Utility Profits FPL files largest rate increase ever

Given the poster, this post seems about right.

Have you heard of the concept of monopoly? Do you know what happens if monopolies pricing and profits aren’t regulated?

If you don’t even understand this you really shouldn’t be posting.

 

Even the ones that receive government money to improver their grid and infrastructure?

Even one that taxpayers are forced to use?

So electric companies should be allowed to just triple their rates tomorrow because they want to make more money?

You don't even believe that.

 

This is very basic stuff. Some monopolies are allowed, like utilities, because it would inefficient and impossible to have competition. Are you going to have multiple sets of power lines down the streets? Are you going to have multiple water delivery system or sewage pipes for competing companies? Of course not. You can only have one.

If there were no regulation of the monopoly then they could charge pretty much anything they wanted and make unlimited profits.

While I get not everybody understands basic economics, and that’s fine, such people are usually not participating in message board threads on the topic.

 

It's not zero risk.

 

This is what happens in TX, and that’s fine. But the delivery - the actual delivery infrastructure, are regional monopolies.

 

How so? It’s near zero risk at least.

 

This is just my understanding, but a utility would go in for a rate case and a determination would be made that it’s entitled to a certain percentage return on its invested capital. Then the rate for the service (let’s say electricity) is set for that utility. However, that rate does not float if there are unexpected costs to the utility. So the actual rate of return that the utility gets could be lower, even substantially lower. It would only be at the next rate case that the utility could attempt to recoup those extra costs. Again, I am not an expert on utility rate setting, but that is my understanding.

 

So the variable cost they have is fuel purchase which is a cost that gets adjusted perhaps monthly.

 

If I’m not mistaken FPL lowered rates recently.

 

I’m not sure that’s totally true. One of our nearby cites has its own power company.

 

Until a hurricane comes through are wipes out half the grid in Florida.

 

I am reminded of a conversation I had in the late 80s with a fpl exec I had in the late 80s. I was dating his niece at the time. They had just gotten a rate increase to pay for the building of a new plant. I asked who would own and profit from the plant. He just kept saying it would be ours so we and our investors would. I countered but the investors in this case would be the users. He refused to understand. I think he was just being a good executive but it is in the realm of possibility that he was an idiot who didn’t understand capitalism.

 

The power companies don’t profit off that too?

 

Not sure how you “profit” when half the grid is wiped out and you pay giants amounts of OT for all the linesmen and support staff.

Seems like it’s a huge expense that is hard to fully plan for.

Would your business profit if it had to replace critical infrastructure well before it had reach its useful life?

Certainly rates are tied to expected natural disasters, but how accurate are those predictions.

Then factor in extremely variable costs of materials.

 

Fuel purchase might float the rate. Hurricanes might not. There might be other people on this board who know better than me.

 

I don’t believe FPL gets to change fuel charges monthly.

 

They profit off repair work too, just in arrears. Here’s a short news clip from Houston that explains it with their local power company.