Utilities are incentivized to increase costs. There is a nexus of generation, transmission and distribution companies, all together in increasing costs. Just the same as healthcare (insurers, pharma and hospitals), hence, band-aids cost $500, which your friendly insurer discounts to $50, and proudly shows on the statement: $500 band-aid, insurance plan rate $50, your deductible/copay $50. We'll pay $5 for the band-aid AFTER you meet 10K deductible!
This is why Warren Buffett owns a lot of utilities. They are monopolies that extract a lot of rents, lobby against residential solar. Solar installations are 3 - 5X costlier in US compared to other countries (Ref: posts by HNs in other countries - Australia, Bangladesh, etc).
The right thing to do is to let go of this benevolent public utility sham, while monopolizing and extracting huge rents, at the same time publicly crying that your friendly utility can't help everyone, the costs are rising and they can't do maintenance or build transmission lines.
Breaking down ATT monopoly was the moment which started the tremendous growth in communications sectors. People used to pay $$/minute, now something magical happened around 2010 -- people can talk to 100 other people around the world on video chat for free! We need something similar for utility monopolies. Costs of energy will come down to nothing, a LOT of people can make money supplying power back to the grid: https://electrek.co/2023/07/05/tesla-electric-customers-repo...
"More people need to realize that utilities are not at all like normal businesses, so to spell it out in more detail for those that don't know:
Normal businesses make more money when they cut costs. Utilities (typically) get to charge a fixed upsell percentage and so they make more money when they increase their costs."
Long distance prices actually dropped tremendously under AT&T especially when you include inflation. Night/Weekend 3.10$ per minute (35.23$ inflation adjusted) in 1955 down to 0.87$ (3.50$ inflation adjusted) in 1980. They benefited from that 90% price drop in 25 years as people would make more and longer calls at lower rates. https://www.scribd.com/document/422152895/FCC-Report-1950-19...
People often show price drops after the breakup, but AT&T started installing fiber in 1977 so those price drops are mostly a continuation of the same technical advancements rather than competition.
At&t did not reduce rates under the consent decree, regulators did.
But the specific complaint that led to antitrust action had more to do with the control at&t was exerting over the network preventing the adoption of new technology by customers.
You have this backwards. Utilities typically have to build a rate case where they have to justify the price they are charging based on the necessary costs (like the price of energy and necessary investments into the grid). They absolutely want to reduce costs. This is a good thing, because otherwise they would just not improve the grid
> Utilities typically have to build a rate case where they have to justify the price they are charging based on the necessary costs (like the price of energy and necessary investments into the grid).
Which is jacked up because its a collusion between all these players: generation, transmission, distribution. Everyone makes bank by increasing the costs (except the consumers).
Option 1: Everybody in MA installs heat pumps in their homes.
Option 2: Everybody in MA installs heat pumps in their homes, as well as re-insulates and enhances air-sealing.
Government is deciding how they want to allocate funding for home energy retrofits. If you are a grid operator, which plan would you want the government to support? Keep in mind that you will be negotiating with regulators to set rates which will correspond to a guaranteed rate of return given your CapEx.
Obviously you as a utility would pick the scenario which will end with you just spending more money, as that will allow you to justify higher rates to the regulator. Your rate of return would be the same, but your actual profit will be higher. Who actually bares that cost? The consumer. Option 1 above will lead to higher demand and higher peaks than option 2, so it is in the utilities’ interest to advocate for the government setting incentivizes for option 1, as it will allow them to negotiate higher rates, spend more capital, and make more profit.
The state/local governments have a responsibility to the constituents IMO to incentivize option 2 over option 1.
But the utility would have an incentive to lobby for legislation which only allocates funding to heat pump incentive programs, as opposed to programs which couple those incentives with requirements/incentives for deep energy retrofits.
They certainly have skin in the game for shaping the legislative/policy outcomes which will affect their ability to negotiate for rates and how they invest in the grid (which is == higher rates and revenue, which in turn == higher profit given the agreed rate of return).
> “Increasing cost” means investing in the grid. For example, to avoid your catastrophic forest fires in CA.
There are multiple instances in history where PG&E lobbied for increases so they can invest in improving the grid and safety. And then turns out the did between barely nothing and nothing and all the money went to executive bonuses.
LOL. PG&E effectively owns the California government, which we can observe by how they continue to get away with everything and raising rates to infinity (71.3 c/kWhr daytime right now, more increases coming).
