I get my electricity from a rural coop (NOVEC) and they are honestly the best service, lowest price, efficient, innovative and treat the community so well.
Flip side - I also get my power from a rural coop in the midwest, and the service is terrible. The price is high. We lose power at least once a week, but that's better than in the past when it was every other day. They have hard limits on what power generation we can do (size of solar panels and no battery backups) and even wade into the situation if you try to install a backup generator - which I understand they want a cut-off to keep from juicing the lines and killing someone, but they want to regulate how large and what kind of generator you can use on your own house.
I know this seems contrary, but I believe people need to understand that a coop isn't a magic bullet. It's a tool, one of many, that if used properly can be great. But if it's not, it's a real pain in the ass.
I have a similar experience here in MA. Our town owns the power company as a non-profit and we have amazing service. We never lose power unless someone crashes into a pole or something, and even then it's only out for a short amount of time. When we have a big winter storm and all the surrounding communities on the large providers tend to be dark for days or longer, whereas here any outages are fixed quickly. They actually go around and trim trees off the lines to prevent future outages.
Because not-for-profit at least guarantees that the primary incentive is..not profit. Especially not profit over the well-being of the consumer.
Now, does that mean that the primary incentive will be the well-being of the consumer? Time will tell, and only if this initiative even makes it through.
I'm surprised that there hasn't been more of a push for not-for-profit health insurance. A for-profit health insurance company has (IMO) unaligned motives with respect to well-being of the patient.
Profit incentives and free markets work great when both sides of a deal can walk away. Most of us reading this work in software, which is in many ways an ideal free market product. But when one party dies if they don't buy, it's time to question market mechanisms.
Aren't there millions upon millions of people covered by non-profit Blue Cross/Blue Shield plans? BC/BS of Michigan is the largest insurer in the state with over five million covered.
Non-profit doesn't make the company (and all non-profits just are companies) suddenly good. It just removes one entity group interested in profiting - shareholders.
And it can introduce others who are interested in profiting - paying the C-level execs of the non-profit, etc.
Or introduce inefficiencies where the non-profit realizes that a "profit" is looming so they waste a bunch of money on stupid stuff to continue to not go over reasonable guidelines on rainy-day funds.
Not for profits are equally unaligned: It's just a matter that instead of giving money to shareholders, it's all about the whims of whoever controls the non-profit company. Those whims can be good, or they can be quite bad.
American insurance company profits are higher than I'd like, but ultimately the magic of America's healthcare is its inefficiency. When you end up owing $3000 for a very minor ER visit, the money didn't just go to the insurance company's profits: A lot of people made more money out of it than in an equivalent visit in, say, a hospital in Spain. And it's not as if the inefficiencies are just due to a single part of the healthcare system being worse all by itself.
The difficult part is that one person's inefficiency is someone else's lunch, or yearly safari to Kenya, so every move to cut costs is politically untenable. Non profits don't fix this, any more than non-profit colleges make US higher education cheap.
> The difficult part is that one person's inefficiency is someone else's lunch, or yearly safari to Kenya, so every move to cut costs is politically untenable.
I think calling it "inefficiency" whitewashes the real problem. That "inefficiency" leads to a much higher rate of unnecessary deaths and adverse health outcomes in the US than nearly every other advanced nation.
And often, even if you can get good health care, the financial consequences are devastating. Even if you have insurance.
Not-for-profit doesn't mean the motives magically align. A lot of not-for-profit healthcare provided by hospitals in the US is Catholic-church affiliated. For reasons that have nothing to do with profit, there is a lot of healthcare (e.g. abortions, birth control) they refuse to provide.
Primarily cost. Oversight includes a democratically elected board and direct oversight by the state public utilities commission. Electric co-ops have been a thing since the 1930s in the US and they tend to work great.
The great part about this is that, come November, the citizens of Maine can take the total amount of money spent advertising against the initiative, divide it by the number of households in the state, and figure out how much money they could’ve saved by voting for the initiative.
I find it humorous that under their estimated $3.8B in utility plant assets they also list $324M "goodwill" assets. GAAP says that goodwill is an intangible asset, but it seems they're spending it rather aggressively...
Goodwill isn't consumer goodwill. It's acquisition goodwill. So if Google buys a company for $1 billion, that might be a great business decision. But the cashflow and projections may only justify an accounting value of 500MM. That doesn't mean it's not a great decision because of a lot of valid reasons. That extra 500MM has to be added to Google's books somehow (they spent $1 billion, and books have to balance), so they have an asset of 500MM of "goodwill" and a corporate asset of 500MM.
This is why I'd never be a good accountant. The price paid was $1m, the thing was valued at $500k, leaving $500k in goodwill? How is spending more money on something than it is worth an asset?
You can say things like this all day long, but to people that think logically and not in the "make-up-numbers" accounting world, this is how things like Enron can happen.
In supply-demand situations like houses, the seller can list a price they are okay with receiving. If it has more interested parties, they can make an offer higher than the asking price. When selling a company, there's similar practices of looking at the current annual income, project growth over a few years, and offer a price based on that. Explaining in terms that are logical, non-accountants can keep up. Making comments of "we value at $500, but paid 2x that for goodwill" just makes no sense
Goodwill refers to the part of the price that is based on "looking at the current annual income and projecting growth over a few years." It's the value over and above what you would get if you emptied the company bank accounts and sold all its other property in a fire sale. It's a perfectly sensible concept, even if the process of quantifying it by coming up with a price "based on" current income and anticipated growth (or other advantages like eliminating competition) is contestable.
> people that think logically and not in the "make-up-numbers"
I would disagree. It’s not very logical to value software companies (for instance) at their book because a lot of their worth is in know-how, workforce and the products themselves. Unless you believe that’s worthless “goodwill” makes perfect sense. The issue is that these intangible assets are notoriously hard to value.
Of course if we’re talking about utility companies for instance it’s quite different.
> current annual income, project growth over a few years, and offer a price based on that
These are not a tangible assets. Future growth expectations are included in “goodwill”.
> Making comments of "we value at $500, but paid 2x that for goodwill"
Nobody does that, or should do it anyway. There is a lot of inefficiency in acquisitions that’s true but no company is going to just say “well we value it X but going to pay 2X”. In most cases there is no real way to calculate future growth without a very wide margins of error anyway..
Anyway there is no point in getting too worked up about this. The main purpose of goodwill is to prevent a massive decrease in company’s assets after they acquire another company. You can deduct depreciation in goodwill from your tax bill anyway. One of the few issues I can think of is this distorts GAAP earnings data for public companies. e.g. look at AMD it looks as if they have not been making any money for the past year or so, which is far from the truth. They just get to depreciate ~$2 billion in goodwill from the Xilinx acquisition depressing their reported net income.
> When selling a company, there's similar practices of looking at the current annual income, project growth over a few years, and offer a price based on that.
Precisely. That practice is establishing the goodwill value of the company. This is another word for expected future cash flows.
If you've ever had a small company be acquired for more than it's asset value - you were the beneficiary of "goodwill".
The book value of a company does not reflect the whole strategic value an acquisition provides (talent, userbase, moat) etc. -basically anything not listed on the balance sheet. "Good will" encompasses the remainder of the value of the acquisition. i.e the price the sellers can command. It's not error in the sense that its "erroneous"
More like the thing was valued at $1m but if you add up all the assets and liabilities of the thing you only get $500k. Obviously when you're a capitalist and buy something, you're doing so for future cash flows, but those don't show up on a balance sheet. Still, the accounting identity must hold, cash can't just disappear, so you end up recording it as goodwill.
People often speak highly of the invention of double entry book keeping. But to me it looks like a half-useful idea that ended up creating a bunch of phantom account categories, just to have somewhere to put many of those second entries. Then it's made even worse because those made up categories get set in stone by tax law and reporting requirements, as if that accidental complexity is the only way to account for things.
Personally I downplay the concept of depreciation as much as I'm able. I don't analyze purchases in terms of cost depletion over some imagined life, expecting virtual savings/profit in the first year. Rather I think in terms of number of years/uses that will be required to break even on the initial purchase, after which it's all a bonus (and/or the new normal).
Having standard accounting customs probably makes more sense as you get further into the business world, with less unilateral decision making plus the general need for standardization. But it's not like overabstracted/overleveraged businesses have great societal effects either.
Imagine a box that is made up of materials worth $10. However, the box has the very peculiar property that a $100 appears in it on the first Monday of each month. Ask yourself how much you would pay to own this box?
Most rational people will be willing to pay more than $10 (the book value of the box). The difference between what you pay for the box and the value of the materials of the box is recorded as "goodwill".
The goodwill is clearly an asset (it's the value ascribed to the future cash streams from the box). This analogy extends to companies if you think of them as a source of future cash streams and should give you some intuition for why the accounting is done this way
It's a perfectly sensible practice. It is, perhaps, an unfortunate name, since as a term of art it makes sense but the plain English implies an awful lot of value judgments for what is really just a "a recognized and intentional mismatch resulting in a fudge factor".
"Goodwill" is just the premium the acquirer had to pay for the company above the net fair market value of its tangible assets.
It starts out as essentially the amount spent to "buy the goodwill" of the owners and convince them to sell, not an estimate of how much the intangible assets are actually worth. That's the first concrete number usable for GAAP.
Afterwards, companies have to annually test goodwill for "impairment" and write down the value of its goodwill if it's impaired.
What part seems sketchy? Like HWR_ said, it's mainly used to balance the books. The tax basis of goodwill is zero and an impairment generally isn't tax deductible. Its main purpose is to track the health of the company.
For example, if you acquire a restaurant chain with a bunch of retail locations but then announce that you're a racist, losing all the customers, you still own the retail locations but the premium that you paid for the constant restaurant revenue is now worthless. Assuming that restaurant revenue was more than you could make from leasing the retail space to someone else, there needs to be a way to represent that loss of book value.
