and maintaining power lines in rural areas. Maintaining the city networks is much cheaper. This is why Santa Clara, Palo Alto and Alameda's power companies can deliver power for half of what PG&E can. You can just copy their cost structure.

You said in the article "PG&E rejected this offer for being too low" but then proceed to use that as the baseline cost that drives the rest of the estimates, that doesn't make sense. If I offer someone minimum wage to do my job and they refuse, I don't start a spreadsheet to calculate my savings.

Boulder CO tried municipalization with Xcel and the gap between the city offer and Xcel position was very large. How do your figures look if you double the price and/or add in a decade tail of having to pay 25% of billing to PG&E?

The small munis you mention are in the same position as PG&E with respect to owning decades old poles and conductors with decades of life remaining. The incumbent has all the cards in this negotiation. An existing muni can do it cheaper for the obvious reasons you stated - legacy network, all the customers are close together. Buying the most profitable bits of the PG&E network at a price they would agree to would not be profitable.

Re: Cities can cost effectively start their own utilities

#217

Post by _heimdall »

MichaelZuo wrote: post #114
_heimdall wrote: post #104

Earlier quoted context omitted.

Maybe I'm naive here, but isn't any company at a similar scale regularly finding ways to reduce profits on paper? Taxes add up fast when you don't have expenses to write off, and my understanding was that most effective ways to reduce tax liability would also reduce profit margins.

Why are you asking me when their financial statements are available online for you to read? I don’t have some special insider scoop to know whether the numbers listed in the statements are real or fake.

Well to be clear, my question there was more broad than any one company's financial statements.

I was asking a general question of the motivation for large corporations to avoid having profits on paper. I asked the question rather than claiming it as a statement because I am less confident in the details and want to raise the issue without presuming that I know exactly what I'm talking about on the topic.

Re: Cities can cost effectively start their own utilities

#218

Post by porridgeraisin »

s1artibartfast wrote: post #199
darth_avocado wrote: post #110

Earlier quoted context omitted.

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

Profit margins are set by the state utility control board. The board says 11% profit Max, so that is what all of the major utilities make. The challenge is that with a fixed profit percent, they have a heavy incentive to maximize open. You can spend $10 and make $1.1 or spend $100 and make $11. It's a very problem to the healthcare market. Health insurance also has fixed profit, therefore there is a huge incentive to…

This is the exact reason for the jacked up prices in many things.

Re: Cities can cost effectively start their own utilities

#219

Post by imajoredinecon »

heylook wrote: post #206
wisty wrote: post #180

Earlier quoted context omitted.

Possibly due to overregulation. The power company wants to cut corners. The government wants to prevent that. So there is constant lawfare between governments and highly regulated companies, with neither really caring if it leaves the customer out of pocket (since regulators can blame the bills on the company). The company outsmarts the regulators so the regulators carpet bomb them with so much regulation that they h…

[flagged]

For what it’s worth, I just took the parent comment’s wording as metaphor.

Re: Cities can cost effectively start their own utilities

#220

Post by bunabhucan »

There was a thread recently on a subreddit talking about hn threads that get outside the hn circle of competence (nuclear weapons in that case) and this thread is giving me the same vibe. I work in utilities and have worked in multiple countries/continents and all over the US (and lived and worked in CA) for munis, coops, national carriers, giant IOUs etc.

If you see something you disagree with here please treat it as "I implemented notepad.exe in elisp" level of not even wrong.

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