ACE Departmental Seminar
Friday, April 16, 2021
12:00-1:00 p.m.
by Zoom (you must be signed into your Zoom account to join)
https://illinois.zoom.us/j/81920728868?pwd=Q3cwQlVRR0ZCODBKc2Q4dkhBTk5hZz09
Meeting ID: 819 2072 8868
Password: 718820
Dr. Catie Hausman
Associate Professor, Public Policy
University of Michigan
"Who Will pay for Legacy Utility Costs?”
(Lucas Davis and Catherine Hausman)
The majority of natural monopoly utilities in the US -- including natural gas, electricity, and water distribution -- recover their large fixed costs by spreading fees out over time across their customer base. In periods of a shrinking customer base, this can lead to a lack of fixed cost recovery. Focusing on natural gas distribution utilities, we show that such periods are commonplace because of net migration within the US. We then show how the loss of customers impacts utility operations and finances. Utilities that lose customers maintain, or even grow, their pipeline infrastructure even as the customer base financing their operations is shrinking. As a result, historical capital cost recovery and some operations and maintenance costs do not decrease. In keeping with this, we observe that utility revenues shrink, but not one-for-one -- indicating that customers that remain on the system are making up some of the lost revenue. We highlight resulting equity implications -- both across income levels and across racial groups -- of the current push for building electrification and other energy transition policies. We conclude by discussing alternative utility financing options, such as recuperating fixed costs through taxes rather than rates.
If you are interested in meeting with Dr. Hausman, please contact Peter Christensen at pchrist@illinois.edu for scheduling. Dr. Hausman is available between 9 a.m. - 4:30 p.m.Thank you.