The "controversy" section [0] of its Wikipedia entry summarizes it better than I could:
> The accounting treatment for goodwill remains controversial, within both the accounting and financial industries, because it is, fundamentally, a workaround employed by accountants to compensate for the fact that businesses, when purchased, are valued based on estimates of future cash flows and prices negotiated by the buyer and seller, and not on the fair value of assets and liabilities to be transferred by the seller. This creates a mismatch between the reported assets and net incomes of companies that have grown without purchasing other companies, and those that have.
I run a startup. You think it could be worth $x based on $y projection. I disagree, optimistically believing I will double your projection.
If you make an offer based on your projection, I'll turn it down. If you make a better offer (hoping to gain some efficiency by combining businesses together, for example) I might instead consider the offer worthwhile since it removes all of my risk, stress, and opens me up to start something different.
At the end of the day, you've paid for my goodwill. Nothing nefarious, I (owner being bought out) just happened to be stubborn.
The fact that we agreed on a price point that's not reflected in your accounting just means that an intangible value has been converted into dollars. Accountants and economists might not care for intangible value, but reality is more complicated than economic and financial models can describe.
Yeah, that's all well and good. But then after I acquire your company, I get to use that goodwill cost to offset other, unrelated losses. It seems counterintuitive, because I could overpay for your company, and then hide my existing losses by covering them with the "goodwill" premium I paid to you. In that situation I'm running a bad business: I was losing money, and I overpaid for an acquisition. But the goodwill makes it look on paper as if I've increased my total assets when really I'm just burning cash.
At heart it's simple enough, as I learned in sixth form accounting: you need something in your ledger to account for the difference between the asset value of your business and the price someone will pay to buy it from you.
Obviously the futher you get away from "my business is a factory that I own, my cash reserves, and a pile of materials that I can turn into product" and more into "my business is the smarts of a bunch of people who can leave with two weeks notice, a bunch of contracts that can be severed with 90 days notice, and an API that people love so much they don't want to go elsewhere" it gets very difficult to justify.
If you buy Coca-Cola Corporation you get tangible assets like the manufacturing plants and work in progress which can be valued fairly simply. But you also buy the Coca-Cola brand, which is intangible and difficult to value.
And yet it obviously has value - nobody thinks the value of Coca-Cola is entirely in its bottling plants.
So we just kinda say, "I guess it's worth what you just paid for it" and put it in the accounts as the difference between the purchase price and the value of the assets that can be valued.
So it's waste. Like if you want to sell sandwiches and you find out later you have to cut the crusts off for them to sell better. The crusts are now "goodwill".
Let's say you own a car yard. You have a chunk of land, a building, and some stock. Those might go on the books as simple assets of ten million bucks.
You decide to sell the business. You want to retire, you entertain offers. The winning offer is fifteen million dollars. The purchaser now has something they paid $15m for. The actual assets are only $10m. How you you account for that in double-ledger accounting? You put $5m down to goodwill.
That's the grossly simplified version. It's the difference between tangible, obvious assets (cash, property, stock, etc), and the intangibles that a buyer might pay a premium for.
At heart it's a reasonable enough convention. You can do all sorts of too-clever-for-our-own-good stuff with it but you know what, that's true of basically every accounting construct.
> The purchaser now has something they paid $15m for. The actual assets are only $10m. How you you account for that in double-ledger accounting? You put $5m down to goodwill.
This is the part I don't understand that makes it all seem shady. Surely, that $5M is a loss for the purchaser, and profit for the seller, no?
So, again, paying more for something than it's worth - isn't the extra literally wasted money? You can justify the cost however you want, tell yourself any story of why you paid over its value. But the extra money you paid is capital that could have been used for something else of similar value, and did not necessarily need to be paid. That's effectively "giving away" money. I suppose "giving away money" can be a form of "good will", when the purpose is specifically charity. But when the purpose isn't charity... it's throwing money away.
To be clear, we're talking about money spent over the value of the product/service. Value is obviously kind of an amorphous thing, in that depending on various market forces the value of a single thing can swing wildly. But assuming there is a known market value, and a purchaser chooses to pay over that market value, that should - in financial terms - be considered a waste, shouldn't it? If the government knew a contractor would take $50M for a contract, and paid them $100M anyway, just for the hell of it, that would be a waste, not goodwill.
I think to call it "goodwill" should imply charity, and thus be required to conform to the same rules and regulations of any charitable donation. Otherwise we should call it waste. This should make it clearer exactly what's being purchased and why. Shareholders might perk up their ears if they hear the company they invest in just wasted $50M.
You fundamentally misunderstand what goodwill represents.
e.g. we can agree that most software companies are worth more than the total value of the chairs, desks and laptops they own? Most of that value is intangible (know-how, employees, products themselves) after an acquisition this becomes goodwill. Obviously these things are notoriously hard to value but that does not mean that they are totally worthless as you keep implying for some reason…
Evaluating most businesses which spend a lot on R&D is hard, estimating future growth is hard to. Look at public companies, majority of the market cap of all(?) tech companies is made up of goodwill rather than backed by tangible assets
e.g. look at Apple it’s worth 46x it’s book value if someone somehow hypothetically acquired Apple at it’s current market price (it’s and oversimplification but more or less accurate) ~97% of what they paid for would be accounted as goodwill
Ok, I just have to resign myself to the fact that none of the explanations here make any sense to me whatsoever. It all sounds extremely shady. I guess this is why I didn't go into finance as a career.
I have a one man SaaS that nets me $100k/yr in revenue. It's button-click simple to setup and requires zero maintenance aside from collecting the money each month.
The net assets are basically $15,000 worth of IT gear like a laptop and some servers. There is current month to month contracted revenue spread across a diverse base of users paying $5-100/mo each.
How much would you offer me for this company? How much would you take for this company if you currently owned it?
Something is worth what someone else is willing to pay for it. Obviously whatever the company sells for is worth exactly that amount at that moment in time. Valuing such a business at $15k would be absurd, just as valuing it at $15m would be.
Thus, the difference in asset value vs. what you paid is just called "goodwill" - perhaps the name hangs people up a lot.
If you then turn around and sell the same company later for a loss, you take a write down on that goodwill.
Certainly not perfect, but there aren't too many other ways you can express the present value of a company other than what it sells for.
> have a one man SaaS that nets me $100k/yr in revenue.
That 100k/yr, though, is tangible and pricing it is straightforward. That's a very different situation that doesn't require making numbers up.
> Thus, the difference in asset value vs. what you paid is just called "goodwill" - perhaps the name hangs people up a lot.
The name absolutely doesn't help, but I don't think that's what I'm hung up on. I'm hung up on the idea of making up a monetary figure out of whole cloth and pretending it's real in some way.
This disconnect confuses me greatly, and the only way I can make it make sense in my head is in the sense of "creative accounting". Which just explains why I didn't choose a career in finance, and highlights why I view the financial world generally with tremendous skepticism.
The monetary number is not made up out of whole cloth. It's the difference between the book value of the tangible assets of a company as an accountant understands them, and the amount paid for the company. An income stream arising from the operations of a business doesn't count as a tangible asset.
You can absolutely assign a value to that stream. That's how you arrived at the purchase price in the first place! But that income hasn't been realized yet and it's not written in stone. The income could be higher or lower depending on what happens in the future.
I suspect the name "goodwill" doesn't really help, either. It's just that accounting wants both sides of the ledger to balance, and this is the bucket that was chosen a long time ago to balance the difference between traditional assets and intangibles.
I will say that while I don't think goodwill is sus in and of itself, your intuition that people doing things with the goodwill value can be sus. If I buy a company with $10m in assets and $5m in goodwill, and a year later announce I'm writing down the goodwill to $1m, something is definitely up! I may have mis-managed the company into the ground. It may be that the premium I paid was based on fraudulent assessment of the intangibles (e.g. a bunch of future sales that never existed), things like that.
> I suspect the name "goodwill" doesn't really help, either
I said in an earlier comment that I didn't think I was getting hung up on the name, but I had a thought that hints that maybe I am.
If it were called "slop" instead of "goodwill", I think I would be less bothered by it. don't get me wrong, it would still bother me -- and I wouldn't understand it any better -- but it would feel less like a term someone would use when trying to pull a fast one.
> It's just that accounting wants both sides of the ledger to balance
Yeah, you and a couple of other people keep saying that, but I don't really understand what that means. I mean, I know what having both sides of the ledger balance means, but this sort of example seems bizarre and extremely suspect to me. It just looks for all the world like people making stuff up.
That's OK. I can't understand everything, and this isn't something that's actually important for me to understand.
Here's what's balancing: I've traded assets worth X dollars for a company with Y dollars of tangible assets plus G, the fudge factor that makes both sides equal. I've traded X dollars of assets for X dollars of assets, where Y dollars is like real estate and cash in the bank and financial instruments and tools and stuff, and G = X - Y is some intangible/uncertain/something that caused me to pay $X for $Y of stuff.
Before the purchase, I had some pile of assets worth $A. After the purchase, I still have some pile of assets worth $A. The purchase balances.
> Surely, that $5M is a loss for the purchaser, and profit for the seller, no?
You don’t know that. In theory a company pay a premium because of future growth expectations. I don’t think land is a good example though because it’s relatively easier to value.
If you look at publicly traded companies most have a market cap higher or way higher than their book value (tangible/“real” assets). If another company ends up acquiring a public company that difference will simply be accounted as “goodwill” on their balance sheet
So imagine you buy some stock from of a public company for $100. It’s book value is $5. Do you get to immediately record a loss? What sense would it make? This is the same.
> current asset is what seems shady to me
Why? How? Do you believe all the things you don’t understand are somehow shady? Goodwill depreciates over time so you just incur the same loss just spread out over multiple years.
