Thursday, January 26, 2006

If You Really Want to Fine a Utility Company....

A few days ago, it was announced that FirstEnergy Corporation has to pay $28MM in fines for lying to the government about the dangers of it's Davis-Besse nuclear power plant:

That plant is a mere 20-30 miles from me, and about 5 years ago, the reactor head was so badly corroded from leaking acid that we could have had a serious nuclear disaster here on the shores of Lake Erie.

Supposedly, none of that fine is permitted to be passed on to FirstEnergy's customers (ratepayers). How are they going to enforce that? FirstEnergy makes money by generating electricity, which their customers buy. So, how are you going to keep the various monies separate? Somehow, I just don't see FirstEnergy (or, more locally to me, Toledo Edison) suffering as much as I will over time. I can even foresee rate hikes in the name of "increased energy costs" that will somehow restore that $28MM to their bottom line. This, despite the fact that FirstEnergy made close to $878MM in PROFIT (6.8% of revenue) alone last year. I have a real problem with utility companies continually increasing rates when they are already realizing huge profits, but I digress...

I say that if you really want to fine a utility company, don't simply make it a monetary fine. Instead, take it out of their rates. In FirstEnergy's case, force a lowering of rates over the current baseline for a period of time (years) until the $28MM can be realized. This way, you're ensured that the ratepayer is not paying the debt, and that they are in fact experiencing relief.

Of course, Treasury Department, or whomever is the direct recipient of that $28MM, would not receive that huge check, so we'll never see this idea come to be.