Utilities Wrongly Blamed for Surcharges

A ProPublica piece by Talia Buford titled, "The Obscure Charges That Utility Companies Add to Your Bills" discusses "16 lurking surcharges" on bills from a New Jersey electric utility.

Predictably and wrongly, the article departs from there to impugn utilities nationwide for cheating their customers and implying that they have a freer hand to run their own affairs than they actually do:

Image by Giorgio Tomassetti, via Unsplash, license.

Across the nation, local and state governments have turned to utilities to address acute and pervasive infrastructure needs, while utility companies have looked to surcharges as a way to finance those projects -- and ensure steady profits. Sometimes, utilities have used revenue from surcharges to pay for things other than infrastructure, many of which customers might expect are already included in their rates: tree trimming (Kansas), smart meters (Colorado) and pension costs (Massachusetts).

In New Jersey, gas and electric bills are packed with add-ons that pay for everything from installing solar panels to putting substations on platforms above flood levels. For residential customers, a single charge, added to bills in increments as tiny as a thousandth of a cent per kilowatt hour, can add $35 to $45 a year to costs; for industrial and commercial customers, the charges can add up to tens of thousands of dollars annually. And it's all on top of the price that regulators have agreed customers should pay for their electricity service. [bold added]

In other words, utilities have to go through regulators to set rates -- which are apparently not adequate to cover their costs, some of which are mandated by those regulators. I am already inclined to blame the regulators, but that's not the only reason power rates are higher than they ought to be.

For the full story -- and a more objective take on the current relationship between utilities and government, I refer you to an article by Raymond Niles of the American Institute for Economic Research. He's writing about another problem caused by the government's stranglehold of the energy industry, but much of what he says directly applies to the ProPublica story:

Consider that Californians already pay some of the highest electric rates in the country. This is also a result of the [government-mandated --ed] monopoly status of its utilities. When the utilities ran up excess costs it could simply pass them on dollar-for-dollar to its captive monopoly "customers." Sometimes those excess costs were its fault, but usually it was the result of some regulation that forced extra costs onto the utility, which then passed it on to its customers. The regulators also "benefit" from the monopoly status of the utilities they regulate because they can "try out" expensive "flights of fancy" projects such as making the utilities install extremely expensive "green power." It is of little consequence to the utility because it just passes the costs on to its customers, who have no choice but to pay the bill for these failed experiments.

But here's the rub. There can be no doubt that Californians are already paying electric rates that are so high that a competitive electric utility, if it were unencumbered with these costly regulations, could undoubtedly supply cheaper and much safer electricity over well-maintained transmission lines that don't spark fires to trees. We know this is true because it is already done elsewhere in the country, where utilities are run somewhat more efficiently, even though they are also regulated monopolies. [link in original, bold added]

I recommend reading the entire Niles article, as well as his more comprehensive historic narrative, "Property Rights and the Crisis of the Electric Grid." Each piece greatly clarifies why so many utilities seem more like corrupt government entities than companies eager to make money by providing value to their customers. It is because they are largely run by the government.

Our high electric bills and our increasingly precarious supply of reliable electricity are far from the fault of the profit motive. Indeed, freedom from government control -- not more of the same -- would easily solve the problems Buford and Niles discuss.

-- CAV