> at the time of the sale, a loss was incurred.
An asset is worth what a purchaser is willing to pay for it. There is no loss incurred until you sell it.
It’s simply the intangible assets like know-how, employees, hard to value assets like software and similar products etc and importantly future growth expectations.
You wouldn’t value a software company based on how much the chairs and desk it’s employees sit at cost? It basically the premium a purchaser is willing to pay above the real/book value of a company.
Half of this is correct: goodwill is a balancing item to account for the difference between accounting value and acquisition price.
The other half is incorrect, though: accounting value isn't based on 'projections'. Projections might affect the fair market value of the target (without accounting for post-acquisition synergies). But the accounting value is based solely on historical financial results.
CMP's latest FY22 annual[1; starting p. 130] and 23Q1 quarterly[2] financial statements for the habitual numbers sleuthers.
In case anyone else was wondering what the provenance of this $325MM goodwill line item on CMP's balance sheet is, defer to the parent's (Avangrid) latest 10-K filing[3], buried under footnote 7 on p. 123:
> Goodwill for the Maine reporting unit is $325 million from the purchase of CMP by Energy East Corporation in 2000.
If that much meat is left on the bone for a commodity like electricity that indicates to me the market isn't robust enough and we need to lower barriers to entry and increase competition.
Texas and Massachusetts have markets where you can choose your own retail electricity provider. The REP is responsible for purchasing/providing the power.
Both systems sit on top of regulated monopolies who own the underlying wires, though.
This Maine utility fight is primarily over who owns the wires, not who owns the generation.
I question how a public utility can be viable where a private one can't. In theory similar market forces should apply to both, and commodity prices should be close to the cost of production so the prices offered under competition should be close. Why can't we let private companies do whatever we were going to let the public one do?
Frankly rather than the hack of setting up a public utility I'd perfer straight up price controls, no reason to build out alternative infrastructure at taxpayer expense, but there might be a quicker fix with some modifications to a few regulations.
Still this is better than nothing, just feels overly complicated.
> I question how a public utility can be viable where a private one can't. In theory similar market forces should apply to both, and commodity prices should be close to the cost of production so the prices offered under competition should be close.
Natural monopoly means there is no (or at least insufficient) competition. So either you get accountability by having it be publicly-run, or you end up with very little accountability at all.
> Why can't we let private companies do whatever we were going to let the public one do?
Private companies are very good at coming up with things you never thought of in order to make a profit - that's the whole reason private industry can be more efficient than public ones in the first place. But when most of the creative things they could come up with would be profiting at the expense of the public (because in a monopoly position there's essentially no incentive to treat consumers well), the profit motive does more harm than good and it's better to take it out of the picture.
> Frankly rather than the hack of setting up a public utility I'd perfer straight up price controls, no reason to build out alternative infrastructure at taxpayer expense, but there might be a quicker fix with some modifications to a few regulations.
That's how you get loopholes that then get exploited worse than the problem you were originally trying to fix.
EU is a good case study. Countries which abandoned price controls but instead have a single (usually state owned) company which controls the grid and a bunch of companies which sell power to consumers (effectively renting the grid) tend to have lower prices than those that didn’t.
e.g. I can get a plan which is:
Wholesale hourly market price + €0.08 fee to the grid company + €0.02 to the power company.
Having an EV would be the main reason, I assume. Wholesale prices are often close to zero or even negative on some nights or on very sunny days during weekends.
It might also be worth if you have some heating/cooling system and stuff like that.
If your usage patterns are closer to the average you probably won’t save more than 2-3 cents per kWh but taken on significant risk so it’s probably not worth it.
If you're willing to have government intervention and regulation to enforce a free market then why not just remove the "landlords" here and go with public ownership to take them out of the cut entirely?
Remember the established assumption here is regulation and intervention is required to enforce the thing. Any argument based on the allergy to public sovereignty over public goods is not applicable. Public governance is intimately involved in either solution
Its probably regulation that is making the market not free enough. For power they are often granted explicit monopolies. The straightforward solution to "the guys we gave a monopoly to are charging too much" is not letting them have a monopoly anymore.
The first is that barrier to entry for power companies is that they're enormously expensive to set up - they're huge up-front capital costs with extremely low per-unit costs. This is, as several others have pointed out, the textbook scenario for natural monopolies, in which left to its own course, one company will capture the entire market.
The second is that typically the reason a power company is then granted an explicit monopoly is because there's a social need to deliver power to places that are more expensive to provide to than the civic center, and usually the monopoly is provided with stipulations that the company must deliver power to these areas. This is for two reasons - the first is otherwise nobody, no matter how much competition is in the market, is going to deliver power to those areas, because it's fundamentally uneconomical, and the second is that the company that does try to provide power to those areas will be undercut by the company that isn't. A chartered monopoly in this case is to work around the fact that the market _does not work_ for provisioning these goods - left to its own devices, the market would not provide power to many distant rural areas.
The basic conflict here is between a social good with diffuse benefits - electrification in rural areas is generally considered a net positive for productivity, health, society, etc., and pride of place, but it's deeply uneconomical on a unit basis, and so the market solution does not deliver here.
Sometimes the math says the market's the best choice, sometimes it does not. For large-scale provision of high capital cost goods across a geographically distributed area of variable population density, the math says the market doesn't work out.
I get it. But if that's true we should be able to make it easier for firms to build competitors and worst case, nothing happens right? The fact is power companies enjoy things like access to public land or rights to use poles, often granted to only them explicitly. If they are truly a natural monopoly they won't need the effective legal monopoly protection.
Because the equilibrium point for the natural monopoly is worse than that for the chartered monopoly, both for the company and the region it serves.
For the company, the natural monopoly state still has them having to negotiate rights of way, etc, in a way that raises overall cost and complexity of provisioning the service.
For the region, the natural monopoly state leaves outlying and areas less economical to serve less well served and leads to higher rates, because, monopoly.
So, a chartered monopoly allows the company to operate at lower cost and less uncertainty and allows the region to enforce both quality and quantity of service as well as have some control over rates.
How would a competitor even get established if economies of scale provide such a large advantage? The only way that would work is it the current power company has very wide margins.
I encourage you to go back and re-read my previous posts, paying attention in particular to what is asked of the company granted the monopoly in exchange for the charter.
To refresh, the companies are obligated to take on less and potentially uneconomical customers, and to provide them services at rates below what the market would ordinarily demand. This is done as a social good.
This puts the chartered monopoly at a potential disadvantage to competitors without a similar obligation, who are not required to bear the cost of provisioning service to those customers or can pick their markets more carefully.
Once again, the natural monopoly state is less service to fewer customers at a higher price.
So update that regulation to a version that assumes competition. Force power companies to deliver power to a percentage of the unprofitable customers roughly proportionate to their total market share of the profitable customers. Could also force the encumbant to rent unprofitable customers at their cost to upstarts to make it easier for them, sort of like carbon credits.
Alternatively, we could recognize the incredible amount of effort we’re putting into trying to make the profit motive be sufficiently aligned with our wants and the paltry results of even those Herculean efforts and recognize that this might be one of those places where a market solution is a poor fit.
All markets have rules. Rules are another word for regulation.
You're just proposing a set of rules that's more favorable for a particular outcome.
There's strong evidence when it was tried, just in the last 25 years in real estate, electricity, water, cryptocurrency, precious metals, supplements, and startups that those sets of rules lead to fraud and abuse.
That's why the "regulations" exist - they're laws to prevent crimes that went in because lots of that crime happened.
I personally made good money in those bubbles but most people got wrecked. Encouraging more of them doesn't lead to a healthy stable society.
There's wild examples before baseline regulations in the late 1800s of people selling the same lot of property dozens of times (when you can only sell it once) and people finding out the seller never even owned the property to begin with.
These frauds were super common before government regulation and people are still doing it in international markets. For instance, the airport that never existed https://en.m.wikipedia.org/wiki/Emmanuel_Nwude
Many regulations are written by the encumbant in a market. Often they are designed to be difficult for upstarts to compete with them. Major corporations are often publicly in favor of regulation, they lobby for it.[0]
I don't propose you allow people to burn tires in their backyards to generate electricity for the community.
What I propose that when you see a commodity and the producers of that commodity have relatively high margins that is a signal that something is preventing someone else from coming in and offering the same commodity at a slightly lower price. At a minimum we need to lower those often specifically designed by the encumbant barriers to entry.
This should happen in every market, what people are calling greedflation can only exist due to a mixture of these sort of barriers, money printing and non-existant anti trust enforcement.
The thing preventing others from coming in is the power asymmetry that's an inherent property of capitalism associated with the wealth of the company and their command of the market.
Loosening "regulations" in a way that allows them to consolidate more power doesn't actually get to the goals.
They're propaganda moves to allow the dominant companies to gobble up the market or offload their costs.
These were done, for example, in media and music to ostensibly "increase freedom" but in practice it just consolidated things into fewer hands than ever before.
You don't win the market through naive stupid competition like some price cutting moron. They don't actually work that way.
The problem are in the incentives and fundamental structure, not in the existence of laws or governance.
Libertarian economics is what got us here through 45 years of Chicago and Virginia school policies, not some solution we haven't tried that'll get us out. It is the problem.
That's not the take. Instead it's to stop the illusion that a free market is one without government intervention. Instead, free-market systems are planned, all-encompassing, complex, intimate, specific, and targeted government regulations.
They don't want "less" regulations but instead, a redirection of them.
Additionally it's to stop insisting that movements towards free market ideology hasn't been attempted or that it will be a ticket out of the mess. It's been the leading paradigm since the Volcker shock in 1979.
It was so dominant that libertarian free market economics was often confused as the totality of economics - it was not only the 2 ton gorilla in the room, but it was the room itself.
The libertarian free market economic world of Milton Friedman, James M Buchanan and Hayek was the only mainstream paradigm and the only framing there was for decades.
