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Cities can cost effectively start their own utilities

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Re: Cities can cost effectively start their own utilities

#361

Post by fransje26 »

tmnvix wrote: post #105
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…

Perhaps I'm too cynical, but somehow I doubt that those with decision making power that were in favour of selling at the time regret much. Our modern political economy is almost entirely focused on ensuring that everything that can be sold to private entities (read, the market) is. In this ideology the sale would be viewed as a success regardless of any practical downsides.

> but somehow I doubt that those with decision making power that were in favour of selling at the time regret much.

They possibly even managed to buy a luxury car in the years that followed. Or went on holiday more often. Or somehow unexpectedly landed a nice and cush job at said energy company.

Re: Cities can cost effectively start their own utilities

#362

Post by greesil »

JasserInicide wrote: post #313
greesil wrote: post #58

Earlier quoted context omitted.

Maybe these expensive-to-serve regions need a different model of power generation.

Or living so far from civilization, especially in a state where wildfires have been part of the ecosystem for millions of years.

Altadena isn't exactly far from civilization. The point isn't that wild fires happen, it's that maybe these little places should go "off grid" so everybody can get a lower price. Everybody but them probably.

Re: Cities can cost effectively start their own utilities

#363

Post by fransje26 »

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…

> So I’m skeptical. If there was an analysis that showed a drop in rates that was not 3X higher than the profit margins of the private utility I’d be more open to the idea, but as presented this feels like back of the envelope math that generates savings by ignoring all the details that didn’t make their way onto the envelope.

That's possibly because of a strong underestimation of the actual indirect inefficiencies that come with shareholder profit-oriented companies. Every investment is seen not as a way to maximise profit in the long run, but as a direct decrease in shareholder profit, and should therefore be avoided at all cost (ha!) or postponed for as long as possible.

Strong counterexamples, admittedly not from energy companies, can be found in the remunicipalisation of the water supplies in Berlin and in some districts of Paris. Both came with drastic decrease of user costs, better water quality and a decrease of outages.

Re: Cities can cost effectively start their own utilities

#364

Post by dv_dt »

wisty wrote: post #180
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.

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…

If you look a recent regulations that affect homeowner solar rates, it's quite the opposite, with the California Public Utility Commission being quite beholden to private utility wishes to the point of making home solar arrays much less cost effective so that utilities can be the only source of solar from larger grid installs. Large utility solar installs are inherently more cost efficient anyway, but the finger on inhibiting home solar was completely unnecessary yet still eagerly passed by the PUC.

Re: Cities can cost effectively start their own utilities

#365

Post by ceejayoz »

gruez wrote: post #169
ceejayoz wrote: post #137

Earlier quoted context omitted.

He won’t be the only person getting a bonus. Or a fancy office conference table. Or offsite team building exercises in Hawaii.

>Or a fancy office conference table Even smaller order of magnitude than executive comp >offsite team building exercises in Hawaii. Source this actually happens to an extent that would materially affect the balance sheet?

They add up.

Private plane: https://www.sfgate.com/business/article/executives-at-pg-e-h...

You hire your buddy’s company as a consultant or contractor, too. At a sweet rate.

Re: Cities can cost effectively start their own utilities

#366

Post by simonebrunozzi »

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…

i guarantee you that PG&E is nothing like an efficient company.

Re: Cities can cost effectively start their own utilities

#367

Post by AnthonyMouse »

tofflos wrote: post #352
AnthonyMouse wrote: post #339

Earlier quoted context omitted.

> I would argue that if something may not fail you can only pretend to privatize. You only privatize the profit during the good times. You can straightforwardly privatize things that can't be allowed to fail. Power generation is a decent example: If you have a hundred independent generating companies that all sell into a live auction market, they have to compete with each other which keeps prices down and the market…

There can't be a competitive market. The entity that operates the grid has a monopoly on all customers in the area. So I would say entities that govern grids fall in a can't-be-allowed-to-fail-category while entities that govern generators do not (unless they buy enough generators in a region to effectively become a monopoly).

If you had a monopoly generating company and it failed then the power goes out even if the grid is up. It's just as important as the grid, but it's amenable to competition.

"Operating" the grid isn't the natural monopoly either. The natural monopoly is actually the physical space beneath the grid, i.e. the roads. If a storm knocks down a pole or some transmission lines need to be upgraded you could put out bids to any number of companies to come and do the work. If customers want to buy power from a generator, the grid is used to deliver it, but that doesn't mean the grid operator has to be an intermediary between the supplier and the customer instead of a vendor of the supplier paid to deliver power. It's not even obvious that they should be paying per kWh instead of funding distribution through taxes in the same way as the roads, since a well-functioning grid should never exceed peak capacity but using otherwise-idle transmission capacity has no variable cost.

And then what's the natural monopoly? Just physical ownership of the infrastructure, and some accountants to predict when demand is about to outstrip supply and bids should be put out to expand capacity.

Re: Cities can cost effectively start their own utilities

#368

Post by Affric »

crazygringo wrote: post #321
Affric wrote: post #278

Earlier quoted context omitted.

> “the tax payers are being ripped off as asset owners because once the debt incurred to pay for the energy system is cleared they just give out cheap electricity and don’t seek profit. It is more efficient to sell, reinvest, and then let some massive rent seeker over charge you for something you once owned” The economists who argue for this, only slightly paraphrased.

I have never heard a serious argument that it is more efficient to sell and reinvest from a finance perspective. The argument is generally that private companies are more productive than public services due to productivity improvements that are forced via competition. There's no such forcing function for a government-provided service, enabling (potential) waste and bloat, depending on governmental competence and over…

Here’s [1] a report from the early days of electricity privatisation in NSW. In all honesty it’s been about a decade since I have read it closely but I would say it’s fairly serious and it does like efficiency as a metric.

Underproductive though is certainly simpler but my understanding is that it was inefficient because the asset owner charging an equilibrium price should in theory lead to higher overall production (obviously lack of competition hurts this).

[1] https://www.parliament.nsw.gov.au/researchpapers/Documents/e...

Re: Cities can cost effectively start their own utilities

#369

Post by viernullvier »

DrillShopper wrote: post #356
mschuster91 wrote: post #269

Earlier quoted context omitted.

The thing is, large scandals can have an aftereffect that lasts for decades. Berlin for example had a massive bank collapse in 2001 under the Conservative government that ended up placing the state of Berlin into billions of euros worth of debt and financial risk. The succeeding SD/Left/Green triplet coalitions had to fire-sell off many state-held assets like the water utility (that ended up a disaster on its own [2]…

And then they killed the nuke plants for coal because they're scared little babies.

There have never been any grid-scale nuclear power plants in the state of Berlin. I don't see how this statement relates to the prior discussion in any way other than vague geographic proximity.

Re: Cities can cost effectively start their own utilities

#370

Post by tomjakubowski »

treis wrote: post #316
rsynnott wrote: post #290

Earlier quoted context omitted.

The problem is, if cities don’t pay for that, who will? Just abandoning electricity for rural areas isn’t _really_ an option, but it would likely be uneconomic without the effective subsidy from urban areas.

It probably is an option to go to solar & batteries these days. Especially when the liability from rural power lines is huge due to fires.

Solar would make good use of the big advantage rural has, that land is dirt cheap and space is plentiful.
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