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Charging People for Services They Didn’t Use

Monopolies & the government regulators who serve them are always able to come up with such creative ways to fleece taxpayers.

Under a little-noticed decision by Maryland regulators, Pepco for years has been authorized to raise rates temporarily to recover money it loses when electricity use drops. The system was meant to encourage energy conservation.

But as an unintended consequence, customers could help make the company whole for outage-related losses next month by paying Pepco more than they would have otherwise. The higher rates would apply to all Maryland customers, including those who shivered in the dark for days.

“They are paying for delivery of electricity they did not receive,” said Eric Friedman, director of the Montgomery County Office of Consumer Protection.

I would say that it’s the law on unintended consequences at work, but we can see that there’s nothing unintended about it.

But in Maryland, the billing adjustment is colliding with a string of outages at Pepco in the past year. Some critics have said that the billing system has removed any incentive for Pepco to reduce outages or to rush to restore service once the lights go out. Either way, Pepco is guaranteed the same rate of return. …

A Washington Post investigation published in December found that Pepco’s day-to-day reliability began declining five years ago and that Pepco ranks at or near the bottom in national surveys of reliability. The average Pepco customer experienced 70 percent more outages than customers of other utilities in major metropolitan areas.

Hat tip to @DonIrvine.

7 Responses to “Charging People for Services They Didn’t Use”

  1. Jeff says:

    How was this even supposed to work in the first place? How does paying more if you use less encourage conservation?

    • Bitter says:

      That’s the problem with these kinds of programs. When consumers realized that some “green” changes did make a difference for their pocketbook, they gladly made them and the electric companies saw revenue drop due to decreased usage. So now they have the issue of not making as much money, and that’s just no good. So instead they’ve worked with regulators to change the rules so that no matter what the consumer does, the electric company maintains their profits. They can’t lose, regardless of consumer decisions.

      The problem is that for the people pushing “green” policies & crap because they spend their nights hugging trees, they don’t care if consumers would respond to a financial incentive. They think consumers should be responding to the “feel good about Mother Earth” incentive. Shockingly, they don’t. So they don’t really oppose this stuff even when it takes away the once incentive that will inspire most people to “go green.” For regulators, there’s no accountability so why should they care. In this case, they promise to “investigate” and that will placate the media long enough to get it out of the minds of taxpayers. For the electric companies, these policies make it win-win. If consumers don’t decrease usage, they get a big bill. If they do, well, they can still get a big bill. In fact, with these policies in place, the electric companies are free to do environmentalism-inspired outreach and make it look like they are promoting energy conservation with no threat to their bottom line. Free PR tools + maintained profits = win.

      In this case, the policy has an extreme so that they profit even when the electricity isn’t even available. At least it raises awareness of the issue to a few people, though I doubt enough will care for long enough to act.

  2. Exodus says:

    Theft.

  3. Wes says:

    Yep, this is how my local electric company works, too. Well, I don’t know about the blackout part. But if people around here use less electricity, the company gets paid less, so then they can raise rates to make up for it. So, you tell me why people should bother to conserve electricity except out of the goodness of their heart?

    In their defense, (I guess), a spokesman for the company was on a local talk show and said the rate fluctuations are mainly only due to big companies and how they use electricity. The regular people in regular homes aren’t going to fluctuate rates much if any either way.

  4. Freiheit says:

    http://www.opc-dc.gov/archive/451-opc-opposes-pepcos-bill-stabilization-adjustment-proposals-as-unnecessary

    So the idea is that an electric company won’t encourage people to use less electricity because they’ll see their profits drop. So they let them monkey with billing rates to ease that. Still total bullshit, but thats the technical explanation.

    Also I think that some things got misquoted here. It seems that some of the government folks (democrats even!) are actually questioning why Pepco is allowed to do this. The Montgomery County councilcritter appears to be raising some hell about it. So yes there was some numbnuts that came up with this plan and let Pepco implement it, but there also seem to be some regulators doing their damn jobs too.

  5. dusty says:

    I don’t know the veracity, but I’ve been told all personally owned generators and solar panels are supposed to be routed through the meter, so that the homeowner pays for the electricity regardless of whether or not Pepco supplied it. Supposedly, it is a crime to have a generator that ‘circumvents’ the meter.

    I imagine if times get tough, they’ll slap a meter on my car for the electricity the alternator generates too.

  6. Ian Argent says:

    Why not just cut the middleman and run the electric co out of property taxes? Yeesh.

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