I drove to work today. I don’t normally drive to work these days since getting to DuPont Circle from Huntington is a bit more difficult than driving to Capitol Hill. Today, though, I did because I had to haul in the boxes of stuff my company and our sister company acquired at the Republican and Democratic Conventions.
This morning on the hellish commute — some asshole got into a wreck on 295 — I heard WTOP reporters talking about the recent drive-by storm DC had, and how Maryland was going to allow PEPCO (a much hated public utility) to charge people for electricity they didn’t receive.
Framed this way, I’d understand why people would be mad. On the way home, News Radio 99.1 (a new station and inferior competitor to WTOP) ran a similar report.
However, it doesn’t tell the whole story. People — like Gawker’s Drew Magary — want to make you think that PEPCO execs are lighting cigars off of piles of money and doing lines of blow off of strippers. Yeah, not really. PEPCO’s stock price might be close to Facebook’s, but they’re nowhere near as valuable as a company (Facebook’s volume is 50M to PEPCO’s 1.6M). They’ve been offering quarterly dividends of about $.27 for the past five years. Even some conservative bloggers have jumped on the “I hate PEPCO” bandwagon.
Yes, some of their executives make a lot of money. I’ve heard somewhere CEO’s tend to make bank. Not surprising. But that’s not where all of this money is going. (For a primer on executive pay, please consult Thomas Sowell‘s fine work on the subject.)
And while I don’t live in Maryland (I hate Maryland, for the record), I don’t like PEPCO very much — because they’re Marylanders. I do think, on par, they provide inferior service to Dominion Virginia Power, who powers my home. Part of it is Maryland’s own damn fault for fighting them on tree trimmings, but some of it, I am sure is due to fact that everything in Maryland is inferior to Virginia.
Here’s a theory I haven’t heard being discussed much on the news:
Maybe, just maybe, the fees that are being charged help bring your electricity back faster.
Imagine for a second if Maryland and D.C. instituted laws that said PEPCO can’t pass along the higher costs of hiring out-of-state crews on overtime pay to come in and restore power and fix infrastructure after a Derecho or a Snow Storm. (At the end of the day, consumers bear all of the costs of production and electricity is no different.) If Martin O’Malley and Vince Gray teamed up to pass a pair of stupid laws, if I were PEPCO’s CEO, I’d probably just adjust the rates of Delaware and New Jersey residents to cover the costs.
After all, if I want continued investment in my company, I do have to compete with Dominion and other companies out there for investment. If I project losses or smaller dividends, it would make sense that people would be less inclined to invest in my company.
Now, not to be screwed by the crab cake eaters and Washingtonians, Delaware and New Jersey pass similar laws. What would happen? Would PEPCO be as inclined to spend a lot of financial resources to hire out-of-state crews on overtime pay to fix things? Probably not.
Could it mean longer power outages? That’s very likely. Do Marylanders and Washingtonians want that? No. Ironically, they want PEPCO to bury the lines — something that will cost billions of dollars. (Guess who will pay for that?)
I’m not saying PEPCO is a saint, or provides the best service. I just wanted to throw it out there that consumers will bear the costs of restoring their power and fixing the infrastructure that brings them the juice. Nobody likes to admit that, but it’s the way of the world. It’s not unreasonable.
So, rather than looking at it as “paying for electricity you didn’t receive” maybe you should look at it as your share of restoring the system. Power outages suck. Nobody disagrees with this, but we really should put a little more thought into it — and the unintended consequences of well intentioned but ultimately bad proposed laws — before we rant and rage.