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“Affordable” Utility Service: What Exactly Is Regulation’s Role? With the nation’s economy stressed, politicians are pressuring regulators to make utility service “affordable.” This picture has three problems. Wealth Redistribution just isn’t Regulation’s Department The regulator identifies prudent costs, computes a revenue requirement to cover those costs, then designs rates to produce the revenue requirement under embedded cost ratemaking. Rate design makes each customer category bear the expenses it causes. None of those cost that is steps—prudent, revenue requirement computation, cost allocation—involves affordability. Affordability becomes one factor only whenever we jigger the numbers—if we lower rates when it comes to unfortunate by raising rates for other people. Achieving affordability through rate design means compromising cost causation to redistribute wealth. It resembles taxation of 1 class to benefit another, with this exception: With taxation, citizens can retire representatives whose votes offend; however with utility service, captive customers are stuck utilizing the rates regulators set. As opposed to shifting costs between customer classes, regulators might redistribute wealth in another way: by “taxing” shareholders, for example., reducing shareholder returns underneath the otherwise appropriate level. But taxing shareholders is no more the regulator’s domain than is taxing other customers. And it is likely unconstitutional: Having invested to serve the general public, shareholders expect “just compensation,” undiminished by a forced contribution for affordability. Moving money among citizens is important to a fair society. Poverty is intolerable and charity that is private suffices, so government steps in. But helping the luckless ought to be done by political leaders, who must justify their actions into the electorate; not by professional regulators, whose focus needs to be industry performance. Affordability of any product—groceries, a Lexus, or utility service—depends on a single’s wealth and income, and on the price of other products. The poor could better afford utility service whenever we raised their income and increased their wealth. Or if perhaps we lowered their cost of housing, health care, transportation, or education. But these initiatives are outside regulators’ authority. To produce regulators responsible for affordability is illogical. Cheap Energy is Cheap Politics Politicians who argue for affordability use the road that is easy. To legislate economic development, greenness, reliability, energy independence, and technology leadership, all efforts that increase costs, while commanding the regulator to help make service “affordable,” is low-risk politics, responsibility-avoidance politics, cheap politics. When politicians call for “lower rates,” the electorate feels entitled to get instead of encouraged to contribute. But no family, no congregation, no society that is civil thrives if its key verb is “take” in place of “give.” So when lower rates now lead to higher costs later, citizens become cynical. Self-doubting, also, because they question their ability to differentiate pander from policy. These are the results when politicians avoid their responsibility for affordability. “Affordability” Undermines Regulation’s Responsibility Mathematician Carson Chow says he is found the explanation for our obesity epidemic: low food prices. Studying 40 years of data, he spotted both causation and correlation between girth growth and value declines. He traced these trends to government farm policy shifts (from spending money on non-production to stimulating full production) and technology boosts (which lowered production costs). The low the fee, the greater amount of production; the more production, the more (fast) food; the greater food, the greater calories available; the greater amount of calories available, the greater calories consumed. See C. Dreifus, “A Mathematical Challenge to Obesity,” The New York Times (May 14, 2012). Our company is both over-consuming and under-appreciating: Dr. Chow found that “Americans are wasting food at a progressively increasing rate.” (Fairness point: Chow has his doubters. See Michael Moyer, “The Mathematician’s Obesity Fallacy,” Scientific American (May 15, 2012). What does food want to do with “affordable” utility service? A regulator’s job is to regulate—to performance that is establish, then align compensation with compliance. In this equation, affordability is certainly not a variable. To produce service affordable to your unlucky, the commission would have to lower the purchase price below cost. That leads to overconsumption, to Dr. Chow’s “waste.” This inefficiency hurts everyone. Economic efficiency exists when no further action can create benefits without increasing costs by significantly more than the advantages. Conversely, economic inefficiency exists when we forego some action that, if taken, can make someone best off without making anyone worse off. To over-consume, to waste, to act inefficiently, to leave an advantage up for grabs, makes everyone worse off. Underpricing in the true name of affordability makes someone worse off, unnecessarily. How sensible is that? Actions for Affordability: The Right Roles for Regulators Unless essential services are affordable, government will never be credible. Regulators, being section of government, need to help. (A commission staff chief told me 25 years ago, “Sometimes you must put aside your principles and do what’s right.”) And some statutes that are regulatory require the regulator to make service “affordable.” (As is the way it is, i will be told, in Vanuatu, an 83-island nation in the South Pacific.) Listed below are 3 ways, in keeping with economic efficiency, for regulators to deal with affordability. Assist the reduce usage that is unlucky. Regulators can advocate for affordability by pressing for policies that produce consumption less costly, like improved housing stock, “orbs” that signal high prices, and lighting that is efficient appliances. Analogy: Doctors save lives not only by treating gunshot wounds, but by advocating for gun safety. (American Academy of Pediatrics: “The absence of guns from children’s homes and communities is considered the most reliable and effective measure to prevent firearm-related injuries. “) Interpret “affordability” as long-term affordability. Getting prices right and preventing overconsumption, even when it does increase prices within the short run, reduces total costs when you look at the long haul. Expose the dark side of under-pricing. Rather than follow politicians along the low-price, low-risk, cheap politics path, regulators, like Dr. Chow, can talk facts: about the real costs of utility service, the situation of overconsumption, the error of under-pricing. Along with their credibility rooted in expertise, regulators can pressure legislators to do something on affordability directly by enacting income-raising policies. Better education, housing, and health care—all these result in higher incomes, making sure that citizens can afford utility service priced properly.
“Affordable” Utility Service: What Exactly Is Regulation’s Role? With the nation’s economy stressed, politicians are pressuring regulators to make utility service “affordable.” This picture has three problems. Wealth Redistribution just isn’t Regulation’s Department The regulator identifies prudent costs, computes a revenue requirement to cover those costs, then designs rates to produce the revenue requirement under embedded cost ratemaking. Rate design makes each customer category bear the expenses it causes. None of those cost that is steps—prudent, revenue requirement computation, cost allocation—involves affordability. Affordability becomes one factor only whenever we jigger the numbers—if we lower rates when it comes to unfortunate by raising rates for other people. Achieving affordability through rate design means compromising cost causation to redistribute wealth. […]
simple tips to write paragraphs in essay body After the introduction come the body paragraphs. They usually take up a lot of the essay. Paragraphs contain three sections that are main Point: the topic sentence, which describes the main focus (main point) of the paragraph Illustration: explanations, evidence, and examples that reinforce the main point Explanation: evaluation of this discussion or illustration of their significance and connections between this paragraph and the thesis statement nearby paragraphs The acronym PIE (which stands for Point/Illustration/Explanation) can be helpful to remember as helpful tips for developing well-structured, coherent paragraphs. Academic paragraphs are often at the least three sentences long, but can be longer. However, don’t make those sentences a long time. A sentence longer than three lines is too long as a rough guide. […]