Add Newfoundland Power shareholders to the list of people who deserve more from life than you do.
Well, that’s according to Newfoundland Power executives, who are asking the Public Utilities Board (PUB) to approve a 7.2 per cent rate hike to its customers.
Such an increase in power bills is necessary, the company argues, to pay for general operations and maintenance … oh, and to boost Newfoundland Power’s return on equity to 10.4 per cent.
The PUB regulates Newfoundland Power’s return on equity. In 2012, it was set at 8.8 per cent.
Apparently, there is no objective method of setting power rates, and thus return on equity. Every few years, the PUB and Newfoundland Power merely hash out what is “fair.”
It would be interesting to try something similar with your financial adviser or portfolio manager.
“Hey,” you could say, “that four per cent return last year … I don’t think that’s fair.”
But as the saying goes, fair ain’t got nothin’ to do with it. Newfoundland Power has a monopoly, and wants more just by asking. It’s not as if they have to go out and earn it or compete for it.
Their ratepayers, in contrast, face all sorts of risks in their personal investments — registered retirement savings plans, registered education savings plans, workplace pension plans and the like.
There is no equivalent to the PUB that you can go to and say, “I’d like a return on equity of 10.4 per cent.”
Anyone who still includes stocks as part of their investment or pension portfolio — “Wow, look at those things plummet; I thought the laws of physics prevented falling objects from surpassing terminal velocity” — must want to curse at Newfoundland Power’s nerve. What do they think they are, a bank?
Life savings lost? Retirement nest eggs decimated? Oh, well … can we please pocket a double-digit return?
If you’ve played it safe with your investing and stayed with bonds, you’re looking at an annual return of about 3.5 per cent these days. That’s roughly seven per cent less than what Newfoundland Power is seeking. If they get it, move your money out of bonds and put it into power poles.
How about real estate? Land means a good deal, as Duddy Kravitz’s grandpa wisely advised him. My most recent statement put real estate earnings at 9.3 per cent — not bad (the coming bust notwithstanding), but still a full percentage point less than what Newfoundland Power wants.
If the PUB approves Newfoundland Power’s request, let’s hope the ruling includes a detailed explanation. “Because we think it’s fair” probably won’t satisfy most ratepayers.
• • •
Speaking of ripping ratepayers, post-sanction Muskrat Falls keeps raising common questions among people of my acquaintance: what is the government thinking?
What is Premier Kathy Dunderdale thinking? What is Jerome Kennedy, until this week minister of natural resources, thinking?
What can possibly be running through their minds as they so arrogantly and self-assuredly foist massive, megaproject debt upon two generations of Newfoundlanders (and Labradorians)?
I have yet to hear or read a satisfactory answer.
One explanation could come, albeit indirectly, from American novelist Kurt Vonnegut, who described all politicians — no matter their nationality — as pretenders, poseurs, “guessers,” as he labelled them. They feign knowledge, special intelligence and decisiveness, but in reality their actions are merely guesses, he wrote.
In “A Man Without a Country,” published in 2005, Vonnegut makes an observation about politics that could usefully be applied to Muskrat Falls: “But the guessers, in fact, knew no more than the common people and sometimes less, even when, or especially when, they gave us the illusion that we were in control of our destinies.”
Brian Jones is a desk editor at
The Telegram. He can be reached at email@example.com.