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 Originally Posted by spoonitnow
The bold is something the market can sort out on its own without regulations.
So I've given this example before, but I guess I'll repeat it again. Tell me how the market would solve this problem on it's own.....
The Public Utility Oversight board doesn't oppressively regulate anything. They don't tell companies how to operate, who to hire, who to sell to, what projects to pursue, how to grow, or anything like that.
Basically, it works like this. The utility company adds up all of the capital they have invested in this system to deliver electricity. Then they say....well if I had instead put all that capital in a mutual fund...I could have made 8% with virtually no risk. But I actually sunk my investment into electricity production and delivery. That's harder, riskier, and benefits the economy more....so it's reasonable for me to expect a higher return. How about 11%?
Then the oversight board says yea or nay....end of regulation.
As you can see, the more capital the electric company invests...the more money they are allowed to make.
So, if you're a project manager at the electric company, you're given a project, and a budget. It is important to spend ALL of your budget. If you don't, then the capital investment is smaller, and the company makes less money.
So, let's say they want you to build some kind of electrical doohickey. First step in the project is to get a building permit. Then you find out....oh shit...the permit process takes 14 months. Guess what.....you aren't going to complete your project this year.
But you still have to spend your budget. So you start pulling in future projects that you can do now...just to spend money.
Maybe you replace some utility poles that aren't due to be replaced for another 5 years.
That's bad. What's basically happening is that you're charging consumers for infrastructure improvements that they don't need. What happens in that case, is that the oversight body looks at your expenditures and says "No, this investment doesn't provide any benefit to consumers, it just pads your bottom line. By royal decree...this line item is disqualified from your rate calculation"
How would the market fix that on its own?
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