Cities can cost effectively start their own utilities

Some areas served by SDG&E have community owned power generation and SDG&E handles delivery. The price SDG&E charges for delivery is usually 30% more than generation costs.

Power bills increased after switching to community generated power.

The Enron scandal was 24 years ago, which is a generation ago — almost two.

I’d guess the problem is more endemic to their political system.

I frequently visit a farm in Austria on the very end of a rural transmission line that can be cut during storms by tree fall almost every year. I don’t think they have ever been without power for a full day. In Vienna if average something like 8min a year

I would argue that if something may not fail you can only pretend to privatize. You only privatize the profit during the good times.

Our railroads paid a nice 300m in divident every year then corona came, people were told to stay home. You can guess who had to pay for the lack of travelers.

The most silly are ISP's. The prices in each country depend on how much people can pay and what you get for it is rng

Where are those mythical other places?

It's the end state of neoliberal policies. That's the ideological tendency that actually has the obsession with markets and strangling government capacity to do anything other than be a spigot for tax dollars. Scandinavian social democracies aren't perfect but they don't suffer from these entirely predictable problems to nearly the same degree.

Selling almost any state function to a private entity is almost the opposite of what social democrats want to do…

I think you mean neoliberal democracies.

> A true market won’t have a heavy handed regulator in bed with a govt approved monopoly.

So the only way to have a true market is to count on the opposite of human greed.

Well hopefully that works out.

A true market doesn't exist.

There's also Norway, China etc, countries with productive SOEs. Those governments have debt but also significant assets.

So several problems with infrastructure - the developers always underquote and then once there are overruns the government is locked in and doesn't want to bankrupt the companies making these public infrastructure projects otherwise nobody would ever build anything. Additionally borrowing for infrastructure is often done through public/private partnerships which ends up with private companies owning the infrastructure and payments being made by the government for all sort of things in addition to rent i.e. changing a lightbulb costs £2000 etc. Government tend to get all the downside and the rich (who own the debt and the companies involved in building these projects) tend to see all the upside, look at the utility and train companies in the UK for example, and hospitals under PFI.

The money for these projects is provided by the wealthy through the purchase of government bonds.

Brexit is a problem sure, nobody denies that, but QE of around £1tn since COVID, most of which ended up with the richest (see asset price increases and cash holdings and world stock markets at all time record levels) is even more of a problem as it makes normal people and tax income relatively even smaller so borrowing and taxes need to be increased. And of course we don't tax the people whose assets have gone up enormously until they sell those assets. Quite often rich people borrow money against those assets instead of realising a capital gains tax event or various other loopholes.

I don't know too much about the specific case of transport infrastructure in Australia, but if the government owned them outright without attached debts clearly they would be assets rather than liabilities.

Who "demand[ed] the same quality of life they had"?

Correct, but this doesn't create as much of a wedge as you might suspect. It's also true in the US that commercial electricity tends to be 20-50% cheaper than the home delivered stuff. In the EU the additional tax burden means the difference is usually closer to 40-70%. Ironically, in this way, you could describe the EU as being far more business-friendly than the United States (by dint of being much more consumer-hostile, but hey).

Making the fundamental power generation cheaper is probably still the best lever a private actor can push.

https://countryeconomy.com/energy-and-environment/electricit... is where I'm pulling most of my data from, which itself seems to be using Eurostat as a source.

I think you're spot on. Damn failures are on the rise, and usually it's due to the simple fact that maintenance is expensive and everything has a shelf life. A lot of these dams were built during the same time period and the cost to replace / maintain the aging infrastructure is tough for small communities to swallow. And they're all coming due at roughly the same time.

Selling to a larger company who hopefully has the capital to fix them seems like a bargain when compared to the cost of replacing a hydro dam (or even replacing it with a non-electric generating dam).

Of course, that does come at a cost, and it's probably spread across all rate payers.

Whether they were connected and whether they were selling the power are two different questions.

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...

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.

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.

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.

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 drive up costs. Better to make 15% on a $10,000 drug then 15% on a $10 one.

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

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.

[flagged]

The fact that they charge significantly more money than virtually every other utility company in the country (and indeed, within California) with comparable margins is pretty good evidence I feel.

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.

Can you distinguish effective investment from ineffective? For example, paying competitively to attract and retain talent can be seen as an investment as well. And before you restrict it to just physical infrastructure investment, a non-trivial part of the cost of that infrastructure is in salaries and also how you manage everything at scale and I would think you’d want to incentivize more efficiency there too. This is why the tax code gets so insanely complicated.

