Tuesday, February 21, 2006

delawareonline | The News Journal | Voters mad at legislators for electric rates

The article in this morning's News-Journal tries to picture (and no doubt provoke) a tidal wave of voter discontent over DelMarVa Power's rate increases. After raising natural gas prices something like 36% last year, they recently announced a price increase of 59% for electicity. I'm not so sure that the voters are as upset as the News-Journal is portraying them.

There are three main reactions to this increase in the price of electricity:
1) Anger at DelMarVa - "How dare that greedy power company raise prices so much?"
2) Anger at Delaware legislators - "How dare our government allow prices to be raised so much?"
3) Resigned acceptance - "Yeah, it sucks, but what can we do about it?"

Response number 3 seems the most like response from most people. After the fluctuations we've seen in gasoline prices, I think most people are aware that our power bills would have to increase at some point. Upon reflection, they likely realize we were getting a good deal for the past few years and the time has come to pay the piper.

I think anger at DelMarVa is the next most likely reaction. A significant number of people don't pay that much attention to local news, so they'll only associate the increase with the DelMarVa. Besides, we're Delawareans and fairly unexcitable. I'm not the only one who feels this way:
"I think we'll probably see much the same General Assembly next January as we have now," said Jim Soles, a retired University of Delaware political science professor and dean of the state's political analysts.

Now, despite arguing that the legislators won't see that much of a blowback come Election Day, I by no means exempt them from blame. They made a few mistakes:
1) Maintaining the price freeze: If prices had been allowed to float, this sudden increase would have been spread out over a few years and therefore not as noticeable or painful.
2) Expecting immediate competition: Of course there won't be competition at below-market power prices. Companies aren't going to enter a business knowing they're going to lose money. Expecting competition to arise over the past few years was foolish, especially when you consider the high start-up costs of power delivery. The profits weren't there to draw power companies in. Now that we've returned to market, we might see some companies get interested, but not if the General Assembly keeps talking about re-regulation.

Things might be rough financially for a little while but if voters and the General Assembly don't panic, we should see them them return to a more normal state.


Blogger gutshot said...

You'll see a lot of power conservation this summer. Fewer days with the A/C running constantly. Turning off that extra light or three in your house. Is this the fault of the General Assembly? Probably not. Action taken by members of the Assembly will be in appearance only, i.e. trying to squeeze a few more votes to hold onto their seat.

The major difference I see between Delmarva Power and the oil companies is that you probably won't see Delmarva pull a huge profit from this. Oil companies have enjoyed a robust overseas market, and with our huge dependance it's left consumers biting the bullet. I myself have carpooled to lighten the bill. That's impossible for many.

9:45 PM  
Anonymous Disgusted with Del. said...

Um, hello?
This is a HUGE issue with homeowners. It is but the latest increase we are facing.

My trash, water, and sewer rates have gone up. My school taxes go up a few hundred dollars every year.

My car insurance is up, as is my health insurance (I am self-employed, so I pay the full coverage.) Home insurance also.
Comcast has raised its rates.

Gas for my car is up; so are oil changes and any other work.

Now we hear that New Castle County will need to raise taxes upwards of 60%.

I have had to go over my entire budget and have cut costs wherever I can. My heat is never higher than 67, and goes down to 65 at night. I get 36 mi/gallon in my car. My house is insulated (I had that down 5 years ago), I shut everything off when I am not home. etc.

I have to get part-time job in order to be able to pay for all of these increases.

Everyone I talk to is having fits about all of the increases. I sense a revolt is coming soon.

Christina's last referendum was defeated. Legislators are getting an earful. Comcast will have more people cancel services. Lots of businesses will suffer because extra money for dining out, movies, etc. will be going to taxes, electricity, etc.

12:41 AM  
Anonymous Anonymous said...

Of course there won't be competition at below-market power prices.

What are you talking about? LOTS of companies are competing for Delaware electric sales.

Oh, that's right - that's only for BUSINESS accounts, not residential. Homeowners will now be paying more for electricity than businesses (don't dare call it a business subsidy tax, or God forbid, a redistribution of wealth.)

Expecting competition to arise over the past few years was foolish, especially when you consider the high start-up costs of power delivery.

What start-up costs? The power delivery is done by Delmarva. All you have to do is sign a contract and Delmarva flips a switch and your power starts flowing to your Delaware customers.

The cost that keeps companies out of the Delaware residential electric market is the high cost of setting up and running a customer service and billing operation to manage a handful of residential accounts.

12:13 PM  

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