Utility Rates are just one Example of poor Political Decisions and Procedures that cost our Country and US big money and Serious Problems!
Utility Manager of 32 Years Speaks Out!
If you understand the operation of a public utility and the rate procedure you will begin to see why our country is struggling financially and why our schools, roads, utilities and other public infrastructures are failing to provide us top quality reliability even though we pay enough to have the very best.
It is imperative that each consumer understand that most utility management and employees take great pride in providing top service and reliability to each and every customer. When there is an infrastructure failure whether it is from aging infrastructure or natural causes such as wind, ice or storms the public utilities respond to return service as soon as possible even in terrible conditions. These workers are dedicated and risk serious injury during storms, trying to keep service going to every customer.
This same work ethic and dedication goes into researching rate requirements and infrastructure upgrades to provide each customer the most reliable service at the best possible price.
What is actually happening then that seems to drive our rates up and our infrastructure failure rate up at the same time?
Here is a process that will shock you!
Politicians will tell you it is the rising labor rates, insurance rates and cost of operations. In fact these are a very small portion of the real facts.
We will start with Infrastructure:
The utility will work on an infrastructure review team made up of key utility personnel and a selected consultant with expertise in infrastructure review and evaluation. This process can take up to 18 months to complete. When the review is finished a prioritized list of new infrastructure requi8remnts to meet growing demands and a prioritized list of infrastructure improvements required to keep the system reliability are identified and estimated costs of each our provided with complete details of the improvements and their specific costs.
These are your labor rates, insurance, pensions, benefits, building costs, vehicle costs, etc. Here utility personnel involved in operations and accounting team up with a accounting consultant to work on identifying each cost and place a rate requirement on that item to continue to be able to fund a fair benefit package and to cover required operating costs.
Rate of Return
In addition a fixed rate of return on all of the utility investment is calculated and will be added to the rate structure. This money is not for operating the utility but is paid to the public entity such as a city, town that oversees the utility supposedly for its customers.
In reality it is another hidden tax. On the utility I ran that amount was three and a half million dollars. Quite a nice hidden tax for any city. Our city was 49,000 people so you can adjust that amount to any size city by applying the percentage of money to number of people. It is significant.
What is the real Problem then with Public Utilitiy Rates?
Here is the problem. Behind the doors of public review are the meetings between your public utility staff and your elected political representatives. Two sides will form. One is the staff who are interested in funding the growth infrastructure and the infrastructure upgrades. This is always the primary part of the rate increase, not benefits as politicians will contend.
On the other side will be the political team with two objectives:
1. Obtain improvements in there district regardless of the prioritized list of infrastructure requirements. Remember this is the list that a team of experts has identified in order of importance and need to meet growth and provide reliable service.
2. Cutting the cost of the rate request regardless of the long term consequences on meeting public needs.
When the rate case is completed the staff will have been forced to adjust priorities to be sure that each political district gets certain items accomplished so that each gets a portion of the new rate money spent in their district. Frequently older areas of the city receive far less funding then needed for upgrades to the oldest infrastructure. This results in failures in these areas at a much higher rate than other areas.
What are the long term Consequences?
In the long run what happens is the Utility Rates are used to get votes and for Political reelection purposes. Since the professional recommendations are not followed then growth needs fall short and infrastructure failures cause public outrage and guess what. A new rate case will be formulated and worked on and the same p[process will occur. When improvements are out of sequence the issues grow. It’s like putting new tires on your car but no alignment. Soon you still need the alignment and the tires are worn out again long before they should have been. You end up spending more than if you had done the job right the first time.
In addition to shifting rate money to out of order projects the political world will waive the cut the rate banner for their own edification and vote banner. The cuts will not occur because the rate is too high or not accurate but will happen in order to obtain some of the needed rate increase. Projects will be short funded, corners cut and an incomplete improvements occur.
This much like the tires causing premature failures and then more money is spent then the original request would have cost. I have seen major failures that could have been avoided and the fix more the doubled the original cost to have avoided the failure and more important the inconvenience to the customer.
Alternative Power Sources
Here is your best energy tip. Get out of the unfair never ending increase of rate structures and install your own power grid. Learn how to sell power back to the utility and stop being ripped off by the Utility Rates that do not reflect your best interest. The above links can get you to energy independence and send a signal to our Politicians that we have had enough.
Remember to run a home energy audit to determine your true needs and to reduce your energy consumption while maintaining your life style. I produce all my power now and will never be involved in the rate case rip off again. My power bills and hot water costs are zero.
Below is a link for a simple energy audit system:
Energy Audits made simple
In addition check out all the energy tips and energy tools in other pages of this site. Go Green and get the first step made to eliminating some of the Political problems we face today.
Solar Hot Water a Great Choice for Energy Cost Reduction
Energy Rate Chart for all States