The Spectacle Blog

Utilities: The New Tax Collectors for the Welfare State

By on 3.2.11 | 8:07AM

About those utilities, like Exelon, AEP, NextEra, which are 'folding' on something they actually had been pushing -- the GHG rationing/'clean energy economy' agenda (see here, here, here, here for examples) -- it's time to capture what they're up to in a phrase.

"Tax collectors for the welfare state" gets half of it, and may suffice despite omitting the part about their taste, wetting their beaks in return for the effort.

You see, unlike the world you live in which must be innovative to succeed, they generally make money not by getting you to buy more of their stuff. They make money under a cost-plus model, sometimes now called 'decoupling'. If you are say PG&E in California, pushing the global warming agenda hard, you stand to benefit at the ratepayer's and economy's expense because your guaranteed rate of return, 11.35%, says you'll never get reaalllly rich. But since you make more the more the state makes you spend on capital expenses, you figure out you can do a lot better getting 111.35% of a few billion than you would 111.35% of a few hundred million.

Don't cost nuthin'. The poor saps who weren't at the table pick it up. If you're a utility, as AEP CEO Mike Morris has admitted, the beauty of the system is you get it all back with a little sumpn' for helping out. You actually make out on the deal, while the public -- presuming you are there fighting expensive policies, not thinking that you've arranged a scheme to benefit from expensive policies, thinking 'well, if these guys say it's ok, well...'

So you lobby to get the state to make you buy all sorts of expensive stuff.

Here we see the moral hazard of having these people serve, effectively, as the policymaking gatekeeper to protect the public from kleptocrats, presumed to be there fighting essentially on your behalf by opposing expensive policies, but in fact pushing them because they operate on a cost-plus model.

This Congress needs to ensure the voters are represented somehow. It is too simplistic and ignorant of reality to pretend that the elected Members serve that role. They're the policymakers, 'representing all', but dealing with the people with the deep-pocketed voice.

We killed the 'inevitable' cap-n-trade. Now it's time to clean up this mess.

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