Utilities Are Playing Games with Customers' Money!
What is Gold Plating?
For years, utility companies have exploited the system to line their own pockets. Utilities have steadily pushed for rate hikes, claiming the need to improve infrastructure, reduce power outages, and update equipment. However, there comes a point where the improvements yield diminishing returns. The electric grid is already highly reliable, and any further upgrades offer little benefit, yet we keep paying higher rates. This practice, known as "gold plating," creates the false impression that these utilities are prioritizing customer needs when, in reality, they’re profiting from the increased costs.
Utility companies operate in a way that's not too different from banks. They front the money needed to build and maintain the infrastructure for electricity, gas, water, and other services, and then state regulators set rates that guarantee them a return on their investment. Electric bills, for example, are made up of two components: the cost of the energy itself and the fees for delivering that energy. While energy prices fluctuate with the market, these delivery fees cover the utility’s costs for building, maintaining, and upgrading its system. Over time, due to the incentives in place, utilities tend to overbuild. As a result, customers are stuck paying ever-increasing delivery fees with no real option to avoid them.
Who is doing this?
Utility companies across the country are participating in this predatory practice, but Chicago-based Exelon and its subsidiaries Baltimore Gas & Electric, Pepco, Delmarva Power in Maryland, ComEd in Illinois, and Atlantic City Electric in New Jersey are some of the worst offenders.
Who is impacted?
The impact of unchecked rate increases is severe, especially on low income and minority communities. A recent CNET survey revealed that 80% of Americans are worried about climbing energy costs, with almost a third planning to borrow money or use payment plans to manage their bills. Even more troubling, nearly a third of Americans have said they were forced to choose between paying for essential needs like food or health care and covering their utility expenses.
Unfortunately, low-income families are hit the hardest by these rising energy costs, deepening economic inequalities and fueling inflationary pressures.
What can we do about it?
Julie McNamara, a deputy policy director at the Union of Concerned Scientists said, “A lot of utilities have over many years lost the trust of ratepayers and consumer advocates by putting forward proposals that have limited value to ratepayers. If they want to avoid familiar complaints about ‘gold-plating’ power company investments, utility planning for an extreme weather future must be open to the public. Everybody should be able to see the assumptions, to check their validity … that goes for long-term deployment. People will need ‘to get in under the hood.’”
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Consumers and state regulators must start insisting on more transparency and accountability from energy companies. Utility providers like Exelon should begin by making their financials public and justifying every expense. Regulators must hold them accountable to this standard, by challenging every proposed rate hike, especially the multi-year plans recently put forward by BG&E and other Exelon subsidiaries, and thoroughly evaluate each infrastructure project to see if it's truly needed.
Lawmakers also need to advocate for the consumers and taxpayers who are ultimately footing the bill for the utilities’ excessive investments.