Monday, July 29, 2013

Utility Rate Increase


The recent request of our local water company for a 23% rate increase has caused a storm of opposition. Required public hearings have brought out politicians and citizens alike to protest. Company officials have tried to explain that the rate increase is necessary to cover millions of dollars spent over the past few years to repair and upgrade an aging infrastructure but no one seems sympathetic. The water company is another big bad profit making company that only wants to gouge its customers.

Actually, a glance at my utility bills over the past year indicates that the water bill is actually the lowest of my household expenses. Last year my wife and I paid about $550 for a year’s supply of water. In the last three months we used 17000 gallons of water and paid about $125, less than a penny per gallon for the most valuable and necessary of all the things we buy.

A local hospital was reported to have used over 30 million gallons of water last year at a cost of about $350000. That's less than it took the City of Bridgeport to build a driveway for a local contractor.

Here in Connecticut we take for granted an almost unlimited supply of the purest freshest water on the face of the Earth. We can drink, wash, flush our toilets, and even water our lawns whenever we want.  During some of the major storms that hit Connecticut in the past two years, we never lost the use of water. We know people who did and it was no picnic.

Nevertheless, people complain about a rate increase for a product that costs a penny per gallon. At the same time, they will not object to paying a dollar or two for a gallon of bottled water in a supermarket. Nor do gym rats or joggers object to paying a dollar or two for just a little bottle of the water necessary for their workouts.  Moreover, go to Yankee Stadium where you have to pay over $5 for a small bottle.

What about other commodities that are nowhere near the cost of water. People think nothing of paying three times their water bill for their monthly TV service. Cell phone bills are substantially greater than water bills. I know that people don’t think they can live without their cell phones but they really can’t live without water. If you drive 10000 miles per year and average 20 miles per gallon, you will use 500 gallons of gas per year. At $4.00 per gallon you will pay $2000 each year or about four times your water bill.

I think most of the opposition to increases in utility rates come from a deep down animus against profit making companies. For people today so-called non-profit companies are a good thing but profit-making companies are a bad thing. Yet the same people who rail against company profits would never think of working even an hour without pay. Why has it become so wrong to provide essential goods and services and then profit by your efforts?

We recently hired a man to do some work on our home. He gave us an estimate that we thought was fair and paid him half to start the work and the balance on completion. Although we did not ask him to break it down, his estimate included the cost of materials and the balance would be his profit—the value of his labor. Why has that become a bad thing in America?  Why should he even do the work if he couldn’t profit by it? How else could he support him and his family?

It’s no different with the water company. Why shouldn’t it make a profit? What motivation would they have to deliver such a valuable commodity at such a reasonable price? Why else should it employ so many people if it could not profit by it? Why would those people even work for the company if they couldn’t profit by their labor?

I know that some will say that a non-profit organization or government agency could do it better and cheaper. They will do the job as a public service. Has anyone ever found a public service union whose members are allowed to work for nothing? Other people will complain that CEOs make too much money and in some cases I think this might be true. Still, these same people never complain that movie stars, rock musicians, and athletes make too much money.

Years ago I bought some Apple stock at $20 per share and sold it for a nice profit when it went up $30. One of the reasons I sold was that I read that the company was paying Steve Jobs over $20 million per year. Who is worth that, I thought? What a dope I was! It turned out that he was worth every penny and more. In the same way if all we have to do to get pure drinkable water every day is turn on the tap, then the people who do all the work of delivering it should be well compensated. Does anyone complain that Johnny Depp made over $20 million dollars to star in a money-losing bomb like the “Lone Ranger”?


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