Ridiculous!

[cactusjack]

This has nothing to do with motorcycles but hear me out...

We have two major electric utilities that serve the Phoenix area. One of them runs commercials non-stop with Steve Nash of the Phoenix Suns telling customers about conserving electricity. The customers listen...the utility's profit declines because people aren't using as much electricity. SO GUESS WHAT? The utility wants to raise rates now.

I read this the other day, and even though I get my electric from the other utility, this made my blood boil. I say they need to cut costs to increase their profit. It seems to me that if consumption is down, then they should reduce their overhead a like amount.

[Yellow Jacket]

The dam* water companies did the same thing here in Georgia during out drought which finally ended last year. The water companies advertised ways to save water and the State and county governments put on all kinds of water use bans. Useage dropped and then all the sorry water companies started screaming that they were losing money and needed to raise the rate. BASTARDS, all of them.

[NRiderUSA]

Thats the old if you use less it will cost you more clause... but look at the bright side your saving energy and water!!!!

Doesnt make much sense does it.

[ringadingh]

You cant win, the less you use the more they will charge. Its happening here as well.

[Idaho]

Utilities live in a highly regulated world. Many Utilitiy Commissions that they answer to mandate that they sponsor "Demand Side Management" or DSM projects. The reason is that it helps to conserve the resources that they use to serve their customers and, in the case of electric utilities, it postpones the need to build expensive generating plants.

Coal is the cheapest source that we have right now and it is politically incorrect to use it. It would be suicide for a utility to actually build a coal fired plant right now. So, given the cost of building new plants to generate more power and the mandates from commissions to engage in DSM projects the utilities suffer a loss of revenue.

Many people in the US think that wind power is the magic pill that will solve our electricity supply issues. Only thing is that the wind stops from time to time. Or, conversely when a storm rolls through and you need power for lights and heat it gusts too much. Windmills are automatically feathered offline when hit with gusts over 45mph. One gust can wipe out hundreds of megawatts of power source in an instant. Which brings us to the other dirty little secret about wind power. Reserve power to 'balance' the system.

All utilities that have wind power connected to their system must maintain a certain percentage of conventional power spinning online ready to be excited into service at the drop of a hat so to speak. The reason is that we customers don't want our lights to go brown or out altogether when that massive gust of wind knocks out a wind farm. In other words, they must pay for conventional plants, nuclear-hydro or coal, to be using up fuel and prime mover to keep those generators spinning online just in case. That is wasted financial resources. So much for wind.

In case you have not noticed electricity useage is increasing at record rates. Look around your house. The computer that you are using right now is plugged into the wall socket. Plasma tv's that we seem to be in love with use lots of power. Washers, dryers, lights, toasters, ovens, Wii, Nintendo, stereos, yadda-yadda-yadda, you get the idea. Most of the stuff that we buy for convenience or entertainment uses electricity. Now they want to have us all driving electric cars that we can plug into the grid to get recharged. Do you have any idea how much more load that will put onto the system? I digress.

In order to meet this rising demand that utilities are mandated to serve they have to build new transmission and distribution lines and the substations to serve them. This stuff all costs a LOT of money. But, utilities can't just go out and build this stuff and put it into your rates. They first have to go to the Utility Commission and demonstrate the need then get permission to build the system to serve the load. Then they take all of their receipts from building that stuff that they got permission to build to the Utility Commission to ask for permission to collect those costs by way of increased rates over time. Usually the Commission will through out a bunch of costs because politically they can't approve everything and because some costs just should not be in there. A company may ask for twenty million to recover costs and only get 10 million in rate relief. So, they have to cut costs to make up the difference.

They do that by tightening their belts. Cutting manpower, cutting benefits etc. Although for the bulk of utilities in the country benefits are negotiated with whatever Union represents their workers. So there is another sticking point.

Then there are regulatory mandates that are, of course, unfunded, but still must be observed. Someone decided that power plants and our transmission system are in danger from hackers so the FERC has put in place regulations to safeguard those assets. In order to meet those regulatory requirements utilities have had to cough up millions of dollars to plug holes. Dollars that they then have to go back to the Commissions to ask permission to recover. Not all is granted so the profit margin gets a little slimmer.

