12 Dec 2011

Regulatory fail in the making

The California Public Utilities Commission is contemplating imposing postage stamp rates (PSPs mean same price, no matter where you live) across ANY AND ALL districts run by the same investor owned (IOU or "private") utility. PSP were a big theme in my PhD dissertation on the Metropolitan Water District of Southern California, i.e., unsustainable sprawl and inefficiency down there is due to PSP.

(This webpage has links to Word and PDF files detailing the proposed rule, but I can barely understand the bureaucratic gibberish.)

This idea means that ALL customers in districts operated by the same company will face the same price of water, i.e.,
Multi-District Water Utilities
California-American Water Company
California Water Service Company
Del Oro Water Company
Golden State Water Company
San Gabriel Water Company

PSP is a stupid idea because it:
  1. Creates cross-subsidies from "cheap to run" to "expensive to run" areas. Want a desal plant in Monterey (a CalAm territory)? No problem! Have customers in Sacramento and Ventura pay for it!
  2. Does nothing to address water scarcity. They may even increase water consumption by lowering the "cost" of water below its actual cost (via a subsidy from elsewhere).
  3. Makes it easier for water companies to spread wasteful capital spending and the cost of inefficient operations across many customers, leading to a deterioration of overall quality and value for money.
  4. Shifts costs from heavy to light water users and from established neighborhoods (rich, rural or dilapidated) to new neighborhoods (first time homeowners).
  5. Increases sprawl by lowering the price of system expansion to new customers.
There are only two advantages to PSP that I can find: IOUs can use them to make more money and regulators like them because they can do less paperwork (and get paid the same!).

There's nothing good in them for customers, and who's speaking for customers here if the regulators are pushing a policy that suits them?

(Some people claim that PSP make it easier to make "expensive" repairs in areas where customers cannot afford the improvements. THAT problem should be addressed by regulatory relief and/or income transfers, NOT excess taxes/charges on other customers who've paid their way. PSP subsidies to "poor" customers are neither sustainable nor financially responsible and those customers will pay more in the end...)

I'm sending these comments to the CPUC via email. You can too, if you send them before 15 December (in three days!). Be sure to cite "OIR 11-11-008."

Bottom Line: Postage stamp/average cost pricing is neither fair, efficient or sustainable.

1 comment:

chris corbin said...

what do you really think?

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