- Capital spending by utility companies has soared across the U.S. - and so have customers' bills - despite the lower cost of natural gas, the main fuel used to generate electricity, WSJ reports.
- Annual capex by investor-owned utility companies has climbed to $103B in 2014 from $41B in 2004, while U.S. residential electricity prices have jumped 39% over the same period; the average price of a kilowatt-hour of electricity rose 3.1% last year to $0.125/kwh, far above the rate of inflation.
- Experts say there are several reasons for the surge in spending - including environmental mandates and the need to protect the grid against storms - but there's another major reason: It actually boosts their bottom lines as a result of a regulatory system that turns corporate accounting on its head.
- It is now common for utilities’ allowable profit to be capped at ~10% of the shareholders’ equity that they have tied up in transmission lines, power plants and other assets - so the more they spend, the more profits they earn, which critics say can prompt spending on projects that may not be necessary or to choose high-cost alternatives over lower-cost ones.
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