I could go on but you get the idea. Sometimes things are not as simple as they seem.

Sometimes I also don't think it is worth it to be in the electricity business.

[cactusjack]

I'm not going to argue with you, Bud. You know more about it than I do, but this utility I mentioned gets most of its power from Palo Verde, the largest nuclear generating station in the country.

Anyway, my point was, they preach conservation - so people conserve and they are "rewarded" with increased rates.

[AlabamaNomadRider]

Sad but true Scott. It is like the postal system, they advertise as much as any company and they are set to lose seems like I read 3.8 billion this quarter. If the companies cut out their advertising people would still use their service. After all the electric companies have no competition. We have Marshall-Dekalb Electric, take it or leave it. No other option. So why should they advertise? Why should the postal service advertise? If I am going to mail a letter it will be with USPS.

[desertdog]

In AZ the utility cos have played the game of needing rate increases for various reasons over the years.

A few years ago they claimed they needed rate increases to build new plants, so they got a 9% increase, then they needed an emergency 5% rate increase when natural gas prices increased.

Now they don't need to build new plants, but the rate increases have stayed, natural gas prices fell, but rates stayed up. They requested a 13% rate increase to keep their bond rating up so they can borrow money incase they need to build new plants, in addition to the above rates.

They wanted a 3% rate increase due to increased water rates, but they cool the Nuke plant with Phoenix waste water they recycle.

Now the latest that CJ mentions. Arizona's electric power rates are some of the highest in the country.

The profits they report quarterly are excessive in my opinion for a publicly controlled utility.

The employees who work there are all very well compensated as is management. Too well in my opinion.

There is no incentive to cut costs, do cost containment, or match employees to work load.

[NRiderUSA]

Originally Posted by DesertDog

In AZ the utility cos have played the game of needing rate increases for various reasons over the years.

A few years ago they claimed they needed rate increases to build new plants, so they got a 9% increase, then they needed an emergency 5% rate increase when natural gas prices increased.

Now they don't need to build new plants, but the rate increases have stayed, natural gas prices fell, but rates stayed up. They requested a 13% rate increase to keep their bond rating up so they can borrow money incase they need to build new plants, in addition to the above rates.

They wanted a 3% rate increase due to increased water rates, but they cool the Nuke plant with Phoenix waste water they recycle.

Now the latest that CJ mentions. Arizona's electric power rates are some of the highest in the country.

The profits they report quarterly are excessive in my opinion for a publicly controlled utility.

The employees who work there are all very well compensated as is management. Too well in my opinion.

There is no incentive to cut costs, do cost containment, or match employees to work load.

Amazing but true stories of everyone needing to prove more profits next year.... or they think they are failing... is it shareholder greed driving it?? My .02 cents is yep....

The share/stock holders expect to retire on their investments in the market they invest in.
If a stock doesnt improve for a couple years/months/weeks depending how heavily invested they are they usually dump it or the President/CEO whos not showing an acceptable growth rate.

Soooo the President/CEO has to show the people who put him in his position that he is increasing profits to qualify for his Bonus (which is taxed at a different rate than pay is).

He then deligates the vice CEO's/Presidents that they need to show a profit so they can get their bonuses. (ever notice how many vice presidents a company has.. scary).

They delegate to the Directors to find a way to make more with less so they can get their bonuses.

They delegate it to the Managers who get a bonus for meeting goals.

They delegate it finally to the employee who does not get a bonus but now is responsible to make the entire food chain above him their bonuses.... and thus save his job.

if he cant....he is ultimatley the one responsible to make sure it gets done.... or......

the ultimate instant profit is "rightsizing" to make an "appeared" profit.

In the union/utility environment, this usually isnt a solution they can accept so they "re-negotiate".

So they increase rates to increase pay/benefits etc.

So now everyones happy.... except the consumer......

who in irony is probably one of the share/stock holders in the company thru mutual funds or 401K and expecting his dividend check/401K to continue to increaseso he can retire......

I guess you could call it the "Circle of life"....