Monopoly Much? America's Largest Utility Hikes Rates Most In 9 Years Despite NatGas Price Crash

Tyler Durden's picture

Happy New Year Californians - behold the power of monopoly and regulatory capture.

Submitted by Wolf Richter via WolfStreet.com,

“We want our customers and their families to know that we are here to help them make smart energy choices and save money whenever possible,” cooed Laurie Giammona, senior VP and chief customer officer of Pacific Gas and Electric, on Wednesday between Christmas and New Year’s, when no one was supposed to pay attention.

It was the propitious day when the beloved utility that distributes gas and electricity in the northern two-thirds of California announced that on January 1st it would jack up its rates.

America’s largest electric utility and the second largest gas utility by number of customers, the utility whose 2010 gas-pipeline explosion in San Bruno, just south of San Francisco, killed 8 people, injured another 66, and burned down 38 homes, the utility that is still digging in its heels after five years since the explosion and is now under investigation by the California Public Utilities Commission because it failed to deliver certain documents, the very same PUC that is being probed by a federal grand jury for potential illegal ties between the regulators and the executives of PG&E in this ballooning corruption scandal … well, this beloved utility now has announced a very special New Year’s resolution.

It will hike natural gas rates for the average residential customer by 4.0% and electricity rates by a stunning 8.5%, for a combined rate increase of 7%, the steepest since 2006.

The average small business is going to get whacked by a combined rate increase of 5.1%.

That’s on top of the 6% rate increase it had successfully inflicted on its customers a year ago.

Rate increases, despite a plunge in the price of natural gas

That plunge started in 2008 and has hit new lows on December 17, when the price of natural gas hit $1.68 per million Btu at the NYMEX, the lowest since March 23, 1999. When adjusted for inflation, it was below the prices tracked by NYMEX going back to 1990. This historic price collapse has been eviscerating the US natural gas industry and its investors [read…  Carnage in US Natural Gas as Price Falls off the Chart.]

Much of the power PG&E distributes is generated by natural gas. And all of the natural gas it distributes is, well, the same natural gas whose price has plunged to historic lows.

In fact, in its third quarter financial statement, PG&E admits as much: its cost of electricity over the first nine months of 2015 dropped 8.8% year-over-year, and its cost of natural gas plunged 36%!

The thing is, despite the juicy rate increases imposed at the beginning of 2015, operating revenues have fallen about 1% so far in 2015, as Californians use less energy from their beloved utilities. It’s an existential struggle all utilities face.

However, the company pointed out that the rate increases won’t be used to pay for the fines and penalties associated with the San Bruno pipeline explosion.

Those will largely be covered by the proceeds from a public offering last August of 6.8 million common shares at $51.90 per share. Wells Fargo, the underwriter for the offering, got a bundle of fees. But money is fungible. It’s like water. It flows wherever gravity pulls it, and no one can separate it.

So why the rate increase? The SFGate:

The changes follow a decision by the California Public Utilities Commission in 2014 to let PG&E collect an extra $2.37 billion in revenue from its customers over three years, from the start of 2014 through the end of 2016. The additional money will pay for maintenance and upgrades to PG&E’s sprawling electricity grid and natural gas pipeline network….

What else is PG&E doing with this moolah?

It is paying rich quarterly dividends of $0.455 per common share. With 489 million shares outstanding in the third quarter, dividends for a year would amount to $890 million. So for the three-year period in question (2014-2016), this would amount to, give or take, $2.7 billion, more than enough to pay for the maintenance and upgrades of its system.

If it faced real competition, or a real regulator, PG&E would be forced to pay for maintenance and upgrades with other means than rate increases when its input costs are plunging while it’s paying out a rich dividend.

And how are its customers supposed to deal with the rate increases? PG&E, according to the SFGate, “urged its customers to contact the utility for ways to save energy.” So, turn down the heater, put on another fleece, buy more efficient appliances, and hunt down subsidies for low-income households.

As always, it’s just the beginning.

In September, PG&E asked the Public Utility Commission for another $2.7 billion in revenue increases for the three-year period of 2017-2019. That particular amount of money would be used ostensibly to prepare for natural disasters. Over the same period, it would still pay out $2.7 billion in dividends. The PUC, under federal grand-jury investigation for its cozy ties to PG&E, has not yet voted on this doozie.

Turns out, for utilities, the party is over, again. Read… Dear Electric Utility CEO: Merry Xmas and Cut the Dividend?

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22winmag's picture

If Mexifornia declared independence or fell into the sea and nobody was around would it make a sound?

El Oregonian's picture

Governor Moonbeam seeks a third-world solution to a turd world creation that he initiated...

max2205's picture

Suckers!

 

It is so easy for regular people to hedge their gas bills.

I Will Explain All's picture

We are so fucked.  Goddamn fucking jews

ebworthen's picture

Bend over sheeple!

The Empire rules!

Pay up or join the Dark Side!

Lorca's Novena's picture

Well, we do have 2 jewish cunts as senators...

Wulfkind's picture

Producing your own power by solar and wind, plus growing your own food are now revolutionary acts.

