People wearing masks at a local grocery store (Photo – ColoradoBlvd.net)
The City of Pasadena has announced that electricity rates have been raised because of the recent large increase in natural gas prices since gas is used to generate electricity.
By Scott Phelps
The monthly impact for an average electric residential customer using 500 kWh per month will be an increase of $14.00. The large increase in gas prices is familiar to everyone who had to pay those much higher bills the last few months. The Southern California Gas Company explained that these bills were the result of high regional prices that they had to pay for gas, and it was just passing these high costs on to its customers without any additional profit. It also noted that it had a Gas Assistance Fund of $10 million to help those struggling with the high bills, if they qualified for assistance. That amount, however, is less than one half of a percent of parent Sempra Energy’s profits of $2 Billion last year.
Preserving or increasing profits
Maintaining or increasing profits seems to be the driving force behind these increases affecting Southern Californians. In December 2022, the California Public Utilities Commission (CPUC) approved a 75% reduction in the amount paid to solar panel owners for the excess energy that those panels generate which is provided to the grid. This was in response to a request by the big utility companies, who alleged that payments to solar owners were shifting costs for electricity to lower income people who didn’t have solar, and negatively impacting the companies’ profits, which lead them to raise rates to maintain their profits. Scientists at Lawrence Berkeley National Laboratory studied the effect and disagreed. They found that the effects will likely remain negligible, on the order of 0.03 cents per kWh higher U. S. average retail electricity prices in the long-run, and much smaller than that for most utilities.
The big utilities companies’ request was essentially to preserve or increase their profits. The same thing is behind the Southern California Gas Company’s large rise in gas prices for consumers and the increase in Pasadena’s electricity rates. Pasadena’s Department of Water and Power (PWP) generates a large profit each year and transfers roughly ten percent of its gross revenue to the City’s general fund. Since its annual operating revenue is about $180 million, that is a transfer of about $18 million in profit to help the City balance its budget.
Auto insurers have just announced double-digit percentage increases to the prices they charge their customers. They had complained to the State Department of Insurance about losses and lower profits, so these rate hikes were approved by the State, as they nearly always are. Members of the California legislature have resisted Governor Newsom’s efforts to pass legislation that would apply a penalty to the excessive profits of oil companies. Reportedly, this resistance stems from the large campaign contributions that many of these companies give to these legislators. For some perspective, the UK and the EU implemented, without resistance, windfall profits taxes last year on the high profits of big oil companies resulting from the high prices that were spurred by the war in Ukraine. Those taxes provide a fund to relieve those families and businesses facing high energy costs.
It doesn’t have to be this way
Policy makers can have stronger spines when hugely profitable companies and the local DWP ask for more money. In the latter example, as of its Fiscal Year 2021 annual report,the Pasadena DWP has over $300 million in cash in reserves. The City council can direct it to not pass on the cost of the temporarily high gas prices to residents. The CPUC doesn’t have to always grant the requests of the big public utility companies to charge higher energy rates. The State Department of Insurance and State Insurance Commissioner don’t have to grant the huge increases in auto insurance rates.
Protecting the large profits of companies and agencies from which citizens are required by law to buy power or auto insurance is not more important than moderating costs for all citizens. Can’t the companies get by on a little less profit? Couldn’t they help hold down inflation for the higher value of the common good? Maybe holding the profit motive and the related quest for higher and higher profits as the paramount value in society isn’t a good thing, as we see from the recent spate of bank failures where those banks made risky bets in search of higher profits.
How about putting people above profits?
Governor Newsom has just announced a plan to limit insulin costs to $30 a month because the profit-taking by big companies, not any real change in the cost of insulin, has reached such high levels. That will actually save lives for people have been dangerously rationing their insulin because of the costs; some of them have died. Let’s hope that our local policy makers, state legislators and other regulators in California join him in the effort and begin to moderate the profits of big companies in order to help hold down inflation and costs for everyone. Let’s put regular people above the need to preserve and increase profits and improve everyone’s quality of life.
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