The problems we have are a consequence of those policies - not a consequence of not heeding to them in a pure enough form - claiming an incorrect solution failed only because it wasn't tried with more enthusiasm is an argument of fools.
My advocacy is to be unmoored from ideology and focus on the problems and then advocate for solutions without being subservient to any paradigm of how things ought to happen. This is also known as heterodox economics.
See https://en.m.wikipedia.org/wiki/Heterodox_economics
Weird, because in most markets it's the exact opposite. Also, you can see how the free market handles utilities in Texas. That's worked swimmingly well the last couple of years.
But in reality, public utilities should be owned by the gov't. Otherwise... Enron. Or the aforementioned Texas "free market" debacle.
There is no reason why you can have a single public (state owned) company which owns and maintains the wire and a bunch of companies which generate/buy and sell power to consumers effectively renting these wires.
It makes somewhat more sense for generators than distributors but it's still a difficult situation because almost every form of generation has strict requirements (often government mandated) on where they can be built.
Then with the distributors who actually sell to the public: the service they are providing here is really dubious. Ultimately they are just buying power at wholesale prices and reselling it to the public at some average price + markup. What can they actually do to increase customer service? They are essentially just a middleman. At least where I live it effectively makes no difference which one you go with, some might temporarily have better rates but they inevitably need to get back in line with everyone else or go bankrupt.
> some might temporarily have better rates but they inevitably need to get back in line with everyone else or go bankrupt.
That how “perfect” competition works. All of them are forced to maximize efficiency and minimize prices because they have no way to differentiate themselves. I would not necessarily trust all public monopolies to do the same.
It is very hard to lower the barrier enough to make it profitable to become an energy provider, either for generation or distribution. You have to already have a favorable market position, like easy access to capital, a huge workforce, expertise, relationships in politics and business, land, infrastructure, etc. That's why they're mostly monopolies, and the only competition is in weird middle-men that use financial trickery to resell energy.
It is honestly really dumb to allow utilities to be private. You waste money paying huge bonuses to CEOs who fail to lower costs or improve service, and then pay out much more from civic coffers when said shit service sets half the country on fire. Regulating and running national infrastructure for the common good is basically what government was created to do, after waging war, regulating commerce, and settling disputes between goat farmers.
You can just split infrastructure into a separate company which does not sell power itself. That what the EU forced almost everyone to do. Basically you end up with a publicly owned monopoly which owns the power lines and a bunch of companies which basically make their money from hedging.
The outcome is that countries which adopted the model tend to have lower energy prices than those that didn’t and have it’s a government regulated monopoly (more or less) like Poland. In theory having a lot of participants competing on equal terms should result in higher efficiency longterm.
What you're describing is called "deregulation" in the US. This is what the post you're replying to means when it says "weird middle-men that use financial trickery to resell energy". An unflattering but not unfair way to describe the companies who sell complicated plans direct to residential customers.
If you have multiple of these companies competing on even playing field you should be able to get very close to what considered to be “perfect competition” at least in theory (with some regulation).
too much money, too many customers.. what you can do in your backyard physics demo is not the same as what you can do at scale in real time with millions of customers. Proof? California "de-regulation" + ENRON => stable system changes to first-time-ever failing system
> You can just split infrastructure into a separate company which does not sell power itself.
The largest energy conglomerate in the US is basically that. The distribution and generation companies are 50 feet from each other because they used to be the same company. (They might work out of the same building too, I forget) But of course the state doesn't own the infrastructure (hey, this is the USA!).
The history of our energy market is like that of 10 countries combined. Texas by itself is a weird case study, as deregulating its market (Texas has its own power grid, because... Texas...) shot prices seven times higher, though they eventually stabilized again. Deregulation by itself isn't going to fix things, but more public ownership probably would, as the incentives would be towards stability, safety and stable prices, combined with increased funding toward sustainable energy.
PEC is amazing. We are on San Marcos's service now, but during the nasty winter storm we never lost power with PEC. Where as other friends else where dealt with downed lines for ages.
I used to be under Bluebonnet Electric Co-op (https://bluebonnet.coop/) when I lived outside of my city limits, and now that I'm in the city I have the public utilities (water, electric, gas, trash; https://www.cityofbrenham.org/city_government/departments/pu...). I've never had substantial issues with either, and they're both dirt cheap. Though I have heard anecdotes about billing issues with Bluebonnet...
It still is. City of SC (silicon valley power) charges $0.13/kWh vs north of $0.4x/kWh from PGE. It's simply impractical to charge EV at home regardless of which plan you pick at PGE, due to aggressive tier limits and the intentionally crippled "EV plan". PGE is legalized robbery.
Not give a few executives hundreds of millions of dollars in bonuses for destroying the environment and failing to provide adequate power? That's socialist talk! If a few rich people aren't bilking the public and providing poor services, it's not American.
Background - one of my uncles was the manager of a small (~2,000 customers) municipal (city-owned) electrical power system in Michigan from ~1945 to ~1995.
It can work, and work very well. But electricity is extremely unforgiving of technical incompetence, and financial incompetence can also kill you (generally in the slightly-longer term). If you can't find and keep good managers on both sides (while the big, for-profit players are trying to hire them away, for obvious reason)...then all the feel-goods and eco-friendly bragging rights in the world won't keep your system afloat.
And your system does not need any interference from an actual for-profit utility to suffer organizational failure. Well-intended idiots and short-sighted politicians can do that themselves, in very short order.
Québec has the cheapest electricity in North America, Hydro-Québec pays the provincial government a dividend of several billions a year (3.4 last year), the expertise they developed in hydroelectricity is unrivalled anywhere on the planet.
Any business will fail in the face of technical or financial incompetence. Your argument is quite tautological in that regard.
I'm still perplexed how anyone thinks it is OK for a public utility to pay "dividends". If a public utility is paying dividends, it must be collecting more income that it's expenses. That obviously comes from ratepayers. In any other world that'd be a tax.
But when it is a public utility doing it is "dividends".
In the case of New York it's a foreign country, so I could care less. But if the government sets up from what I understand is a monopoly and then uses that monopoly to sell to another country, of course it should be used to subsidize that same service that the citizens utilize. Otherwise the government is just capturing part of the economy and using it for whatever purposes they desire. Which is in fact, the definition of a tax.
I think it’s okay and even desirable for a public utility to charge more than today’s costs and build up a surplus to cover the inevitable investments and expenses that will hit in the future.
When that accumulated surplus gets too large, paying a dividend feels like obviously the right thing to do as well.
Why wouldn't the right thing to do be giving it back to the ratepayers through reduced rates or credits?
If the utility underestimated the cost of providing service, they'll petition the PUC to raise rates, so if they overestimated the cost of providing service, why shouldn't they give it back rather than treating it as a windfall to be distributed to investors?
I'm fine with a public utility getting a reasonable regulated profit, but if they collect more money than they needed to cover expenses, it should go back to the ratepayers. Otherwise the company is just being rewarded for overestimating expenses.
> reasonable regulated profit, but if they collect more money than they needed to cover expenses
I’m not seeing a categorical difference between these two things, assuming the utility tariffs are subject to approval. The money they receive that is more than their expenses is their profit.
Over time, you tweak the rate increases to get the same outcome as “reasonable profit”
What's why I said "regulated profit" -- if they get to keep all money received above expenses, then they'll do what PG&E did and ask the PUC to set rates to include money for pipeline improvements or tree trimming, but then not actually spend the money and instead return it to investors.
when Enron took advantage of California market deregulation, and the consumer power market actually failed.. a scramble ensued in Sacramento and elsewhere.. many rocks were turned over in short order. It was discovered that, despite countless regulations, full-time oversight and public review, the upper management at PG&E had found a way to transfer real assets to the books of a second groups of companies, and expanded that to purchase power generation facilities across the US. It was expressly forbidden at every step, and it was discovered because the de-regulation failures had made an actual panic situation. The "left" press in San Francisco had run accusatory media stories for thirty years, but yet management was able to do this.
source- attorney involved in private hearings in Sacramento on the PG&E company structure
> I'm still perplexed how anyone thinks it is OK for a public utility to pay "dividends". If a public utility is paying dividends, it must be collecting more income that it's expenses. That obviously comes from ratepayers. In any other world that'd be a tax.
If it's ok for a utility to be publicly subsidised (and I think it is) then by the same token it's ok for it to contribute to the public purse. Setting rates as a matter of public policy means rate revenue might end up being more or less than the cost of supply. So what?
Except it's a tax that's functionally invisible because an equivalent public company would've distributed that same profit to shareholders. So the end result is that the local government charges less taxes because some of their funding comes from utility profits.
This is a misnomer. The only reason is because Quebec gets dirt cheap power from an agreement signed with Churchill Falls, Nfld. Quebec buys energy for $0.02 cents per kilowatt hour.
There are plenty of public employees in the US who know how to run distribution systems. The second biggest city in the country has municipal electricity by way of LADWP.
The problem with for-profit utilities is not even the pursuit of normal profits, but when those utilities are listed companies and then Wall Street almost requires all kinds of magical stuff from said companies because it seems now that every public company should aspire to be a disruptive buy-back addicted unicorn.
Ironic, given that interest rates have (until recently) been so low. Utilities have always been very capital-intensive but stable. They should be low-yield but low risk.
I'd argue it's not as hard as you seem to insinuate.
If a person wants to be able to live in their own accommodation there are some very key things they require. One of the most basic is a bank account (how do you pay rent without that?). Work backwards from just that one basic concept and you'll quickly see how easy it is to figure out what "basic necessities" are.
Granted, these will vary between economic regions, but it's quite simple to do so.
I'm not sure if there's a legal definition, but what I found[0] says that
> Essential services are the services and functions that are absolutely necessary, even during a pandemic. They maintain the health and welfare of the municipality. Without these services, sickness, poverty, violence, and chaos would likely result.
