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September 18, 2014

U.S. Utilities Need Upgrading: Consumers not Shareholders Will Pay the Bill

Gas and electric utilities are in dire need of a massive renovation, but who will pay the bill? According to a National Journal report, the National Association of Regulatory Utility Commissioners estimates the cost for upgrading the system could reach $4 trillion and counting. “All of which will be borne by consumers as a likely permanent line item on their utility bills.”

“But here’s the problem. Most of the people who truly understand how those costs are being divvied up are inside the black box of utility regulators or industry insiders. The few translations that are offered to the paying public are presented as fait accompli. Customers huff, but they eventually accept the higher charges. They’re led to believe they have no choice.”

“Consumer advocates pose a provocative question when it comes to utilities and their fees: Why are the shareholders protected over the monthly rate payers?”

“The answers are convoluted and unsatisfying. It comes down to this: Upsetting the shareholders is more disruptive to the financial structure of a utility than upsetting the customer. Shareholders’ steady dividends are important for a utility to maintain a strong front on Wall Street, which then gives it an easier path toward borrowing any advance money it needs for operations, maintenance, or upgrades. Cheaper borrowing means lower costs overall, so the customer eventually benefits. Or so the reasoning goes.”

 U.S. Utilities Need Upgrading: Consumers not Shareholders Will Pay the Bill

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