Mon, 10 Dec 2007

The Utility of Utilities

[Appeared last week in the Woonsocket Call, the Pawtucket Times, and other fine RIMG papers.]

Last week the state Public Utilities Commission (PUC) voted not to change its rules about gas and electric shutoffs if you don't pay your bill, and rules about getting it turned back on. The PUC had been considering a minimum payment required to get your electricity turned back on, as well as new rules about who could be represented by whom at shutoff hearings, but they decided against it.

In any discussion of utility shutoffs, there is a question lingering in the back of people's heads. It was all over mine, so I'll be the one to admit it: why should I care? If someone can't pay their bill, then how is that different from ordering food at a restaurant without money in your pocket?

Here's why: nobody means to go to Burger King and accidentally winds up in the Capital Grille. And there's no lease or mortgage on your table even if you do, so you can leave if you need to. We have a world where it's easy to get into trouble, but hard to get out. Someone can get sick or laid off, or the price of energy can just shoot through their roof. Fuel prices have shot up by a third since this time last year, and it shows up in utility bills.

Meanwhile, the condition of the real estate market has made it so that even if you realize you're in a too-expensive-to-heat house, there may not be anything you can do about it. You're behind on your heating bill, but selling your house at a depressed price will mean financial ruin. Sounds like an easy choice, right? Maybe that's why 29,970 people had their electricity or gas shut off during the first ten months of this year. That's a record, up 18% since one year ago.

State law protects the very poor, elderly and disabled from having their utilities shut off between November and April, but that only means a reprieve of a few months, and it still leaves a few thousand people in the lurch. As of November 16, National Grid reports that 2,814 gas customers and 1,309 electric customers had their service shut off.

When I hear numbers like these, I can't help but also notice that Exxon Mobil's profits are down to only $9.4 billion this past quarter, down from $10.5 billion a year before. In fact, oil companies are currently so profitable that stocks like Exxon are propping up the Dow Jones average, even while the other blue chip and bank stocks slide down and down. And then there's National Grid, the energy conglomerate that now provides most of our state's electricity and natural gas.

It's difficult to tell from their filings what National Grid earns from Rhode Island, but there is no mistaking that it is a very profitable enterprise. In the first six months of this year, their financial statements show they earned a profit of $1.2 billion on revenue of only $3.2 billion on their electric transmission business alone. (About $152 million of profit that was from US operations.) This is a huge profit margin in any business, and is up 17% since last year.

A part of your electric rate is dedicated to bills that will likely never be paid off. According to the PUC attorney, this is about 1% of your electric bill, which covers a substantial part of the losses. But why this should come out of your bill at all is something that has never been adequately explained to me. This is, of course, the way things work with regulated private utilities, so what can you do?

As it happens, our state contains its very own counter-example. The Pascoag Utility District provides power to about 5,000 residents of Burrillville, and is owned by those very same residents. Pascoag isn't a particularly poor place, but like all our towns, they have some poor people. And no town is immune from illness, divorce and layoffs. But as of November 16, they had zero ratepayers cut off for non-payment of their bill. Plus their rates are lower. (Or they will be after National Grid's proposed 5% rate hike in January.)

I asked Judy Allaire, their deputy general manager about all this, and she told me there were plenty who were cut off over the summer, but that they were mostly people who had fallen into some temporary bad situation and that they'd worked out payment plans with each of them. She told me, "We're smaller, so we know our customers and we know when they're getting into trouble and can help them get out." Pascoag can do things that National Grid can't, partly because they're smaller, and partly just because there are no shareholders demanding their investment returns.

Decades ago, our nation decided that regulating private utilities was better than trying to own and run them. Over the years, this has created these strange situations where you have public bodies like the PUC guaranteeing the profits of private investors. The system does appear to work, after a fashion -- people get their electricity and the investors get their profits -- but right here in Rhode Island, next to the huge for-profit utility is a little municipally-owned enterprise that gives better service for less money. Markets are fine things, but we shouldn't let them blind us to other possibilities for organizing government services. Like health insurance, for example. For most of the knotty policy problems facing us and our government, open minds are what we need to get the job done.

21:57 - 10 Dec 2007 [/y7/cols] link

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