So for those of you who refuse to pick up the gun like your forefathers did, these are your only options left.

crossroaddemon's picture

Picking up the gun is useless. We can't win unless the military stands down  (it won't).

Yes, find alternative ways of getting the things we need. That's priority number one. Also stop contributing; quit your job. And take everything you can from the system. Give nothing back.

These are about the only options we have. The deep state is undefeatable at this moment in history. 

crossroaddemon's picture

He who down votes without thoughtful refutation is the worst kind of fucktard.

MayIMommaDogFace2theBananaPatch's picture

This is Fight Club not StackOverflow.  I mean, really.

Having said that I will add that I did not down vote you.

crossroaddemon's picture

Ok, lemme rephrase. He who down votes without statement of position is a fucking pussy.

RafterManFMJ's picture

Give them nothing, but take from them EVERYTHING!

crossroaddemon's picture

So what asshat has federally reportable savings?

GMadScientist's picture

Those for whom downvotes are the only topic of conversation should STFU or say something meaningful sometime before we're all dead.

Anacrust's picture

Haha, if you're white and have Federally reported savings in the bank, forget about getting anything from the system.  You'd have to dump everything to show at least one tax year of being flat broke before getting anything.

The better way is to start your own business, control your own cash flows, take as many tax breaks as possible for your net zero profit business. Salary men get screwed.

Anacrust's picture

Haha, if you're white and have Federally reported savings in the bank, forget about getting anything from the system.  You'd have to dump everything to show at least one tax year of being flat broke before getting anything.

The better way is to start your own business, control your own cash flows, take as many tax breaks as possible for your net zero profit business. Salary men get screwed.

Max Cynical's picture

"Nevada net metering service charge hike announced"

http://www.reviewjournal.com/business/energy/nevada-net-metering-service...

Net metering customers of (Warren Buffet's) Nevada Power will see their service charge climb to $17.90 a month on Friday from the current $12.75

The monthly service charge will continue to ratchet up, reaching a rate of $38.51 by Jan. 1, 2020

The Friday increase is a 40 percent jump over the current rate for rooftop solar customers of Nevada Power.

The new tariff, submitted for review and potential approval, also proposes new, lower credits for excess energy generated by rooftop solar customers. The current credit of about 11 cents per kilowatt hour would be reduced to about 9 cents on Friday, declining to 2.6 cents by Jan. 1, 2020.

The Dec. 22 order prompted one of the largest rooftop solar companies, SolarCity, to announce it would no longer sell or install systems in Nevada.

world_debt_slave's picture

another reason to leave Cali, exodus 2012

Government needs you to pay taxes's picture

Pour it on, bitches.  Take their guns AND hammer those Kommiefornians with a deluge of new taxes.  They voted for it!!!

rejected's picture

Imagine that! An American corporation slamming customers and not maintaining their infrastructure.

Americans doing what Americans do best!

Wulfkind's picture

George Carlin said it best....

You know what the best thing about America is ?  We take a good idea.....and we run it into the ground.

You know what the SECOND best thing about America is?  We take a BAD idea.....and we run it into the ground.

 

Here's my take.  America is best at fucking other Americans over.   USA !  USA !  USA !

jammin1's picture

America is best at fucking EVERYONE over...

Questan1913's picture

Public graft and extortion....in la la land. This just shows the utter well founded contempt public officials have for their constituents.

Id fight Gandhi's picture

Public utilities should remain public. They used to be. Their concern was to provide utilities and infrastructure. Now that politicians sold these off, creating monopolies their number 1 concern is to share gains and dividends.

Charles Offdensen's picture

So in other words....FUCK YOU PAY ME!!!

For the record it's shit like that why I left that leper of a shithole state. Good riddance.

TheFutureIsThePast's picture

What are you going to do when it's nationwide?

Sudden Debt's picture

My electric bill here in Belgium is going to go up by about 2500 euro's next year...

The "average" electric bill of 470 euro's (who the fuck pays only that per year...) will go up to 900 euro's a year.

I pay about 2800 euro's a year on electricity...

 

Reason?

Solar panels....

Our government made them tax deductable (the socialists...)

And pilled up a debt of 9 billion just for that... That comes up to about a debt of 3000 euro's per taxpayer that they need to collect to stay into budget...

Now, as soon as solar panels got tax deductable, large companies put them on their warehouses. I know warehouses with thousands of square meters of solar panels. All funded by the taxpayer and the companies make hughe profits on them.

And our nuclear power plants? They're in such bad shape that it's becomming dangerous.

Suez bought them a decade ago for next to nothing, they jacked up prices like crazy and didn't do any maintenance. All the revenue was near pure profit. Per employee they make about 700.000 euro's profit. I wish I had a company like that... even coke dealers don't get a profit margin like that...

And all commodities are at their lowest in a decades.

 

katchum's picture

But, but, but, you get a bonus of 80 euros a month! And your wife too.

scaleindependent's picture

Wait...

 

the government makes the solar panels tax deductible and the big companies buy a ton of them and make the regular guy pay for them ... and you call that socialism?

 

LOL.

There is a better name for the union of corporations and state... Hmmm...

