Regulated utilities generally get a fairly sweet deal. They receive a guaranteed rate of return. That is to say, however much they spend, they get a percentage of that as profit.
The spending need not even be useful or productive. A utility can partly build or repair a facility, change its mind, and still charge its cost plus profit to its customers. It is a sweet deal for almost everyone.
In a lot of industries, a larger cost of production means a smaller profit margin. This is not the case with military “cost-plus” contracting, and also not with “regulated rate of return” utilities.
In those cases, the more it costs, the larger the profit. Cost-plus makes inefficiency a sweet deal for almost everyone.
Evidently, not sweet enough for the power companies. You know they collect taxes. Each bill shows a gross receipts tax and a local utility tax. Those are essentially passed through. The respective states, counties and cities collect a bunch of money with essentially no effort on their parts.
In addition, the utility companies may also collect a “regulatory assessment fee.” I have one on my Duke (formerly Florida Power) bill, for instance.
That item is grouped on the bill as “taxes.” So, you figure it goes to some government, right? Ha-ha, fooled you! It is actually just a little extra profit for the power company.
Of course, this is unfair and deceptive. Essentially, the power company is charging for extra profit, but lying about it to shift the blame. And it is a small amount, unless you multiply it over a few million properties.
Then it is big money, so the Public Service Commission carefully ignores it. The PSC has long been an embarrassing lot, appointed by the governor, but figuratively in bed with the utilities.
On the utility-paid vacation seminars, you can presume that the commissioners are also literally in bed with the young ladies of the vacation support staff.
In fact, this “regulatory assessment fee” just might be apportioned to cover exactly that. Utilities provide educational seminars at luxury resorts for their regulators. Those things cost money.
The term “regulatory assessment” sounds just about right for that. At least it lets us know what the utilities and the Public Service Commission members are thinking — luxury vacations are expensive, but the ratepayers have plenty of money.
— Andrews is a DeLand-area attorney and a longtime government critic. For purposes of the column, he finds it convenient that there is so much government to criticize. Andrews owns small amounts of utility stocks.
