The closure of the AEP plant will be a big loss to our community and for the employees that will be impacted by the loss of income to support their families, they were good paying jobs. So why did they close the plant? Could it be because they needed to make a profit, or could it be that regulators posed so many restrictions on the facility that the cost of upgrading could never be recovered?
If a company does not make a profit they can't stay in business without government subsidies and do we really need more government subsidies to business at taxpayer expense? It is popular to blame business for being greedy (aka making a profit). Profit is what allows companies to grow, hire people and pay competitive salaries. Our country is the richest and has the highest standard of living in the world because; the individual can achieve anything within their capabilities and willingness to work toward their goals. We have the privilege to succeed or fail based on our own efforts. The same is true for companies; they will succeed only if they have a product that the public wants, at a competitive price and they continue to keep that product competitive. We all want and need electricity to run our lights, air conditioners, furnaces and factories. The utility company needs to make a profit to reinvest in infrastructure, maintenance, salaries and new plants and equipment as demand increases.
We can blame the utilities for increasing the cost of electricity but they are regulated by the Public Utilities Commission (PUCO) since they are a monopoly. The PUCO is responsible to review all rate increases and ensure the increases are justified. Our state government makes the laws that the PUCO operates under and our politicians (governor) appoints the PUCO commissioners and they make the rules that the utilities operate under. On top of the state government regulations are the federal labor, safety, health, environmental, etc., etc. Whenever a law is passed that affects a company, there are people required to implement and enforce the regulations within the company and that is an expense which reduces profit. So because of the additional regulations the cost of the electricity must go up to maintain a profit level.
With the deregulation of utilities, which allows the consumer to shop for utilities and get a lower cost, this was a positive step toward preserving the free enterprises system in the utility industry. This has put pressure on the producing utilities to make their product competitive. So the utilities must now keep the cost of production as low or lower than the competition in order to stay in business. Many of the older established utilities have older production facilities and the cost of upgrading the facilities to meet current regulations does not provide a reasonable pay back on the investment required. If the need exists for more capacity it is often more cost effective to build a new facility than update the old ones. With the increased requirements of EPA, coal fired plants are almost not an option for new facilities and natural gas as a fuel becomes a more viable cost effective alternative.
The customer has a choice where they buy their utilities from because of the deregulation and if their town has aggregation they can have even lower rates. Aggregation allows towns to provide the citizens better buying power by going to a provider as a group and shop for lower rates than they could get as individuals.
One of the biggest losses to the community will be the support that AEP provided to our community and its organizations, the organization that provides help to our citizens that need a little extra help during some difficult times. Most communities could not provide the support that is provided without the involvement of the businesses in the community.
The utilities pay taxes that support our schools and various government entities. The loss of the tax revenue will force our school districts to reevaluate where they are spending money and how they can provide quality education to our students. It will be a difficult task and we as citizens need to support our school systems, so that our students, upon graduation, have the skills to go into the workforce or to college for an advanced education. Maybe the citizens need to pay less to the state and federal government so we can support the needs of our local communities. For every dollar we send our state and federal governments we may get back approximately .70 cents in services, where does the other .30 cents go? Maybe for political favors to the contributors of the politicians or salaries for the bureaucrats that sends us the .70 cents.
It is easy to blame the utilities for being greedy, socially irresponsible and putting people out of work, none of which is true, but it makes good political commentary. But if you look at the facts of the situation it is our fault. The politicians made the laws, they appointed the PUCO commission, and who elected the politicians, we did. So until we step up and elect politicians that will preserve the free enterprise system and our individual rights to succeed or fail, or we will become a socialist nation. A nation like much of the rest of the world; where the government takes care of our daily needs. Someone once said "we are one generation away from losing our democracy," are we going to be that generation?
Rex Kenyon is mayor of Beverly.