The listed examples of essential services include things not absolutely, positively necessary to protect life and limb:
* Maintenance of communication infrastructure (e.g., telephone system, radio, internet)
* Maintenance of utilities (e.g., gas and electricity)
I'm sure you're being rhetorical, but to some extent the answer is yes.
At least where I live, light and heat are basic rights and those are often most easily and cheaply provided by electrical means. X-ray machines, considered as part of adequate medical care, are similarly guaranteed.
I don't know that the internet is considered a "basic" necessity anywhere, but again we're entitled to education and to engage with the society in which we live, and the internet is a common and effective means for doing those. That said, I'm not aware of state-provided internet outside of libraries and schools.
The UN has strongly implied that internet access should be considered a basic human right, but haven't quite crossed the line to actually stating it plainly.
Given that in plenty of locations in the developed world you can now no longer function as a normal member of society without internet access because everything has gone online it makes good sense that it should be. Paper is pretty much done for, invoices are all pdfs, banking and interaction with the government on all levels is all online.
If we go by your definition, there's nothing left. Every single one of those things requires parts and if you're going to require all of that to be nonprofit, there's no commercial activity left.
I don't necessarily agree. If I have a "right" to transport that doesn't mean the government has to give me a car, maybe they provide a train and if I want a car I have to buy it commercially.
Even of the things listed above, their being a basic right doesn't preclude someone buying them. I pay for electricity like almost everyone else.here, but it won't be taken away from me even if I do not pay (though it's not worth the hassle unless I have really cannot afford to pay).
You seem to think that those proposing this don't recognize we're pushing for a massive shift in how things work, that will disrupt many areas significantly.
We recognize that just fine. There are ways to mitigate the harm from that disruption.
It's absolutely clear to us that even if we don't mitigate that harm, the system afterward will be much more just and much more kind and humane than the system we have now.
It’s hard for many to consider alternatives under the long shadow of the Cold War where the US food and grocery system was the envy of the world and was basically fantasy land compared to the Soviet counterparts. So why not mitigate current harms instead of overthrow a system with a speculative alternative with speculative mitigations?
Otoh: maybe just saying “everything remains the same except the large orgs are non-profit” could be an interesting mitigation to current system.
Nobody has ever explained how this "mitigation" is supposed to happen. Instead there are just flippant "Yes? Why not?" comments like yours and your siblings, as if "why not" hasn't been demonstrated and explained countless times before.
Feel free to show any example of a non-market-based society that had plentiful food. You cannot. Non-market-based societies always fail to provide what people want. The only societies in history where the problem has been too many calories instead of not enough calories are modern commercial societies.
Of course you can't. Post-scarcity is a new thing; you can't go to societies of the past and see its effects.
But you act as though adding any features to our society and economy that move toward taking better care of all our people would somehow ruin the whole thing.
Now, to answer your initial question:
Provide governmental support for small businesses during the transition—local grocery stores, small family farms; not the ones already making hundreds of millions+ in profit every year. A lot of this support wouldn't even need to be monetary—remember, this isn't even talking about making food free or anything; it's just talking about moving to a non-profit model. The most obvious type of assistance is legal (to understand what being a non-profit means and how to legally go about making those changes) and accounting (to understand what this will mean for their books).
I don't believe that massive chain supermarkets and agribusiness conglomerates should get much in the way of financial support for this kind of change—they've already been making huge amounts of money for their execs and shareholders. And, again, only one of those groups actually has to stop making money off this. While I would 100% support separate measures to reduce the exec pay disparity, that's out of scope for this particular discussion. Going non-profit just means you don't have shareholders who get to make money off the business—and, vitally, you don't have shareholders pushing the business to make more profit at the expense of pricing people out of staples or reducing the quality of the food.
Why don't you provide that service profit free then. People on this stuff are always all talk. Id be interested in people demonstrating a world with no profit on a smaller scale first. Why not run a company where every one gets paid the same and demonstrate your competence.
Why would anyone want to "exercise curiosity" about abject nonsense? There's nothing to be curious about here. You might as well make the same comment on any topic where something has been dismissed. The concept of "every human need" (whatever a "need" is, given that anatomically modern humans lived without electricity for hundreds of thousands of years just fine) necessarily being provided without any profit motive is just plain stupid. It's being dismissed for that reason.
What is "stupid", or even controversial, about the idea that society should be organized to provide for people's needs? To suggest that society should be a zero sum economic gladiatorial affair, that that's the best our species can do or should strive for, seems like a failure of imagination to me.
We need farms and some sort of food distribution system for everyone to survive, so that doesn't sound like a bad idea.
You could always decide that grocery stores are allowed to be for-profit, or perhaps only things like co-ops or benefit corporations.
We eventually came to accept the reality that our society works better if we ensure universal access to things like mail, so we should be willing to evaluate whether the list of universal goods needs to be expanded
This sort of thing can have a really bad failure mode. If the government is running the utility who do you go to if service is bad?
Where we live, we used to have the trash collection done by the government. That did not work. Trash was strewn all over. Trash was not picked up on time or at all sometimes. We had a change in party controlling things, and they contracted it out. The contractor does the work and the government proides oversight. It's been several years and this arrangement has been far superior during that time.
Already mentioned in the article, the government, depending on who is in power, can have motives that are contrary to running a utility. To run a utility, you need to be focused on good service at least cost. Improving the physical plant costs sums that are amortized over decades. If the party in power decides to offload the cost of some agenda into the utility, it will have the same effect as raising taxes. California has the highest electricity prices in the country due to them doing this sort of thing. It would be likely much worse if that state also ran the utility themselves.
I live in British Columbia and BC Hydro (a government-owned utility, thanks to our right-wing Social Credit party, which bought out a private supplier in 1961) is the best. Service is amazing and rates are great. Apparently, government ownership doesn't have to be disastrous.
P.S.: I know that a party called Social Credit doesn't sound right wing and does sound like a Chinese Communist Party plot. In reality, it was a conservative party run by a small-town hardware store owner. Don't ask.
CMP is owned by avangrid, whom I believe is a company based in Spain. As someone who lives in Maine, I can promise you that their services are lacking and they just raised prices 45% on supply side in January(ish) and are talking about a similar price increase in their delivery side coming up soon.
They are also doing everything they can to combat people installing solar. Alsoz the past few years people have seen 400% increases on their bills, and CMP suggested to the individuals that saw this spike to perhaps limit their consumption, and stuck people with the bills. 2 years later oops, turned out our new billing system wasn't working correctly, hence the insane bills some people were getting.
My friend had a $25 a month typical bill balloon to nearing $400, with nothing broken (ie hot water heater) and no change in usage. Many many people.
The license plate on one of my cars reads Agorist, and I'm honestly STILL learning towards the idea of the state run utility, because AT THE MINIMUM, the state has to deal with the situation they cause if they fuck it up royally.
Spain doesn't have to give a shit.
It's a really terrible company to have as your power company. (The linemen / crews are all super nice typically, it's the corporate side of it that's a nightmare).
> If the government is running the utility who do you go to if service is bad?
I also live in Maine and this part.... is not true! The Maine Govt would not run the company. No government would. It would be consumer owned.
Meanwhile, the power companies themselves actually are in large part government owned: Qatar is the largest shareholder of Avangrid and Versant Power is directly government owned, by the city of Calgary.
Yeah I live in Maine and we are constantly carpet bombed by ads targeted at baby boomers which complain about “government controlled power.” Which is totally false, they’re going to run it more like a credit union. It’s consumer owned.
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[ 4.3 ms ] story [ 238 ms ] threadI get my electricity from a rural coop (NOVEC) and they are honestly the best service, lowest price, efficient, innovative and treat the community so well.
It can be done!
Do they own the grid and wires and whatnot, or just the power? Are there other choices in your area?
They do a good job explaining here:
https://www.novec.com/About_NOVEC/index.cfm
I know this seems contrary, but I believe people need to understand that a coop isn't a magic bullet. It's a tool, one of many, that if used properly can be great. But if it's not, it's a real pain in the ass.
Is it about reliability? Cost? Both? Why not-for-profit?
What controls will be in place to ensure that this one new company will be more responsive to the public than the prior two, smaller companies?
Now, does that mean that the primary incentive will be the well-being of the consumer? Time will tell, and only if this initiative even makes it through.
I even think for-profit schools are a shitty idea, but this may be less obvious why
Aren't there millions upon millions of people covered by non-profit Blue Cross/Blue Shield plans? BC/BS of Michigan is the largest insurer in the state with over five million covered.
And it can introduce others who are interested in profiting - paying the C-level execs of the non-profit, etc.
Or introduce inefficiencies where the non-profit realizes that a "profit" is looming so they waste a bunch of money on stupid stuff to continue to not go over reasonable guidelines on rainy-day funds.
American insurance company profits are higher than I'd like, but ultimately the magic of America's healthcare is its inefficiency. When you end up owing $3000 for a very minor ER visit, the money didn't just go to the insurance company's profits: A lot of people made more money out of it than in an equivalent visit in, say, a hospital in Spain. And it's not as if the inefficiencies are just due to a single part of the healthcare system being worse all by itself.
The difficult part is that one person's inefficiency is someone else's lunch, or yearly safari to Kenya, so every move to cut costs is politically untenable. Non profits don't fix this, any more than non-profit colleges make US higher education cheap.
I think calling it "inefficiency" whitewashes the real problem. That "inefficiency" leads to a much higher rate of unnecessary deaths and adverse health outcomes in the US than nearly every other advanced nation.
And often, even if you can get good health care, the financial consequences are devastating. Even if you have insurance.
