19 February 2015

Why not try profit sharing?

Many people are suspicious of Investor Owned Utilities (IOUs), which -- they claim -- have reasons to "rip off" the community in the name of profits. Others will say that these claims need not be true if (1) the firm cares about its reputation or (2) regulators are doing their jobs.

It occurs to me that it would be easier to put these hard-to-verify claims and counter-claims to rest by specifying that any "profits" earned by IOUs should be split between their shareholders and customers (as would be the case in a cooperative). Such a system would mean that the IOU's profits in flush times would be less controversial to customers getting a check at the same time as their misery in skint times would be seen with more sympathy. I know that investors might be unwilling to share "their" money, but it's not like their taking a big risk with a utility, eh?



  1. Intriguing idea...but in the end Investors are a separate class from customers.

  2. In the wind energy industry there is a trend for fewer objections to noise, visual pollution etc. to proposed wind farms in cases where the developers encourage local residents to invest in the local wind farm. It's not quite identical, but does indicate that economic buy-in gives important attitudinal effects in a range of situations.

  3. @Anon -- Yes, and that's not the point. @NMorris has the point, exactly...

  4. David Lloyd Owen20 February, 2015 14:24

    Ofwat has introduced the concept of 'gain-share' for England & Wales. In theory, it incentivises outperformance in innovation and efficiency by the utility by allowing it to share a proportion of its improved profitability with customers. This may well be 60-40 or 50-50.


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