> Generation is very competitive
It isn't. Its a fiction they sell to naive public.
> These price of energy sent to customers is controlled by regulators
Regulators approve what the utilities want. Which is increased costs, more profits. They have no incentive to reduce OpEx -- it is pass through. There is no competition to compare alternatives. Both CapEx (increases profits) and OpEx (pass through) keep going up because of perverse incentives.
> “Increasing cost” means investing in the grid. For example, to avoid your catastrophic forest fires in CA.
They don't invest in maintenance. They are allowed to profit off of capex, not maintenance expenses.
Most utilities operate with perverse incentives to increase profits by building more expensive systems than necessary (known as “gold plating”) and by prioritizing capital expenditures like new gas-fired power plants over operating expenses like energy efficiency or demand-side resources (called “capex bias”): https://rmi.org/for-ratepayers-to-realize-savings-from-clean...
"But all utility spending isn’t the same: there are two types of expenses for utilities, and they are treated differently. The first is operating expenses: costs for the day-to-day operation of business, which includes things like workers’ salaries, paper to print bills and stamps to mail them, and rent for offices. The second is capital expenses: the physical infrastructure that makes up the electric grid, including things like wires, poles, transformers, and substations.
Utilities can collect their spending on operating expenses from you and me, on our bills. In practice, they almost always cover their costs, but they don’t get anything extra beyond what they spent. So, if a utility spends $100 on operating expenses, it collects $100 back, spread out across all the bills people pay to that utility. They don’t profit.
But with capital expenses—that is, physical infrastructure, like poles and wires—utilities can collect the money they invested plus an additional percentage they keep as profit. So, if a utility spends $100 on capital expenses, they might collect $110 on our bills, with $100 paying for the wires and poles and $10 going towards profits." https://www.nrdc.org/bio/jc-kibbey/utility-accountability-10...
From: Electricity Regulation In the US: A Guide
https://www.utilitydive.com/news/inside-the-new-guidebook-fo...
Cost-plus regulation was adopted as an effective way to regulate monopoly
utilities. That is, by allowing only prudently incurred costs associated with
used and useful investments and expenses, the regulator addresses the
revenue requirement to arrive at just and reasonable rates. Because there was,
by definition, no competitive service provider against which to benchmark
prices, price control regulation was not appropriate. And competition itself
was seen as inefficient because it would lead to unnecessary duplication of
infrastructure.
In addition to high investment levels, traditional utility regulation may
also encourage excessive operating expenses, because its cost-plus structure
means that all approved costs will be passed through to consumers.
Although commissions do review operating expenses to determine if they are
reasonable before approving them, they may not have the staff adequate for
them to really examine them in detail in every rate case.
Also, the higher the operating expenses were in the test year, the more the
company is allowed to earn in the year after the rate case is resolved, so there
is an incentive to “load up” expenses in any year expected to serve as a basis
for a future rate case.
I’m getting the sense you’re not really familiar with the accounting terms you’re using.
Opex hits the income statement. Capex does not, because it stays on the balance sheet. It is free money in that sense. And that’s generally good because we WANT the utilities to BUILD ASSETS. They wouldn’t do that unless the incentives were there. It is definitely not the case that opex is broadly a good thing or climate oriented thing. Building solar capacity is capex too.
The expenses are not a free pass either way. Utilities must justify the expenses to build them into the rate case (prices they can charge). Lots of stuff is just on them without being built in too.
There’s certainly problems and difficulties with this system but it’s not terrible. You don’t want multiple companies building the same infrastructure in the same place. That’s just hugely
Inefficient. You don’t want a free market monopoly either.
All it takes to drive specific incentives is to have the regulators demand specific goals to approve the rate case
> “Normal businesses make more money when they cut costs. Utilities (typically) get to charge a fixed upsell percentage and so they make more money when they increase their costs."
Yeah this is a pretty essential thing to understand right now… utilities are licking their chops at the prospect of heat pump electrification (which is absolutely necessary) because in the northeast for instance, it will mean shifting peak demand to winter and greatly increasing the size of the peak, which means grid expansion, which means more profit in absolute terms, even if the margin stays the same, with the added costs passed onto the customers. This is one of the reasons why state and municipal governments need to be funding deep energy retrofits (insulation, weatherizing via air sealing etc) in conjunction with heat pump electrification (ie to help control winter peaking, and thus keep grid expansion to a minimum and control costs passed onto customers).
