Illinois has enjoyed a ten year rate freeze on electricity rates that have kept consumer's electrical bills low. That bill expires at the end of this year leaving Illinois residents looking at upwards of a 55% rate hike. As expected, legislators are looking to stop the rate hike because short-sighted pandering is what politicians do best. This is the absolute worst thing to do for Illinois and will lead to a dark future for our children.
The New York Times recently ran an article about discussing a report from the commission set up to investigate the causes of the massive Ohio power outage in 2003. The report says bleakly that the United States is not building enough power plants to keep up with demand, that consumers waste a great deal of energy and have no incentive to reduce their demand on the grid, and that the grid's general infrastructure is so old and aging that it's susceptible to massive outages.
There is no such thing as a free lunch. By artificially capping prices, costs have to be cut somewhere to make up for it. For the power grid, this means less money for research and development, less new construction, less new technology to increase efficiency, less redundancy, and so on.
There is one idea that needs to be put to a violent death right now; that energy company executives should cut their pay to pay for new power stations. Everyone who likes this idea, consider this. That national deficit is about a few trillion dollars and it should be paid off. Will you take a 10% pay cut to help pay this debt off? Didn't think so.
Another feature of letting market prices take effect in Illinois is that it will give consumers the full incentive needed to curtail and conserve their energy usage. The power companies have said that they will give near-time energy pricing data so that they can adjust their power usage by time. This is one of the biggest suggestions in the study cited above.
By artificially keeping prices low, consumers have lost the incentive to conserve. By artificially keeping prices low, energy companies do not have the resources to invest properly to maintain and improve the energy grid. The status quo will lead to more and more failures like we saw in 2003.
Rate freezes are good politics, if pandering is your thing. However, in reality they never work quite as advertised. It's time to let the rate caps expire before it is too late… and too dark.
Article comments
1 - BriMan
You dont mention that there used to be a requirement that utilities pump a certain % of sales back into their grid. The industry lobbied and had this provision successfully killed not long after deregulation. That these corporations do not volunteer to reinvest some of their profits should not be such a big surprise to anyone. You are blaming caps as the sole reason for poor reinvestment. The industry would much rather not be capped and keep their profits too. But people shouldnt exist to serve industries and corporations - it should be the other way around.
If you want to talk incentives, where is their incentive to do this reinvestment caps or no? Do you think it would flow naturally out of desire? You rationalize not asking for those who benefit the most to sacrifice in the least but I think that is a sad excuse for a rationalization. It is analogous to a farmer who sows his field (investment) but refuses to water it (reinvestment) because he has done enough already. Sooner or later, his business goes kaputt. Trusting the corporations to do the right thing is why America lags the rest of the world in affordable, available, speedy broadband access for instance. They take the money and run.
We only have to look at water privatization efforts in S. America to see the folly in your logic. Bechtel took over the water supply, raised the rates, people couldnt afford water and it became illegal to collect your own, Bechtel didnt reinvest their profits and water quality tanked, and then came the revolution. This is a simplified version of events that happened in Bolivia to be sure but that is the gist. You have to serve the people - you can not expect them to sacrifice when they dont benefit from the system. Those who benefit should also be the ones doing some sacrificing.
Your analogy about the deficit rings hollow because we are all already paying for it and we will end up all paying more eventually if someone steps up to the plate and takes the responsibility for solving what amounts to our largest national security issue - terrorists be damned.
Here in California, the Public Utilities Commission has a say in how much money a utility gets to reinvest in the grid from funds that are created via fees and surcharges on ratepayers. Each utility applies for a share of the funds which are then allocated towards (supposedly) the greatest need. Cities and other jurisdictions collect additional local surcharges for conversion projects as well (overhead to underground or copper to fiber, etc.). These fees only amount to a few dozen dollars a year per household.
California's energy woes came in the form of deregulated theft and market manipulation not poor infrastructure. Comparing our method of renewing infrastructure to Illinois problems may not be fair but the PUC system seems to work well for maintaining the grid.
2 - John Bambenek
California's problems didn't come from deregulation, it came from illegal market manipulation.
3 - John Q. Public
Actually, it was the deregulation of the California power grid that enabled Enron to go in and artificially manipulate the market for their own benefit and to the detriment of the Californians themselves, as well as the overall fiscal health of the state.
As normal, John appears to be a bit factually challenged.
BriMan raises most of the valid points, even pointing out the flaws in the analogies poorly constructed in the original post.
Simple example is the deficit/debt being compared to the Illinois power grid. The U.S. taxpayer is paying off the deficit/debt every tax day, including the insane interest on such a debt. Check the CBO or GAO for the numbers there, and then try and explain how a national government issue has any resemblance to a private corporation providing utility service to a state of consumers.