Corporatism?  or as Mussolini defined it himself... fascism.

 

Those are the facts.

doctor10's picture

Basically the state of indebtedness of the Western Social Welfare Democracies, and the limits of human opportunity those debts impose upon their citizens, is a marker of the destructiveness and uselessness of those 20th century legacy governments.

Their gradual morphing into worldwide fascism is their only hope to continue a semblence of their current structure, and yet that serves merely to propagate the deficiencies of 19th-20th century burocratic heirerarchy well into the 21st century.

Artificially created and encouraged conflict is staged around the world to attempt to justify the status quo, which remains the greatest anchor around the neck of 21st century humanity.

A Nanny Moose's picture

Fascism is just Socialism with corporations.

Make_Mine_A_Double's picture

Wait! What?

I lived in Belgium - fucking solar panels in Belgium makes about as much sense as solar panels where I live now in the god damn Pacific Nowthwest.....

What..my electric bill is going up by a third? Solar panels you say....I thought only Wallons were dumb enough......never mind.

Sudden Debt's picture

You live in Belgium and you don't know this? Don't you watch the news????

First we'll lose on the electric bill called the turtle tax and if you make a above average salary of just 1600 euro's a month you'll pay another 700 euro's more in taxes next year!

And not the mention the "speculation tax" that will make it impossible to invest in the stockmarket from now on as we'll have to pay an extra 33% tax above the 40% tax we already pay on our profits!!!!!!!

 

mkkby's picture

Hitler couldn't conquer you 70 years ago so they devised a smarter way -- print up paper money and buy each gov.  Now they have the best of both worlds.  You are a slave who THINKS he's free.

Pay up, asshole.  The gangster always gets his cut first.

Make_Mine_A_Double's picture

Someone's gotta pay for all those Muzzies, West Africans - not too mention all the dead assed Waloons on the dole.

Wulfkind's picture

Well, I mean, until Belgium figures out whether they're Dutch, French or German, how the hell can they fight off being taxed to death ?

Although I'll cut them some slack for giving us great beer, Belgium waffles, great chocolate and French fries.

And Jean-Claude Van Damme

Sudden Debt's picture

I remember reading the firtst post :)

Didn't know you where the author!

Wile-E-Coyote's picture

In the UK there is a scheme for fitting solar panels and other green energies that paid a dividend guaranteed for 20yrs; index linked. It meant a domestic customer who fitted PV for example would get a return on investment of approx 10% per year. The feed in tariff paid for every kWH produced by the panels, excess energy was fed back into the grid. This scheme has just been cut by 85%.

It's estimated 40K PV installers will lose their jobs, some have already shut down operations.  PV in the UK is a joke we are too far north, in winter the panels barely produce anything, especially this winter; it hasn't stopped raining for months. We are real danger of drowning over here. Severe flooding up and down the country.

https://www.youtube.com/watch?v=UpEReBBwVMw&feature=player_detailpage

https://www.youtube.com/watch?v=H2kGq0q8Zvo&feature=player_detailpage

https://www.youtube.com/watch?v=Mb4HPYSSv8U&feature=player_detailpage

GMadScientist's picture

"If you like your unaccounted externalities, you can keep your unaccounted externalities." - Suez, BP, Chevron, etc ad nauseam

krispkritter's picture

Great racket they have. Here in FL they don't have to insure any of their infrastructure so when a hurricane blows through, they go ask the State to pass an increase to customers to pay for all the downed lines and poles, etc. and foist the cost on to the consumer.  Last I checked I was being forced to insure my house, my car, my health, etc., guess I better start my own power company and go off grid...oops, can't do that, it's illegal in Floriduh. (shakes head)

Raging Debate's picture

Krisp - Got a plan for that in my HOA to be energy independent, have neighboring HOA's pay us and sell excess to the city. One must be crafty about it to deliver value. Easier said than done...

GhostOfDiogenes's picture

"Great racket they have. Here in FL they don't have to insure any of their infrastructure so when a hurricane blows through, they go ask the State to pass an increase to customers to pay for all the downed lines and poles, etc. and foist the cost on to the consumer. "

Bullshit!

When was the last hurricane you paid for?

God why are you people such fucking idiots!

The fluoride is working.

We really are entering idocracy.

gatorengineer's picture

Its by no means just California.  I live in Pennsyltucky and spend about 15 cents per kilowatt hour.  Reason, The old utility sold off its generation and is happily paid 7 cents per Kw for Transmission and the independent generator gets about 8 cents for generation....   no break on power or gas bills with cheap nat gas.

sTls7's picture

can you say Enron.  deja vuuuuuuu   

Occams_Chainsaw's picture

We rate hiked some folks....

sTls7's picture

Anybody that's been around a few years is thinking  ENRON.  

SgtMilstar's picture

But down in Southern California, The Gas Company is lowering its natural gas procurement rate by 16%.  But I expect in the future they will have to raise other rates to pay for the fiasco in Porter Ranch.

I Write Code's picture

Are they charging all their neighbors for gas received?  LOL.

My "The Gas Company" bill is going to be righteous for this past month, but then I'm actually burning the gas not just inhaling it.