Those terms exist.

The payout ratio is the percentage of net income actually paid out to equity investors.

For utilities it's around 50% of net income, though it obviously depends

This is a PG&E area as stated charging ~40c per kWh as stated by the post above?

What city in the Bay Area is that out of curiosity?

PG&E is a private company, much of the responsibility for their wildfire costs are the result of mismanagement of the risks.

Their costs get shouldered by their customers and their stock price. (they really should issue shares to pay their bills to dilute their stock price and cause their existing investors to lose money). In any case it's not going to get very willingly picked up by the government.

PG&E's liabilities aren't going to be put into taxes.

It's not the state government taking over PG&E, it's individual municipalities leaving the PG&E network and forming their own utility to buy wholesale electricity (or make some of their own) and distribute it to their citizens... resulting in a large reduction in cost in no small part because they no longer have to pay for PG&E's liabilities.

He’s talking about local governments in places that have little or no fire risk. Should people living in dense cities be paying to underground power lines to rural communities hundreds of miles away?

Using tax money to subsidize higher rates on certain areas is roughly the same as just charging people all a slightly higher rate.

“The people” in expensive areas have literally no agency in finding an efficient solution. They don’t have any say about the utilities grid investments. In most parts of the country “these people” are also poorer.

This has to be the most confidently incorrect take I’ve ever read here.

The Rural Electrification Act not only brought power to rural areas, but also jobs to Americans when they were most needed, and countless follow-on benefits: increased farm productivity, longer lifespans and higher quality of life, etc.

It’s also not that subsidized compared to many other industries; the entire point of co-ops is purchasing something in bulk, with no one taking the profits. They get loans, yes, but the default rate on them is absurdly low.

And on that point, electric co-ops consistently produce reliable power at a lower cost than privately-owned utilities. I’ve experienced both, in multiple areas of the country, and by far co-ops beat everyone else.

This doesn’t even touch on the fact that the infrastructure enabled by the REA is also the only reason high speed internet ever made it to rural areas. Fiber everywhere should absolutely be a goal.

That basically describes my area. There are 3 streets (2 connect, the 3rd doesn't). There are 11 houses on my (dead end) street and maybe 25 on the other two streets.

Because of this clustering - I live in a pretty rural area - but have natural gas and cable internet (only one option, so not that awesome).

But, I also have a well and a septic system. And I'm very thankful. As I was moving back to the US after 2 decades in a city, I did a winter with no high speed internet (used a mofi router with a SIM card as Starlink was overprescribed in the area) and propane for heat. It was a small house but heating with propane is crazy expensive.

Who cares about the way things should be when it comes to utilities. There’s no feasible way you’re going to cut power to rural communities and people. Deal with it.

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).

Eh, but we should not leave people without basics of civilization. Yes, it’s a subsidy, but benefits outweigh hoarding of wealth.

Cleveland Public Power rates online are <$0.10/kWh in the summer and <$0.05/kWh in the winter.

I’m not sure where “out here” is, but $0.11/kWh is not the national low for municipal power costs.

Usually, for a private company, there is a forcing function (profit and loss) that incentivizes the management to ensure the knives are at least functional. Public employment doesn't have the same forcing function, and runs the risk of turning into a jobs program for the otherwise unemployable or a patronage network.

Of course, none of this is exclusive to one or the other.

they might be subsidized less than the rural areas, but they're still subsidized by the urban core.

I assume the same should apply to, say, USPS, and the residents of Alaska and Hawaii should stop being leeches who can get letters delivered to them below cost?

The underlying problem is that utilities are set up assuming their capital investments pay out over an extended period, but the technology is now changing over shorter timescales. The electric power industry is changing at a rate that it hasn't seen for over a century.

The average residential electricity rate in CA is $0.34/kWh. In these problematic locations, I'd expect the cost to be even more than this. Ground mount PV would be suitable here, so there would not be great problems with scaling. I think a PV + battery system should be competitive regardless of "modernity", whatever it was you meant by that.

To put numbers on it: for a 12 kW system in Chico, CA (a location at ~40 degrees N I chose arbitrarily) the NREL calculator at https://pvwatts.nrel.gov/pvwatts.php gives annual generation of 18500 kWh (40 degree inclination). For a lifespan of 20 years at $0.34/kWh this is $125800 worth of electricity. A 12 kW + 16 kWh LFP battery system costs something like $36K (+ installation and financing).

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