There is also the point BriMan brought up, that the regulations of the state required the utility company, to partly pay for their monopoly, to utilize a percentage fo their profits for research, maintenance, and upgrading the grid.
This has not been done.
Andone of the things that is always amusing about utility companies complaining. they have been granted an area monopoly, with definitive rules and regulations laid out. They signed the contract, did not live up to their end, but did get paid. And now have the gall to whine when they are called to task about living up to their obligations.
John was right about one thing, you don't get something for nothing. He was just completely incorrect about who was wanting the free lunch.
4 - John Bambenek
That's absurd, that's like saying not having gun control laws are the cause of gun crimes.
That's not the principle of how this country is organized. Sure, if you want to engage in massive end-to-end regulation to prevent any possible wrong doing, then be honest and say you support communism.
Enron didn't get away with what they did, they got screwed mightily for it. If you want to preempt all illegal activity by regulating every aspect of life, fine, but that's not the American way. We expect people to behave and punish wrong-doers after the fact, not assume that everyone is a criminal.
5 - John Q. Public
John, you obviously are unfamiliar with the rules of cause and effect.
Take a look at what deregulation was actually done, and you will find that it completely enabled Enron to manipulate the California market as well as all the crimes it committed against it's shareholders and the banking institutions which helped finance it.
Enron did get away with it for years, ruining a large portion of the California economy for years before they were caught and stopped.
What is absurd are your mangling poor analogies in a feeble attempt to shore up a poor argument in order to excuse the Illinois utility from living up to the commitments it had made in order to receive a state monopoly.
It's called a contract, and the utility did not live up to it, whereas the consumers did, by paying their bills as agreed upon.
All else is sturm und drang, and you cannot distract form the actual facts by merely saying anything you please with no factual basis for reference.
6 - Illinois Consumer
To deflate one other point of Mr. Bambenek's argument:
I, nor any other U.S. Citizen who is not the President, or a member of Congress or a member of the administration or any some other in a position of power or influence, should never be asked to take a pay cut towards reducing the national debt because we have no direct control, and very minimal indirect control, over the policies that create, or increase that debt.
How dare you, Mr. Bambenek, compare each of us to an executive, who is getting paid, what he is getting paid, because he is in a position of power and control.
There is a direction correlation between his position and his salary; between his company's performance and his salary (at least that's how it's supposed to work, right).
My getting a project at work done on time doesn't mean the national debt is reduced, or that the electric grid is becoming more efficient, but if the President, or the ComEd executive does what he is supposed to we wouldn't have the national debt, or this so-called crisis with energy companies!
If I were to give a portion of my income to pay off the debt I would be paying twice: with my taxes and with my rightfully earned, personal income.
Perhaps our leaders' salaries should be tied to the national debt and other economic factors, but you leave us powerless people alone.
You do have a talent for deeply flawed analogies!
7 - money bags
O.K there may be alot of wasteful people and the demand for power has grown along with the population.Wich means the power company is getting more customers which means they are making more money and it is there responsibility to keep their equipment up to date.My workplace is growing and the company puts some profit away so than can buy new equipment without having to raise the price of their product.Which they have to stay competitive with the market.The power company in Illinois has no competition.It's a monopoly.The customer should come first.I dont think the executives should take a paycut but maybe their wages shoulnt increase anymore.I'm sure one of their houses draws atleast 5 times more power than my house.Who needs to conserve?
8 - Billed out of my house
Ameren executives are a bunch of thieves!
First of all most houses expected a jump of 40 - 55 percent, in my house the bill jumped over 300 percent. This was due not to the increase in power comsumption but rather due to Ameren's GREED!
They gave incentives to developers to build houses with only electric hookups. This monopoly does not allow the residents the chance to change since gas was never installed. The change in price was also dictated by removing the space heat allowance, this now charges the same amount Kw/hr regardless of the way you expend the energy. Or maybe I should just keep my house at 45 degrees F so I can continue to live in my house.
9 - Ameren the next Enron
20-55% of a hike we could possibly handle. Our bills went up over 100% some people they went up 300% or more. I would not take a pay cut to pay for the national deficit because I make hardly enough to send my kids to school and pay for gas for my car. I own nothing fancy, keep my other bills low so I can just survive day to day. I don't make hundreds of thousands or millions like most executives do. Then I get hit with an almost $500 electric bill?? And here I keep the lights off when not in use and keep my heat at 58... should I just shut it off? Live in a coat?
10 - The Beast
How much did ComEd pay you to write that?