We can have a very different outcome with the right policies. Instead of natural gas peaker plants raking in more than 90% of the pricing, that money can go to people directly -- who can supply power from solar panels on their roofs and from their car batteries connected to the grid (V2G). A powerwall is a small battery (13.5 KWH), car batteries are 100KWH, with 250+ mile range. Only 1% of trips are over 70 miles, for 99% of the trips the battery is a LOT more than required. Just carving out a small portion of car battery to supply power back to the grid can net a lot of money (no need to install powerwalls): https://electrek.co/2023/07/05/tesla-electric-customers-repo...
So far, folks have only been doing rooftop solar, but vertical solar is just as efficient, if not more. If we break the utility monopolies, people will put in vertical panels (fences, walls facing west, etc) and supply solar power during peak demand until sunset.
Definitely not opposed to grid expansion! Obviously we need to massively increase the capacity of our grid and hook up as much solar and wind as possible (and the queue to do so is already massive). I am opposed to people who are already energy-burdened (ie their energy bill is over a specific threshold of their annual income) baring the cost of grid expansion due to heat electrification in high-income areas! In a lot of cases, heat pump electrification will rapidly occur in high-income areas but the resulting cost of grid expansion will be spread out over an entire state, resulting in significantly higher energy burden.
I was just trying to point out that things like heat pump installation really need to be paired with other mechanisms for moderating demand, like adding more insulation to a building and sealing up the building, and that states and local governments ought to be providing incentives to do that as well (which many are) as opposed to just providing rebates for heat pump installs. It is in the utility companies’ interest to advocate for the latter but not the former.
This reads as somewhat one sided to me, as the expected thing is for the subsidies to be reduced over time.
It feels like journalism often gets two scare stories out of renewables or clean energy subsidies, one when they are introduced and another when they are phased out.
The recent reporting around Chinese EV regularly tries to catastrophise the reduction in subsidies which were only ever intended to kick start the market.
Of course some subsidies are cut too early or too fast for political reasons, some like carbon fees and internalising pollution costs should probably rise over time.
But if they're not interested in that level of conversation then the story is effectively just noise.
> is at the end of the day just another means to attract eyeballs to sell ads to
If you’re poor (or stupid), yes, this is the journalism you’re limited to, and that’s a problem. For everyone else, quality subscription-based journalism is an option.
The entire energy model of CA needs to be rethought. From CPUC just doing what the companies want, to monopolies that are on the stock market that increase prices while also making huge profits… it is not serving the people.
Most companies give you a discount if you use more of their product. California energy works on a scarcity mindset with punitive punishments and now extra charges based on income. sigh.
and the CPUC is solely in the hands of PG&E.
As a customer it's sort of like wargames - the only winning move is not to play.
Unless you live in say, santa clara or palo alto, where they have sane energy companies with reasonable prices (like the outside of california)
Progressive taxation to support a basic shared infrastructure with strong network effects is entirely sensible.
Actual criticism of real problems in California (which seems to be doing better than most states in most ways, but isn't perfect) gets buried under tribal political nonsense, where everything is an outrage.
> Progressive taxation to support a basic shared infrastructure with strong network effects is entirely sensible.
It isn't crazy, but it is a bad idea. There should be one debate where we work out how much support successful people are expected to provide for their less successful peers, and one transfer payment to cover it. Then everyone pays for things as equals.
Setting up multiple parallel societies where everyone has a different experience and financial incentives is wasteful. It ends up in situations where the electricity provider needs to consult with someone's accountant to work out what to charge customers. That is kinda crazy. A customer's tax position has nothing to do with the services they are provided and linking them is going to have weird second order effects.
It is the same lunacy as linking paying for medical services and employment together and we have all seen how that worked out for the US. Linking parts of the system together at random is not the path to a high-functioning administrative state.
When you see really goofy progressive taxes, if you look behind them, you'll usually see a strong legal or political barrier behind more sensible ones. This is why you are always hearing about ridiculous Amazon taxes coming out of the state of Washington; the place has no income tax, and progressive income taxes have been held to be unconstitutional there. So they have to get creative if they want a progressive tax.
Of course, the barrier in California is the infamous Proposition 13. You're right that charging people different rates for energy based on their income is silly; if they want to let the poor off the hook they should just tax them less, or even give them money. But the state's lawmakers are operating in a constrained environment.
