Truthout - March 8, 2020
"PG&E has its sights set on keeping its for-profit monopoly, and if it does remain private, the company is planning on big profits, financed by rate increases on captive customers."
Consider a hypothetical corporation that has a monopoly over millions of people, providing a service that is indispensable to its customers. If it raises prices, customers have no choice but to pay those prices. Recognizing this, the government imposes some regulation. It cannot set arbitrarily high prices, but it negotiates with the government to obtain prices that guarantee a steady profit rate.
To the corporation, this is an acceptable bargain: Profits may not be as high as it likes, but they are high, and they are virtually guaranteed. Plus, because the corporation has been around for a long time, it has cultivated friendly relationships with local and regional politicians. It even makes a point of hiring some of them when they leave office. This makes it easier to strike a good deal.
The corporation is a staple in your town. Without you knowing it, though, a chain of parent corporations has bought the company, and investors from around the world have flocked to get an ownership stake. The people calling the shots about this necessary part of your life have become a shadowy network of global shareholders.
These global investors decide whether or not to raise your living costs, and where to send your jobs or whether to cut them entirely. They decide the quality of the service you receive and how much to charge you for it. Since your life and livelihood depend on the service they provide, the government sometimes steps in to make sure that service is decent and reliable. But the shot-callers are mainly interested in their profits, so they regularly shirk their responsibilities. Customers suffer, sometimes fatally.
This tale, which is replicated across the world, is the story of my upstate New York community’s electricity provider.
Hiking New York State Energy Rates for Profit
Rochester Gas and Electric (RG&E) and its sister company New York State Electric and Gas (NYSEG) are investor-owned utilities: private corporations that generate or purchase electricity which is distributed to customers within a monopolized service area. While they are local brands, RG&E and NYSEG, which serve around 1.3 million customers in upstate New York, are privately owned subsidiaries of Avangrid, which is itself the North American subsidiary of the $68 billion multinational Iberdrola, based in Spain.
Who owns Iberdrola? Its top two shareholders are the sovereign wealth fund of the oil kingdom of Qatar — where fossil fuel revenues account for more than 70 percent of government revenue — and BlackRock — the largest of the world’s multinational shadow banks, through which the global 1 percent hide their money from regulators through speculative investments. BlackRock, which manages assets valued at more than a third of the U.S. gross domestic product, is a prime example of the secretive financial institutions that have taken control of an enormous share of our economy in order to further enrich the ultra-rich.
Investment in Avangrid is very lucrative. The company posted a profit rate of 9.2 percent in 2018, well above the average profit for all non-financial corporations (6.4 percent). The RG&E subsidiary reported profits of 10.2 percent. But the real costs of decisions made by executives halfway across the world and on behalf of a segment of the global elite are felt locally. This year, RG&E and NYSEG went to the New York Public Service Commission asking for rate hikes of up to 23.7 percent, which would boost their revenue by $163 million. Customers are, of course, captive to any rate hikes since, as with all utilities, if you live in RG&E and NYSEG’s service areas, you have but one option for buying the service that heats and lights your home.
The burden of rate hikes is felt most sharply by low-income households, which often happen to be people of color. Black people are twice as likely as their white counterparts to live in poverty. Indeed, a census-based study of 48 large U.S. cities found that the median Black household pays 64 percent more of its income on utilities than the median white household.
The requested rate hikes also come in the context of shameful infrastructure neglect. In the last three years, RG&E and NYSEG were cumulatively fined more than a record-breaking $14 million for violations of reliability and emergency response standards leading to hundreds of thousands of homes having their power shut off in 2017 and 2018 winter storms, a scenario that is playing out again this winter. Moreover, while science indicates that global climate change is already increasing the frequency and severity of winter storms, RG&E and NYSEG have done little to transition to renewable energy sources.
Faced with public opposition, RG&E and NYSEG argued that their rate increases “are designed so that each company has the resources necessary to best serve our customers.” If these utilities provided rates near the cost of service, this would be plausible, but Avangrid’s elevated profit rate reveals that they are lying. Given the multimillion-dollar fines that RG&E and NYSEG recently incurred from the state, it is clear that additional rate hikes are not intended for infrastructure improvements, but rather to preserve profits. ...
Read full report at Truthout