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RATE HIKES
Electric shock for consumers
TUE
Michigan Daily
Edited and managed by Students at the
University of Michigan
Wednesday, May 22, 1974
News Phone: 764-0552
To Robbed Rob
in Memory
of His Raleigh
Winter is over, warm springs on Ann Arbor,
The pale yelow sun coaxes trees to show leaves.
Rays promising summertime freckle the cyclists
... And signal the throngs of bicycle thieves.
Lured out by the Mayness, the season's rewarming
Winter-white cyclists roll up their jeans
And pedal through petals, watched by the robbers
who plan their "transfer of ownership" schemes
Anything with wheels has a potential market
Any color will do, or speeds one to ten
The thieves are not known to be too selective-
Question not if the bike's to be stolen, but when.
Against cable cutting and commandeered U-Hauls
The bike-owning victim does not often win;
A country renowned as safe for democracy
Can't guarantee a safe Raleigh or Schwinn.
The students provide the thieves' best source;
Both owning a bike and residing in dorms
Has sent a few tearful former owners
to file a sheaf of insurance claim forms.
The cyclists are helpless, although they can ride
girded by five pounds of heavy-weight chain.
They lose speed on the hills, though, and run the
great risk
of rusting themselves if they're caught in the rain.
To make their bikes legal and safe as can be
a. fifty-cent license is affixed to the frame
This preventative action by cyclists will save
Their bike's new owners from doing the same.
The best solution to these maddening thefts
That "liberate" bicycles, leaving no clues
Is to sell your bike now to the highest bidder
And walk where you go'if they don't steal your shoes.
By PETER BARNES
WERE YOU shocked by your latest electric
bil?.
If so, you are not alone. Electric rates have
been soaring all over the country: rate increases
granted to electric utilities last year totalled $1.2
billion, an all-time high. Another $1.7 billion in
rate hike applications are currently pending.
And this summer, with air conditioners going
full blast, millions of consumers could pay more
for electricity each month than they pay in rent
or mortgage payments.
Utilities say the rate hikes are due mostly to
higher fuel costs. That is part of the story, but
not the whole story.
It is true that coal and fuel oil have nearly
tripled in price during the past year, but since
most utilities buy on long-term contracts, their
average cost rose only 20 percent.
FUEL COSTS account for about a quarter of a
utility's expenses, so a 20 per cent rise in fuel
costs should mean only about a five percent
rise in rates.
Utilities also blame soaring electric bills on new
environmental safeguards, higher interest rates
and rising construction costs. The first two may
be justified, but the last raises some interesting
questions.
In most states, government regulatory com-
missions set the utilities' electric rates on a cost-
plus basis, somewhat like Pentagon defense con-
tracts. The more a utility spends on new generat-
ing plants and other equipment, the more profit
it is allowed to make.
Naturally, utilities want people to use more
electricity so they can build more plants and
make more profit. And if the new plants are
very expensive to build, as nuclear plants are,
so much the better for the utility.
TO STIMULATE electricity consumption, util-
ities give discounts to large users. And when
they build new plants and put in new lines to
.service new customers - for example, in su-
burban subdivisions - they spread the costs to
long-established customers - mostly in cities -
whose electricity comes from old power plants
and old lines that have been largely paid off.
"A flat rate structure and one that charged
newly-installed customers a rate that reflected
their true share of costs would lessen the need
for new construction," says Edward M. Kirsh-
ner, an Oakland, California, economist. "That
in turn would help keep rates down, especially
for small users and people in cities."
ANOTHER WAY to keep rates down would be
to build a nationwide transmission grid. As things
are now, utilities in each area must build
enough generating capacity to handle their maxi-
mum power demands, which usually ocur in early
evening hours or on especially hot or especially
cold days. At off-peak hours, a lot of expensive
generating capacity sits idle.
With a nationwide transmission grid, utilities
could spread peak power loads across time and
temperature zones. But private utilities h a v e
strongly opposed a nationwide grid because it
would reduce their individual construction costs
and thus their profits.
Rates might also not be rising so fast if utilities
passed on to customers some of their savings
as well as their higher costs. For example, fed-
eral taxes paid by utilities have declined from
14 per cent of revenue in the mid-1950s to less
than 4 per cent in 1972 - savings which are not
passed on to consumers. The same is true for
savings in hydro power costs brought about by
this year's heavy rainfalls.
WHILE SOME rate increases are inevitable,
the real problem lies in the structure of the
utility industry.
Investor-owned utilities, or IOUs, they like
to be called, sit between two kinds of people.
At one end of the utility are the rate pay-
ers; at the other are sock owners and bond
holders.
The IOU's first loyalty is to the latter - the
people who demand a return on their invested
capital. For example, utilities also explain that
rates must go up because consumers are start-
ing to conserve energy. Their reasoning g o e s
like this: if consumers use less electricity, util-
ity revenues will go down. But since utilities
don't want their profits to go down, they must
raise their rates.
If more utilities were consumer-owned or city-
owned, the interests of rate payers would be
better protected.
ONE ILLUSTRATION: private utilities have
not protested the surge in fuel costs - they have
simply passed on the increases to ratepayers.
By contrast, the American Public Power As-
sociation, which represents municipally owned
utilities, and the National Rural Electric Coop-
erative Association, which represents consumer-
owned utilities in rural areas, have been vigor-
ously fighting the rise in fuel prices.
For the past several years, these groups have
been demanding a government investigation of
anti-competitive practices within the energy in-
dustry, especially the takeover by oil companies
of coal, uranium, shale and geothermal resources.
They have. also been fighting for a nationwide
transmission grid, a roll-back of oil prices, and
a non-profit federal oil and gas corporation to
develop energy resources on public lands.
IF PRIVATE utilities would put their political
clout behind the demands of city and consumer-
owned utilities, it is quite likely that your electric
bill would not be rising so fast.
Peter Barnes, West Coast editor of the New
Republic, and editor-publisher of People and
Land, was formerly Washington correspondent
for Newsweek. He is the author of Pawns: The
Plight of the Citizen Soldier, Knopff, 1972. Copy-
right Pacific News Service, 1974.
'Well, who knows? We might have a president
someday who'd like to fight another little war
- ~ over there.'
-BETH NISSEN. I