Electric Company Profits Will Drop a Smidge. Don’t Get Too Excited

Source: The Orange County Register  |  By Teri Sforza

As our electric bills continue their skyward ascent, a question crackles like lightning over regulators’ heads: how much profit should the big utilities be allowed to make? The California Public Utilities Commission wrestled with that lightning on Thursday. In the end, commissioners gave the utilities less than they asked for, and less than they got the year before, but way more than what consumer advocates believe they should get.

“What the CPUC giveth with one hand, they taketh away with the other,” said Mark Toney, executive director of the consumer advocacy group TURN, The Utility Reform Network.  People pay a lot of attention to the ROE percentages the utilities can collect — ooo! they’re going down! — but that misses the forest for the trees, TURN’s Toney suggested. “When you’re financing a home, you want to know, ‘What’s my monthly payment?’ ” he said. “The two things that impact that are — yes, the interest rate on your mortgage — but, much more importantly, the price of your house.”  In this analogy, the amount of money utilities borrow for capital projects equates to the price of the house. “It’s the same thing with people’s monthly bills. They’re more impacted by how much is being financed,” Toney said. “I get frustrated because there’s so much media on the percentage, while utilities are allowed to bloat their capital costs. So the reduction in the percentage — don’t get me wrong, that’s a good thing — is going to be more than offset by how much is being financed.”