Look at how much the CEOs of non-profits make and ask yourself if you really believe that.
https://ourpowermaine.org/faq/
I find it humorous that under their estimated $3.8B in utility plant assets they also list $324M "goodwill" assets. GAAP says that goodwill is an intangible asset, but it seems they're spending it rather aggressively...
Goodwill is basically a carrying error.
In supply-demand situations like houses, the seller can list a price they are okay with receiving. If it has more interested parties, they can make an offer higher than the asking price. When selling a company, there's similar practices of looking at the current annual income, project growth over a few years, and offer a price based on that. Explaining in terms that are logical, non-accountants can keep up. Making comments of "we value at $500, but paid 2x that for goodwill" just makes no sense
I would disagree. It’s not very logical to value software companies (for instance) at their book because a lot of their worth is in know-how, workforce and the products themselves. Unless you believe that’s worthless “goodwill” makes perfect sense. The issue is that these intangible assets are notoriously hard to value.
Of course if we’re talking about utility companies for instance it’s quite different.
> current annual income, project growth over a few years, and offer a price based on that
These are not a tangible assets. Future growth expectations are included in “goodwill”.
> Making comments of "we value at $500, but paid 2x that for goodwill"
Nobody does that, or should do it anyway. There is a lot of inefficiency in acquisitions that’s true but no company is going to just say “well we value it X but going to pay 2X”. In most cases there is no real way to calculate future growth without a very wide margins of error anyway..
Anyway there is no point in getting too worked up about this. The main purpose of goodwill is to prevent a massive decrease in company’s assets after they acquire another company. You can deduct depreciation in goodwill from your tax bill anyway. One of the few issues I can think of is this distorts GAAP earnings data for public companies. e.g. look at AMD it looks as if they have not been making any money for the past year or so, which is far from the truth. They just get to depreciate ~$2 billion in goodwill from the Xilinx acquisition depressing their reported net income.
Precisely. That practice is establishing the goodwill value of the company. This is another word for expected future cash flows.
If you've ever had a small company be acquired for more than it's asset value - you were the beneficiary of "goodwill".
Personally I downplay the concept of depreciation as much as I'm able. I don't analyze purchases in terms of cost depletion over some imagined life, expecting virtual savings/profit in the first year. Rather I think in terms of number of years/uses that will be required to break even on the initial purchase, after which it's all a bonus (and/or the new normal).
Having standard accounting customs probably makes more sense as you get further into the business world, with less unilateral decision making plus the general need for standardization. But it's not like overabstracted/overleveraged businesses have great societal effects either.
Most rational people will be willing to pay more than $10 (the book value of the box). The difference between what you pay for the box and the value of the materials of the box is recorded as "goodwill".
The goodwill is clearly an asset (it's the value ascribed to the future cash streams from the box). This analogy extends to companies if you think of them as a source of future cash streams and should give you some intuition for why the accounting is done this way
It starts out as essentially the amount spent to "buy the goodwill" of the owners and convince them to sell, not an estimate of how much the intangible assets are actually worth. That's the first concrete number usable for GAAP.
Afterwards, companies have to annually test goodwill for "impairment" and write down the value of its goodwill if it's impaired.
For example, if you acquire a restaurant chain with a bunch of retail locations but then announce that you're a racist, losing all the customers, you still own the retail locations but the premium that you paid for the constant restaurant revenue is now worthless. Assuming that restaurant revenue was more than you could make from leasing the retail space to someone else, there needs to be a way to represent that loss of book value.
> The accounting treatment for goodwill remains controversial, within both the accounting and financial industries, because it is, fundamentally, a workaround employed by accountants to compensate for the fact that businesses, when purchased, are valued based on estimates of future cash flows and prices negotiated by the buyer and seller, and not on the fair value of assets and liabilities to be transferred by the seller. This creates a mismatch between the reported assets and net incomes of companies that have grown without purchasing other companies, and those that have.
[0] https://en.wikipedia.org/wiki/Goodwill_(accounting)#Controve...
If you make an offer based on your projection, I'll turn it down. If you make a better offer (hoping to gain some efficiency by combining businesses together, for example) I might instead consider the offer worthwhile since it removes all of my risk, stress, and opens me up to start something different.
At the end of the day, you've paid for my goodwill. Nothing nefarious, I (owner being bought out) just happened to be stubborn.
The fact that we agreed on a price point that's not reflected in your accounting just means that an intangible value has been converted into dollars. Accountants and economists might not care for intangible value, but reality is more complicated than economic and financial models can describe.
And then in one year you'll need to take an impairment charge?
(And there's no need for the "Uhh??" tone, this isn't Reddit.)
Obviously the futher you get away from "my business is a factory that I own, my cash reserves, and a pile of materials that I can turn into product" and more into "my business is the smarts of a bunch of people who can leave with two weeks notice, a bunch of contracts that can be severed with 90 days notice, and an API that people love so much they don't want to go elsewhere" it gets very difficult to justify.
If you buy Coca-Cola Corporation you get tangible assets like the manufacturing plants and work in progress which can be valued fairly simply. But you also buy the Coca-Cola brand, which is intangible and difficult to value.
And yet it obviously has value - nobody thinks the value of Coca-Cola is entirely in its bottling plants.
So we just kinda say, "I guess it's worth what you just paid for it" and put it in the accounts as the difference between the purchase price and the value of the assets that can be valued.
My assumption is that I'm not understanding something important about it, but I can't figure out what that is from the explanations in these comments.
You decide to sell the business. You want to retire, you entertain offers. The winning offer is fifteen million dollars. The purchaser now has something they paid $15m for. The actual assets are only $10m. How you you account for that in double-ledger accounting? You put $5m down to goodwill.
That's the grossly simplified version. It's the difference between tangible, obvious assets (cash, property, stock, etc), and the intangibles that a buyer might pay a premium for.
At heart it's a reasonable enough convention. You can do all sorts of too-clever-for-our-own-good stuff with it but you know what, that's true of basically every accounting construct.
> The purchaser now has something they paid $15m for. The actual assets are only $10m. How you you account for that in double-ledger accounting? You put $5m down to goodwill.
This is the part I don't understand that makes it all seem shady. Surely, that $5M is a loss for the purchaser, and profit for the seller, no?
Why the weird "goodwill" accounting?
Because why would you buy a business for more than it is worth?
To be clear, we're talking about money spent over the value of the product/service. Value is obviously kind of an amorphous thing, in that depending on various market forces the value of a single thing can swing wildly. But assuming there is a known market value, and a purchaser chooses to pay over that market value, that should - in financial terms - be considered a waste, shouldn't it? If the government knew a contractor would take $50M for a contract, and paid them $100M anyway, just for the hell of it, that would be a waste, not goodwill.
I think to call it "goodwill" should imply charity, and thus be required to conform to the same rules and regulations of any charitable donation. Otherwise we should call it waste. This should make it clearer exactly what's being purchased and why. Shareholders might perk up their ears if they hear the company they invest in just wasted $50M.
e.g. we can agree that most software companies are worth more than the total value of the chairs, desks and laptops they own? Most of that value is intangible (know-how, employees, products themselves) after an acquisition this becomes goodwill. Obviously these things are notoriously hard to value but that does not mean that they are totally worthless as you keep implying for some reason…
Evaluating most businesses which spend a lot on R&D is hard, estimating future growth is hard to. Look at public companies, majority of the market cap of all(?) tech companies is made up of goodwill rather than backed by tangible assets
e.g. look at Apple it’s worth 46x it’s book value if someone somehow hypothetically acquired Apple at it’s current market price (it’s and oversimplification but more or less accurate) ~97% of what they paid for would be accounted as goodwill
The net assets are basically $15,000 worth of IT gear like a laptop and some servers. There is current month to month contracted revenue spread across a diverse base of users paying $5-100/mo each.
How much would you offer me for this company? How much would you take for this company if you currently owned it?
Something is worth what someone else is willing to pay for it. Obviously whatever the company sells for is worth exactly that amount at that moment in time. Valuing such a business at $15k would be absurd, just as valuing it at $15m would be.
Thus, the difference in asset value vs. what you paid is just called "goodwill" - perhaps the name hangs people up a lot.
If you then turn around and sell the same company later for a loss, you take a write down on that goodwill.
Certainly not perfect, but there aren't too many other ways you can express the present value of a company other than what it sells for.
That 100k/yr, though, is tangible and pricing it is straightforward. That's a very different situation that doesn't require making numbers up.
> Thus, the difference in asset value vs. what you paid is just called "goodwill" - perhaps the name hangs people up a lot.
The name absolutely doesn't help, but I don't think that's what I'm hung up on. I'm hung up on the idea of making up a monetary figure out of whole cloth and pretending it's real in some way.
This disconnect confuses me greatly, and the only way I can make it make sense in my head is in the sense of "creative accounting". Which just explains why I didn't choose a career in finance, and highlights why I view the financial world generally with tremendous skepticism.
You can absolutely assign a value to that stream. That's how you arrived at the purchase price in the first place! But that income hasn't been realized yet and it's not written in stone. The income could be higher or lower depending on what happens in the future.
I will say that while I don't think goodwill is sus in and of itself, your intuition that people doing things with the goodwill value can be sus. If I buy a company with $10m in assets and $5m in goodwill, and a year later announce I'm writing down the goodwill to $1m, something is definitely up! I may have mis-managed the company into the ground. It may be that the premium I paid was based on fraudulent assessment of the intangibles (e.g. a bunch of future sales that never existed), things like that.
I said in an earlier comment that I didn't think I was getting hung up on the name, but I had a thought that hints that maybe I am.
If it were called "slop" instead of "goodwill", I think I would be less bothered by it. don't get me wrong, it would still bother me -- and I wouldn't understand it any better -- but it would feel less like a term someone would use when trying to pull a fast one.
> It's just that accounting wants both sides of the ledger to balance
Yeah, you and a couple of other people keep saying that, but I don't really understand what that means. I mean, I know what having both sides of the ledger balance means, but this sort of example seems bizarre and extremely suspect to me. It just looks for all the world like people making stuff up.
