The shovel-ready rate hike
Fine print – January 2012
What’s the functional difference between a tax-funded federal stimulus program and Duke Energy Corp.’s recent rate-hike request? Not much. Both would take money from our pockets and use it to finance big construction projects and thus create jobs — except that the Charlotte-based utility would actually give us something tangible in return, namely electricity. And that electricity is a valuable thing, because the progressive-minded souls among us need it to power their laptops so they can send expressions of outrage to government regulators about being forced to cough up more cash for Duke’s job-creating construction projects. Anybody besides me see the irony here?
Let me say right up front that nothing that follows is an argument on behalf of Duke Energy. At the very least, the company has demonstrated an abysmal grasp of the fundamentals of public relations. As you might recall, it is seeking to acquire Raleigh-based Progress Energy Inc. and create the nation’s largest power company. Its sales pitch to regulators and customers is based on the premise that the combined company will offer financial and operating efficiencies that can be passed along to bill payers. Did it not occur to any of the company’s well-compensated executives that asking for a 15% rate hike right after making that pitch might be a tad awkward?
When that thought finally sank in, Duke reduced its request to 7.2%. It says it needs the money for construction projects and pollution-control efforts totaling $4.8 billion. The N.C. Utilities Commission already had approved those projects, and the commission’s Public Staff — whose job it is to look after the interests of consumers — has given its OK to the 7.2% rate increase. But none of that mattered to the parade of objectors who appeared at various hearings to denounce, vigorously and sometimes profanely, the power company and its lying, thieving, greedy, pollution-spewing executives (my paraphrase, exaggerated only slightly).
I’ve already made my first point. Everyone generally agrees that the way to economic recovery is through those big “shovel-ready” projects that President Obama keeps saying we need, which will create jobs and upgrade the infrastructure. Improving Duke’s power grid accomplishes both things. Does it really matter in a practical sense to whom, politicians or business executives, we give our money to bring a shovel-ready project into creation?
But there are two other, more elusive points to be unearthed from the rate-hike squabble, both of which speak to the progressive wish for government to have a greater hand in running things. The first point is that the protests against the rate hike shouldn’t be seen as anti-corporate. They are, in fact, anti-government.
After all, the relationship between Duke Energy and the state of North Carolina is the closest thing we’ve got to the progressives’ utopian ideal of business held captive by government. It’s exactly what Elizabeth Warren, Michael Moore, the Occupy Wall Street crowd and such heavyweight philosophers as Kanye West and Roseanne Barr have in mind when they demand that corporations be brought to heel. Duke, like all other major utilities, is so highly regulated and closely supervised by government that about the only decisions over which it has total control are things like the paint color in the executive washroom. It can only ask for rate hikes. The Utilities Commission, an agency of the state, ultimately grants or denies them. If your power bill goes up, it’s because your government has decreed that it should.
Perhaps you think the problem is that government isn’t smart, efficient or even very good at its job. If so, welcome to the club. That’s why I’m disinclined to give it even more money.
The other point is that in one notable and significant way, Duke does exactly what politicians do: It uses your money to subsidize sweetheart rate deals in order to attract business. The only difference is that when politicians do it, they’re lauded for their commitment to economic development. When a utility does it, it’s just another complaint on the progressive bill of particulars.
As The Charlotte Observer reported, objections to the rate-hike request also came from the city of Durham and “three advocacy groups,” which expressed dismay that the company provides discounted electricity to “power-hungry data centers” such as Google’s server farm in Lenoir. Duke pointed out that discounts on their power bills are one reason high-tech companies come to North Carolina. What went unsaid, however, is that a bargain power rate was a minor reason for Google to locate in Lenoir. The biggest incentive was the promise of almost $100 million in state tax breaks that the General Assembly bestowed.
It’s not that Google needed the money. Shortly after negotiating that sweetheart tax break, its two founders bought themselves a Boeing 767, then spent $10 million to install private staterooms outfitted with king-size beds. Commercial air travel is so déclassé, you know. No self-respecting tycoon should have to endure it.
All this boils down to a simple question: If it’s true, as progressives like to say, that the government is us, why be angry when Duke Energy does exactly what elected officials do on our behalf?