(It's also the case that subsidies and means-tested benefits are trendy in Democratic policy-making circles, despite being dumb and inefficient compared to simpler and less directed benefits.)
The problem with this is that many Californians who can afford solar can afford batteries too. If you live in socal its not unreasonable to decide you're just going off grid entirely in the face of income based fees. Then utilites will have to raise the price even more on the poor customers who arent being subsidized anymore
The most successful social democracies actually have significantly flatter taxes than the US. IMO, overly progressive taxes are the reason why nobody gives a shit that the government is so inefficient at spending money. Those who benefit the most from government services aren't paying for the waste, and the rich either are privileged enough not to care or become overly antagonist towards the government altogether.
No, the plan was changed to have a fixed monthly fee in addition to the cost per kWh for all, but lower income households will have a lower fixed monthly fee.
I have no idea about this particular program, but similar programs already exist for other utilities, you can look at how they do it (open the "What information do I need to provide..." section): https://www.att.com/internet/access/
Previous proposals would have required everyone to provide income data to their utility which the utility would verify “somehow” (never fully articulated AFAIK)
The latest proposal (which has been accepted by the CPUC) has fixed charges applied for everyone (much lower than previously proposed fixed charges) with discounts available based on existing low-income programs ( https://www.pge.com/en/account/billing-and-assistance/financ... )
So yes in order to get the discount low-income customers need to declare income and may need to verify that income with tax documents (depending on how much fraud these program plan to tolerate) but other customers do not need to provide income information.
Are there fixed costs to having a connection?
As in can one have a connection to the grid as a backup pay negligible amounts every month since they don’t use it?
Lawyers argued that Title 24 required that residential buildings be interconnected with the grid [0] [1], but 2022 updates to the code seem to have clarified that standalone solar PV systems with storage are OK (though they should still be meet the same standards as grid-connected systems would) [2]
In any case the small number of people who can afford to do so and want to do so seem to be doing so [3]
The old net metering model where the utility serves as a battery was never going to be sustainable as distributed renewables grew in popularity. Home batteries are definitely the way forward, but NEM 3.0 is an abomination.
Home batteries are a terrible idea. As a municipality -- or a neighbour -- you don't want 30 houses with 35 different batteries, installed by some nephew who's handy with DIY-stuff.
To just timeshift from daylight to evening/night/morning, you'd need batteries in the 25-35kWh range, 40-50kWh if airco on in the night, another 80kWh if you're driving electric and typically away from home during the day, charge at night. That is a lot of energy to pack, even at the low end. Imagine if everyone finds the cheapest set on AliExpress and DIYs it themselves, and then looks for a new model once current installation no longer matches their needs (capacity loss or use increase)... this must be a fire brigade worst nightmare.
Due to generation being more localised, we also need some form of much more local redistribution and/or storage. But not the nightmare that is one or more poorly installed and poorly maintained batteries of dubious origin per house.
There are a couple points to consider and a couple that refute some of your concerns.
First, you don’t need a full off grid battery setup to benefit. With time of use rates a battery that covers peak usage and even recharges under low time of use rates is a big benefit over its lifetime.
On safety, to sell back to the grid you need an interconnect agreement and inspection of your system. California utilities can install meters that can apparently detect secondary sources of back feeding the grid. Lastly if you try to DIY a correct setup you’ll have to buy UL1741 spec equipment for managing back feeding and equipment with other safety standards relevant to your use. Often this is not a code requirement but in the interconnect agreement and utilities have enforcement powers.
For off grid solar it’s a different story but the NEC always applies. If someone wants to do a comically bad job at their electric work they’re probably going to burn down their house anyway.
In my current home I’ve recently finished removing and replacing all the electric work accomplished by a previous owner’s “contractors.” Nothing like having electrical work run through low voltage grade audio visual wall plates and connectors for zero fire protection IN AN AIR PLENUM THAT GOES FROM MY BASEMENT TO MY SECOND FLOOR. That way if something does catch on fire it didn’t have all those pesky layers of protection between the floors of the house. Literally $30 in parts later and shorting wires get two hours to melt and trip a breaker.
The energy flowing through the batteries is the same despite the different battery brands and inverters. There's now APIs like Enode and others that have open standards for connecting dozens of EVs, batteries, HVAC equipment to react to grid events. Hopefully not too many DIYers out there but we're starting to see new models emerge where aggregators like Tesla, Sunrun, Currents, etc. (still needing PTO) can join the grid thanks to the APIs
Beyond fire risks or whatever, I actually don't see a problem with different battery models etc. The interface to the grid isnt exactly complicated, and decentralised storage seems like it would actually be quite robust and useful.