That's OK. I can't understand everything, and this isn't something that's actually important for me to understand.
Before the purchase, I had some pile of assets worth $A. After the purchase, I still have some pile of assets worth $A. The purchase balances.
You don’t know that. In theory a company pay a premium because of future growth expectations. I don’t think land is a good example though because it’s relatively easier to value.
If you look at publicly traded companies most have a market cap higher or way higher than their book value (tangible/“real” assets). If another company ends up acquiring a public company that difference will simply be accounted as “goodwill” on their balance sheet
Sure I do. It's right there in the basic math.
> In theory a company pay a premium because of future growth expectations.
Yes, but until that growth happens, it doesn't exist. So it doesn't change the fact that, at the time of the sale, a loss was incurred.
To treat the expectations of future growth as a current asset is what seems shady to me. It's just making things up.
> current asset is what seems shady to me
Why? How? Do you believe all the things you don’t understand are somehow shady? Goodwill depreciates over time so you just incur the same loss just spread out over multiple years.
> at the time of the sale, a loss was incurred.
An asset is worth what a purchaser is willing to pay for it. There is no loss incurred until you sell it.
You wouldn’t value a software company based on how much the chairs and desk it’s employees sit at cost? It basically the premium a purchaser is willing to pay above the real/book value of a company.
The other half is incorrect, though: accounting value isn't based on 'projections'. Projections might affect the fair market value of the target (without accounting for post-acquisition synergies). But the accounting value is based solely on historical financial results.
In case anyone else was wondering what the provenance of this $325MM goodwill line item on CMP's balance sheet is, defer to the parent's (Avangrid) latest 10-K filing[3], buried under footnote 7 on p. 123:
> Goodwill for the Maine reporting unit is $325 million from the purchase of CMP by Energy East Corporation in 2000.
[1] https://s24.q4cdn.com/489945429/files/doc_downloads/2023/04/...
[2] https://s24.q4cdn.com/489945429/files/doc_financial/Suppleme...
[3] https://www.sec.gov/Archives/edgar/data/1634997/000163499723...
Both systems sit on top of regulated monopolies who own the underlying wires, though.
This Maine utility fight is primarily over who owns the wires, not who owns the generation.
Frankly rather than the hack of setting up a public utility I'd perfer straight up price controls, no reason to build out alternative infrastructure at taxpayer expense, but there might be a quicker fix with some modifications to a few regulations.
Still this is better than nothing, just feels overly complicated.
Natural monopoly means there is no (or at least insufficient) competition. So either you get accountability by having it be publicly-run, or you end up with very little accountability at all.
> Why can't we let private companies do whatever we were going to let the public one do?
Private companies are very good at coming up with things you never thought of in order to make a profit - that's the whole reason private industry can be more efficient than public ones in the first place. But when most of the creative things they could come up with would be profiting at the expense of the public (because in a monopoly position there's essentially no incentive to treat consumers well), the profit motive does more harm than good and it's better to take it out of the picture.
> Frankly rather than the hack of setting up a public utility I'd perfer straight up price controls, no reason to build out alternative infrastructure at taxpayer expense, but there might be a quicker fix with some modifications to a few regulations.
That's how you get loopholes that then get exploited worse than the problem you were originally trying to fix.
The lack of need to make a profit for one thing
EU is a good case study. Countries which abandoned price controls but instead have a single (usually state owned) company which controls the grid and a bunch of companies which sell power to consumers (effectively renting the grid) tend to have lower prices than those that didn’t.
e.g. I can get a plan which is:
Wholesale hourly market price + €0.08 fee to the grid company + €0.02 to the power company.
It might also be worth if you have some heating/cooling system and stuff like that.
If your usage patterns are closer to the average you probably won’t save more than 2-3 cents per kWh but taken on significant risk so it’s probably not worth it.
Remember the established assumption here is regulation and intervention is required to enforce the thing. Any argument based on the allergy to public sovereignty over public goods is not applicable. Public governance is intimately involved in either solution
The first is that barrier to entry for power companies is that they're enormously expensive to set up - they're huge up-front capital costs with extremely low per-unit costs. This is, as several others have pointed out, the textbook scenario for natural monopolies, in which left to its own course, one company will capture the entire market.
The second is that typically the reason a power company is then granted an explicit monopoly is because there's a social need to deliver power to places that are more expensive to provide to than the civic center, and usually the monopoly is provided with stipulations that the company must deliver power to these areas. This is for two reasons - the first is otherwise nobody, no matter how much competition is in the market, is going to deliver power to those areas, because it's fundamentally uneconomical, and the second is that the company that does try to provide power to those areas will be undercut by the company that isn't. A chartered monopoly in this case is to work around the fact that the market _does not work_ for provisioning these goods - left to its own devices, the market would not provide power to many distant rural areas.
The basic conflict here is between a social good with diffuse benefits - electrification in rural areas is generally considered a net positive for productivity, health, society, etc., and pride of place, but it's deeply uneconomical on a unit basis, and so the market solution does not deliver here.
Sometimes the math says the market's the best choice, sometimes it does not. For large-scale provision of high capital cost goods across a geographically distributed area of variable population density, the math says the market doesn't work out.
I get it. But if that's true we should be able to make it easier for firms to build competitors and worst case, nothing happens right? The fact is power companies enjoy things like access to public land or rights to use poles, often granted to only them explicitly. If they are truly a natural monopoly they won't need the effective legal monopoly protection.
For the company, the natural monopoly state still has them having to negotiate rights of way, etc, in a way that raises overall cost and complexity of provisioning the service.
For the region, the natural monopoly state leaves outlying and areas less economical to serve less well served and leads to higher rates, because, monopoly.
So, a chartered monopoly allows the company to operate at lower cost and less uncertainty and allows the region to enforce both quality and quantity of service as well as have some control over rates.
To refresh, the companies are obligated to take on less and potentially uneconomical customers, and to provide them services at rates below what the market would ordinarily demand. This is done as a social good.
This puts the chartered monopoly at a potential disadvantage to competitors without a similar obligation, who are not required to bear the cost of provisioning service to those customers or can pick their markets more carefully.
Once again, the natural monopoly state is less service to fewer customers at a higher price.
“With sufficient thrust, pigs fly just fine.”
You're not actually proposing an alternative. You're "comparing" a word with its definition. The difference doesn't exist
You're just proposing a set of rules that's more favorable for a particular outcome.
There's strong evidence when it was tried, just in the last 25 years in real estate, electricity, water, cryptocurrency, precious metals, supplements, and startups that those sets of rules lead to fraud and abuse.
That's why the "regulations" exist - they're laws to prevent crimes that went in because lots of that crime happened.
I personally made good money in those bubbles but most people got wrecked. Encouraging more of them doesn't lead to a healthy stable society.
There's wild examples before baseline regulations in the late 1800s of people selling the same lot of property dozens of times (when you can only sell it once) and people finding out the seller never even owned the property to begin with.
These frauds were super common before government regulation and people are still doing it in international markets. For instance, the airport that never existed https://en.m.wikipedia.org/wiki/Emmanuel_Nwude
Many regulations are written by the encumbant in a market. Often they are designed to be difficult for upstarts to compete with them. Major corporations are often publicly in favor of regulation, they lobby for it.[0]
I don't propose you allow people to burn tires in their backyards to generate electricity for the community.
What I propose that when you see a commodity and the producers of that commodity have relatively high margins that is a signal that something is preventing someone else from coming in and offering the same commodity at a slightly lower price. At a minimum we need to lower those often specifically designed by the encumbant barriers to entry.
This should happen in every market, what people are calling greedflation can only exist due to a mixture of these sort of barriers, money printing and non-existant anti trust enforcement.
[0]https://en.m.wikipedia.org/wiki/Regulatory_capture
Loosening "regulations" in a way that allows them to consolidate more power doesn't actually get to the goals.
They're propaganda moves to allow the dominant companies to gobble up the market or offload their costs.
These were done, for example, in media and music to ostensibly "increase freedom" but in practice it just consolidated things into fewer hands than ever before.
You don't win the market through naive stupid competition like some price cutting moron. They don't actually work that way.
The problem are in the incentives and fundamental structure, not in the existence of laws or governance.
Libertarian economics is what got us here through 45 years of Chicago and Virginia school policies, not some solution we haven't tried that'll get us out. It is the problem.
For example abortion bans are regulations, they prevent businesses from harming fetuses.
The libertarian Cato handbook for policymakers book, for instance, is 744 pages long: https://www.cato.org/sites/cato.org/files/2023-03/cato-handb...
They don't want "less" regulations but instead, a redirection of them.
Additionally it's to stop insisting that movements towards free market ideology hasn't been attempted or that it will be a ticket out of the mess. It's been the leading paradigm since the Volcker shock in 1979.
It was so dominant that libertarian free market economics was often confused as the totality of economics - it was not only the 2 ton gorilla in the room, but it was the room itself.
The libertarian free market economic world of Milton Friedman, James M Buchanan and Hayek was the only mainstream paradigm and the only framing there was for decades.
The problems we have are a consequence of those policies - not a consequence of not heeding to them in a pure enough form - claiming an incorrect solution failed only because it wasn't tried with more enthusiasm is an argument of fools.
My advocacy is to be unmoored from ideology and focus on the problems and then advocate for solutions without being subservient to any paradigm of how things ought to happen. This is also known as heterodox economics. See https://en.m.wikipedia.org/wiki/Heterodox_economics
But in reality, public utilities should be owned by the gov't. Otherwise... Enron. Or the aforementioned Texas "free market" debacle.
Unless you think we should allow each distribution company to run their own set of power lines down your street?
