Privatized profits, socialized losses?

In response to Tuesday’s story about CenterPoint’s Hurricane Ike expenses, several readers called and emailed asking why electricity ratepayers are expected to foot the bill for fixing the poles and wires damaged by Hurricane Ike.
One subscriber asked: “It seems to me we’re being asked to subsidize or socialize their losses while they get privatized profits. Under regulation it seems we didn’t have to secure their equipment. Am I wrong?”
The short answer: Yes.
Ratepayers have always been responsible for the expense of maintaining and expanding the power grid in Texas. This was true before electricity deregulation went into effect in 2002 and it’s true today.
Deregulation effectively broke the state’s power industry into three separate businesses: power generation, transmission and distribution, and retail power sales. The transmission and distribution piece of that puzzle — which is CenterPoint’s business — is still regulated by the Public Utility Commission of Texas.
That makes CenterPoint, the local company that controls the bulk of the power distribution system in Houston, a regulated entity. That means CenterPoint cannot simply pass along costs to consumers. It must go before the Public Utility Commission of Texas and make a request to pass along costs to ratepayers.
Rate cases are usually lengthy back-and-forth affairs where consumer advocates, cities and state PUC commissioners get to ask questions of the utility about its operations and cost estimates. Traditionally, these cases get settled for some amount that is less than the utility originally asked for.
Spreading around or “socializing” the costs to expand, repair or maintain critical public infrastructure – whether power lines, phone lines or water and sewer infrastructure – is fairly common around the U.S. in both regulated and deregulated markets.