In economics, public utilities occupy a special middle
ground – they are neither fully private nor fully public corporations. With the
rapid decline in the cost of solar power and other green technologies, it is
worth considering if American-style power companies are still necessary? They
may even be hindering the adoption of new and cleaner technologies.
An interesting article on the topic:
The article notes –
“But, in the odd world of regulated utilities, a company like Con Ed traditionally makes money by building more stuff: put in a billion-dollar substation and you can “rate base” it, making customers pay the cost, plus a ten-per-cent markup, for decades. That arrangement worked well when society needed utilities to build the electrical system, to serve everyone, and when the cheapest technical solution involved big plants “pushing electrons in one direction,” Kauffman said. But today “the system is not just energy-inefficient; it’s capital-inefficient.” At any given moment, New York’s utilities are using only about fifty-five per cent of their system capacity. “No other industry uses capital like that anymore,” Kauffman said. The regulations are perverse: new software that can reduce electrical demand must be expensed in the current year, while a new wooden pole can generate that ten-per-cent markup for the utility in the course of its fifty-year life span. A pole makes money—hence, poles.”
“But, in the odd world of regulated utilities, a company like Con Ed traditionally makes money by building more stuff: put in a billion-dollar substation and you can “rate base” it, making customers pay the cost, plus a ten-per-cent markup, for decades. That arrangement worked well when society needed utilities to build the electrical system, to serve everyone, and when the cheapest technical solution involved big plants “pushing electrons in one direction,” Kauffman said. But today “the system is not just energy-inefficient; it’s capital-inefficient.” At any given moment, New York’s utilities are using only about fifty-five per cent of their system capacity. “No other industry uses capital like that anymore,” Kauffman said. The regulations are perverse: new software that can reduce electrical demand must be expensed in the current year, while a new wooden pole can generate that ten-per-cent markup for the utility in the course of its fifty-year life span. A pole makes money—hence, poles.”