This story illustrates a great example of how investor owned utilities use socialized cost recovery to make themselves a bundle of money at your expense. In the example, the Virginia SCC allowed an AEP subsidiary to recover up to 50% of the cost of their charitable contributions from captive ratepayers. The amount approved for recovery by the SCC was $250,000. A spokesman for the company said that it equated to "two pennies on a $100 bill," and that any other company would roll the cost of their charitable contributions into the cost of their product.
Two pennies? No big deal to you personally, right? Maybe, but to the investor owned utility on the receiving end of those two pennies it's a very big deal. Every utility customer needs to take a fresh look at those two pennies. Your "two pennies" are added to the "two pennies" of millions of other individual ratepayers until they form one gigantic pile of pennies. That gigantic pile of pennies is what Uncle Scrooge McDuck, the CEO of the investor owned utility, swims around in daily.
Two pennies? No big deal to you personally, right? Maybe, but to the investor owned utility on the receiving end of those two pennies it's a very big deal. Every utility customer needs to take a fresh look at those two pennies. Your "two pennies" are added to the "two pennies" of millions of other individual ratepayers until they form one gigantic pile of pennies. That gigantic pile of pennies is what Uncle Scrooge McDuck, the CEO of the investor owned utility, swims around in daily.
That's exactly the point I made to a reporter last year while doing publicity on the Formal Challenge filed with FERC. Dividing the amount challenged by the 51 million ratepayers in the PJM region who paid it only amounted to roughly a nickel per ratepayer. However, on the receiving end, the PATH Companies ended up with a roomful of 51 million nickels. Go ahead, try to imagine what that would look like, and instead of Uncle Scrooge McDuck diving in, you've got a couple of ultra-rich investor owned utility CEOs quacking and swimming around in their ill-gotten gain.
It's also the same point the Maryland Office of People's Counsel made in their recent comments on FERC Docket No. ER12-269. The amount that the PATH Companies are wrongly recovering from ratepayers is not great enough for any single entity to spend the time and money to hire consultants to examine PATH's annual formula rate filings to find the errors, therefore no one is examining them and the PATH Companies are free to get away with recovering all sorts of costs they are not entitled to.
As far as the utility's other argument, which is that every other corporation rolls the cost of their charitable contributions into the ultimate cost of their product, there is a distinction that argument fails to make. Any other corporation is subject to the whims of competition when pricing their product. If they make too many charitable contributions that they must roll into the cost of their product, and it raises the ultimate cost of their product higher than the cost of a competitor's product, then the consumers will buy the competitor's product and the corporation who makes too many charitable contributions will lose market share and revenue. This is part of the system of checks and balances that powers the engines of capitalism and is known as cost accounting. In the case of a regulated utility, however, the corporation's customers are captive, which means that they MUST buy their product from a certain corporation, no matter how much it costs. This is the argument Commissioner Christie made in his dissent.
If AEP really wants to "roll charitable contributions into the cost of their product," they ought to roll those contributions into their cost of generation... and then give freely. Since the cheapest generation is dispatched first we'd all breathe a little easier.
So, when "The AEP Foundation" makes those wonderful, charitable contributions, do they take all the credit for the charity? Of course they do! And when tax time rolls around, do they take the deduction for the charitable contribution? Of course they do! Who really paid for the charitable contribution? You did!
That $250,000 that Appalachian Power recovered from Virginia ratepayers is just another dump truck full of nickels and dimes to pour into the ol' corporate money bin. Since the AEP Foundation would have made the contribution anyhow, the amount they are permitted to recover from ratepayers is 100% pure profit.
The investor owned utilities have the act of pulling the wool over your individual ratepayer eyes down to a science, and it's working, as long as you think about it as "just two pennies."
But, take a minute to think about the big picture.
It's also the same point the Maryland Office of People's Counsel made in their recent comments on FERC Docket No. ER12-269. The amount that the PATH Companies are wrongly recovering from ratepayers is not great enough for any single entity to spend the time and money to hire consultants to examine PATH's annual formula rate filings to find the errors, therefore no one is examining them and the PATH Companies are free to get away with recovering all sorts of costs they are not entitled to.
As far as the utility's other argument, which is that every other corporation rolls the cost of their charitable contributions into the ultimate cost of their product, there is a distinction that argument fails to make. Any other corporation is subject to the whims of competition when pricing their product. If they make too many charitable contributions that they must roll into the cost of their product, and it raises the ultimate cost of their product higher than the cost of a competitor's product, then the consumers will buy the competitor's product and the corporation who makes too many charitable contributions will lose market share and revenue. This is part of the system of checks and balances that powers the engines of capitalism and is known as cost accounting. In the case of a regulated utility, however, the corporation's customers are captive, which means that they MUST buy their product from a certain corporation, no matter how much it costs. This is the argument Commissioner Christie made in his dissent.
If AEP really wants to "roll charitable contributions into the cost of their product," they ought to roll those contributions into their cost of generation... and then give freely. Since the cheapest generation is dispatched first we'd all breathe a little easier.
So, when "The AEP Foundation" makes those wonderful, charitable contributions, do they take all the credit for the charity? Of course they do! And when tax time rolls around, do they take the deduction for the charitable contribution? Of course they do! Who really paid for the charitable contribution? You did!
That $250,000 that Appalachian Power recovered from Virginia ratepayers is just another dump truck full of nickels and dimes to pour into the ol' corporate money bin. Since the AEP Foundation would have made the contribution anyhow, the amount they are permitted to recover from ratepayers is 100% pure profit.
The investor owned utilities have the act of pulling the wool over your individual ratepayer eyes down to a science, and it's working, as long as you think about it as "just two pennies."
But, take a minute to think about the big picture.
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