Then with the distributors who actually sell to the public: the service they are providing here is really dubious. Ultimately they are just buying power at wholesale prices and reselling it to the public at some average price + markup. What can they actually do to increase customer service? They are essentially just a middleman. At least where I live it effectively makes no difference which one you go with, some might temporarily have better rates but they inevitably need to get back in line with everyone else or go bankrupt.
That how “perfect” competition works. All of them are forced to maximize efficiency and minimize prices because they have no way to differentiate themselves. I would not necessarily trust all public monopolies to do the same.
It is honestly really dumb to allow utilities to be private. You waste money paying huge bonuses to CEOs who fail to lower costs or improve service, and then pay out much more from civic coffers when said shit service sets half the country on fire. Regulating and running national infrastructure for the common good is basically what government was created to do, after waging war, regulating commerce, and settling disputes between goat farmers.
The outcome is that countries which adopted the model tend to have lower energy prices than those that didn’t and have it’s a government regulated monopoly (more or less) like Poland. In theory having a lot of participants competing on equal terms should result in higher efficiency longterm.
The largest energy conglomerate in the US is basically that. The distribution and generation companies are 50 feet from each other because they used to be the same company. (They might work out of the same building too, I forget) But of course the state doesn't own the infrastructure (hey, this is the USA!).
The history of our energy market is like that of 10 countries combined. Texas by itself is a weird case study, as deregulating its market (Texas has its own power grid, because... Texas...) shot prices seven times higher, though they eventually stabilized again. Deregulation by itself isn't going to fix things, but more public ownership probably would, as the incentives would be towards stability, safety and stable prices, combined with increased funding toward sustainable energy.
https://www.pec.coop/
I think there should be more COOPs around. Just having more choice is a good thing.
Several cities and coops are their own delivery providers as well, PEC delivers most of their electricity if I remember correctly.
https://www.santaclaraca.gov/services/utilities
I can't even imagine what would be involved logistically to replace PG&E state-wide.
https://calmatters.org/economy/2020/02/what-happens-if-calif...
It can work, and work very well. But electricity is extremely unforgiving of technical incompetence, and financial incompetence can also kill you (generally in the slightly-longer term). If you can't find and keep good managers on both sides (while the big, for-profit players are trying to hire them away, for obvious reason)...then all the feel-goods and eco-friendly bragging rights in the world won't keep your system afloat.
And your system does not need any interference from an actual for-profit utility to suffer organizational failure. Well-intended idiots and short-sighted politicians can do that themselves, in very short order.
Any business will fail in the face of technical or financial incompetence. Your argument is quite tautological in that regard.
But when it is a public utility doing it is "dividends".
As a Québécois I prefer it that way, even if a small part of my electricity bill is used as a disguised tax on energy consumption.
When that accumulated surplus gets too large, paying a dividend feels like obviously the right thing to do as well.
If the utility underestimated the cost of providing service, they'll petition the PUC to raise rates, so if they overestimated the cost of providing service, why shouldn't they give it back rather than treating it as a windfall to be distributed to investors?
I'm fine with a public utility getting a reasonable regulated profit, but if they collect more money than they needed to cover expenses, it should go back to the ratepayers. Otherwise the company is just being rewarded for overestimating expenses.
I’m not seeing a categorical difference between these two things, assuming the utility tariffs are subject to approval. The money they receive that is more than their expenses is their profit.
Over time, you tweak the rate increases to get the same outcome as “reasonable profit”
source- attorney involved in private hearings in Sacramento on the PG&E company structure
If it's ok for a utility to be publicly subsidised (and I think it is) then by the same token it's ok for it to contribute to the public purse. Setting rates as a matter of public policy means rate revenue might end up being more or less than the cost of supply. So what?
Except it's a tax that's functionally invisible because an equivalent public company would've distributed that same profit to shareholders. So the end result is that the local government charges less taxes because some of their funding comes from utility profits.
https://www.cbc.ca/news/canada/newfoundland-labrador/quebec-...
We all lose when corporate greed meets basic necessities.
Electricity isn't a necessity, neither is internet access. Or maybe it is? Does that mean a phone is a basic necessity?
Is an x-ray machine a basic necessity?
If a person wants to be able to live in their own accommodation there are some very key things they require. One of the most basic is a bank account (how do you pay rent without that?). Work backwards from just that one basic concept and you'll quickly see how easy it is to figure out what "basic necessities" are.
Granted, these will vary between economic regions, but it's quite simple to do so.
> Essential services are the services and functions that are absolutely necessary, even during a pandemic. They maintain the health and welfare of the municipality. Without these services, sickness, poverty, violence, and chaos would likely result.
The listed examples of essential services include things not absolutely, positively necessary to protect life and limb:
* Maintenance of communication infrastructure (e.g., telephone system, radio, internet)
* Maintenance of utilities (e.g., gas and electricity)
* Transportation
* Road maintenance/repair
* Banking
* Payroll departments
* Tax collection
[0] https://www.paho.org/disasters/dmdocuments/RespToolKit_24_To...
At least where I live, light and heat are basic rights and those are often most easily and cheaply provided by electrical means. X-ray machines, considered as part of adequate medical care, are similarly guaranteed.
I don't know that the internet is considered a "basic" necessity anywhere, but again we're entitled to education and to engage with the society in which we live, and the internet is a common and effective means for doing those. That said, I'm not aware of state-provided internet outside of libraries and schools.
If we go by your definition, there's nothing left. Every single one of those things requires parts and if you're going to require all of that to be nonprofit, there's no commercial activity left.
Even of the things listed above, their being a basic right doesn't preclude someone buying them. I pay for electricity like almost everyone else.here, but it won't be taken away from me even if I do not pay (though it's not worth the hassle unless I have really cannot afford to pay).
Why not?
You seem to think that those proposing this don't recognize we're pushing for a massive shift in how things work, that will disrupt many areas significantly.
We recognize that just fine. There are ways to mitigate the harm from that disruption.
It's absolutely clear to us that even if we don't mitigate that harm, the system afterward will be much more just and much more kind and humane than the system we have now.
Otoh: maybe just saying “everything remains the same except the large orgs are non-profit” could be an interesting mitigation to current system.
Feel free to show any example of a non-market-based society that had plentiful food. You cannot. Non-market-based societies always fail to provide what people want. The only societies in history where the problem has been too many calories instead of not enough calories are modern commercial societies.
But you act as though adding any features to our society and economy that move toward taking better care of all our people would somehow ruin the whole thing.
Now, to answer your initial question:
Provide governmental support for small businesses during the transition—local grocery stores, small family farms; not the ones already making hundreds of millions+ in profit every year. A lot of this support wouldn't even need to be monetary—remember, this isn't even talking about making food free or anything; it's just talking about moving to a non-profit model. The most obvious type of assistance is legal (to understand what being a non-profit means and how to legally go about making those changes) and accounting (to understand what this will mean for their books).
I don't believe that massive chain supermarkets and agribusiness conglomerates should get much in the way of financial support for this kind of change—they've already been making huge amounts of money for their execs and shareholders. And, again, only one of those groups actually has to stop making money off this. While I would 100% support separate measures to reduce the exec pay disparity, that's out of scope for this particular discussion. Going non-profit just means you don't have shareholders who get to make money off the business—and, vitally, you don't have shareholders pushing the business to make more profit at the expense of pricing people out of staples or reducing the quality of the food.
> Converse curiously; don't cross-examine. Edit out swipes.
People who don't follow the guidelines make HN a worse place.
1. https://news.ycombinator.com/newsguidelines.html
You could always decide that grocery stores are allowed to be for-profit, or perhaps only things like co-ops or benefit corporations.
We eventually came to accept the reality that our society works better if we ensure universal access to things like mail, so we should be willing to evaluate whether the list of universal goods needs to be expanded
(Note: I get my insurance through a co-op, and the difference between my experience and people who don't is pretty eye-opening.)
Salt River Project is a state run public power company.
They actually just cut their rates, while Duke raised them.
No surprise to me that Duke is publicly traded and more expensive.
Where we live, we used to have the trash collection done by the government. That did not work. Trash was strewn all over. Trash was not picked up on time or at all sometimes. We had a change in party controlling things, and they contracted it out. The contractor does the work and the government proides oversight. It's been several years and this arrangement has been far superior during that time.
Already mentioned in the article, the government, depending on who is in power, can have motives that are contrary to running a utility. To run a utility, you need to be focused on good service at least cost. Improving the physical plant costs sums that are amortized over decades. If the party in power decides to offload the cost of some agenda into the utility, it will have the same effect as raising taxes. California has the highest electricity prices in the country due to them doing this sort of thing. It would be likely much worse if that state also ran the utility themselves.
P.S.: I know that a party called Social Credit doesn't sound right wing and does sound like a Chinese Communist Party plot. In reality, it was a conservative party run by a small-town hardware store owner. Don't ask.
They are also doing everything they can to combat people installing solar. Alsoz the past few years people have seen 400% increases on their bills, and CMP suggested to the individuals that saw this spike to perhaps limit their consumption, and stuck people with the bills. 2 years later oops, turned out our new billing system wasn't working correctly, hence the insane bills some people were getting.
My friend had a $25 a month typical bill balloon to nearing $400, with nothing broken (ie hot water heater) and no change in usage. Many many people.
The license plate on one of my cars reads Agorist, and I'm honestly STILL learning towards the idea of the state run utility, because AT THE MINIMUM, the state has to deal with the situation they cause if they fuck it up royally.
Spain doesn't have to give a shit.
It's a really terrible company to have as your power company. (The linemen / crews are all super nice typically, it's the corporate side of it that's a nightmare).
I also live in Maine and this part.... is not true! The Maine Govt would not run the company. No government would. It would be consumer owned.
Meanwhile, the power companies themselves actually are in large part government owned: Qatar is the largest shareholder of Avangrid and Versant Power is directly government owned, by the city of Calgary.