In a legal sense, most jurisdictions require some form of certification for such systems anyway, and the true diy versions are never going to be very common regardless.
The entire argument from the utilities is flawed. The solar customers are providing electricity in the middle of the city. So they are doing distribution in the sense that there are almost no transmission losses going to the city from generation.
The generation credits are not tou based and therefore they gutted their duck curve argument. And they already had the tou lever if they wanted to control the power curve. Increase the price for evening. Why punish solar customers who actually would have helped by generating power in evening. Sunset is at 8 PM.
Shouldn’t regular customers install battery to help with the curve? They should decouple solar and battery.
Weren't the power companies Public Utilities decades ago? Entities capable of making long term investments and maintenance, and paying for things like beating back the shrubs from transmission lines so that when they sparked in high wind situations stuff didn't catch fire?
The Erin Brockovich case was brought 31 years ago, for damage done from a chemical used from 1952-1966. 1966 was 58 years ago. So I don't know about the rest, but as of 6 decades ago, PG&E were capable of grave harm and a cover up.
Not detonating entire neighborhoods with dilapidated natural gas pipelines. Not poisoning entire communities and their wells with hexavalent chromium. Not having half your wikipedia page dedicated to Disasters and Controversies.
There are other power providers in California that aren't nearly so horrific. It seems that publicly traded companies operating a natural monopolies on behalf of the public is probably just a bad idea.
It doesn't. Solar is so cheap now that it makes sense to build huge amounts of it, but most of the existing infra still needs to be in place for times where solar doesn't generate. We save some money on fuel costs, but those other generators just make a lot more money when solar isn't generating instead.
Battery-backed systems in general are still not really financially justified vs pure solar systems, but the bigger the disparity between dirt cheap daytime energy and super expensive nighttime energy gets, the sooner that will change.
Australia doesn't have winters with lack of sun and extreme energy requirement to heat homes, that makes solar with batteries viable. In any place with winters that will make solar stop producing for months combined with peak energy demands for those months solar will always just be an extra, storing enough power to last through winter will not happen this century using batteries.
In locations with very predictable weather it makes perfect financially sense. Knowing when supply is high and when it is low makes predicting prices accurate, and the number of recharge cycles each year are fairly guarantied. Add a large amount of subsidies and it makes sense to continue building more of them.
Cutting down on subsidies removes a bit of the enthusiasm, but as long the other aspects are true then there is no reason why people would not build more storage when the financial aspects make sense.
This quasi public-private partnership only makes customers foot the bill. If utilities aren't willing to innovate, what can we do? We can add more distributed energy and go off-grid, but it creates this "death spiral" all the utilities talk about.
How about compensating homes for their generation when needed. Distributed energy that is co-located to demand, thus reducing T&D costs. This is the idea of VPPs and DERs. Obviously goes against what monopolistic IOUs want.
I'm no ANCAP but the confusing of incentives every time the government steps into a market... almost certainly creates an insane amount of waste every time.
Tax incentivization I understand – but in places like CA it always seems to make things so much worse.
This is why Warren Buffett owns a lot of utilities. They are monopolies that extract a lot of rents, lobby against residential solar. Solar installations are 3 - 5X costlier in US compared to other countries (Ref: posts by HNs in other countries - Australia, Bangladesh, etc).
The right thing to do is to let go of this benevolent public utility sham, while monopolizing and extracting huge rents, at the same time publicly crying that your friendly utility can't help everyone, the costs are rising and they can't do maintenance or build transmission lines.
Breaking down ATT monopoly was the moment which started the tremendous growth in communications sectors. People used to pay $$/minute, now something magical happened around 2010 -- people can talk to 100 other people around the world on video chat for free! We need something similar for utility monopolies. Costs of energy will come down to nothing, a LOT of people can make money supplying power back to the grid: https://electrek.co/2023/07/05/tesla-electric-customers-repo...
Comment by epistasis https://news.ycombinator.com/item?id=39487714
"More people need to realize that utilities are not at all like normal businesses, so to spell it out in more detail for those that don't know:
Normal businesses make more money when they cut costs. Utilities (typically) get to charge a fixed upsell percentage and so they make more money when they increase their costs."