If ever there were a time to question how companies make a profit, this is it. Eversource Energy and United Illuminating — public utilities charged with keeping people warm, safe, and, literally, not in the dark — want to raise rates so dramatically even those who can absorb the additional $80 per month are appalled.
Our capitalist system presumes — and most of us readily accept this premise — that a company exists to make money for its shareholders. But Eversource and UI are not selling cupcakes or tchotchkes. They’re selling one of the basic necessities of life. It’s not optional for citizens to avoid freezing to death in their own homes, and it is a utility’s moral responsibility to make sure hospital respiratory equipment functions, nursing homes are well lit, and classrooms full of children are safely heated and cooled.
For the second year in a row — including during the pandemic — Eversource has posted more than $1.2 billion in profits. Where are the voices of outrage over inflation?
Indeed, this requested rate hike issue is complicated because the utilities are being forced by international factors out of their control to pay more for the energy they distribute. So they pass that increase on to us. And because the General Assembly passed legislation in 1998 that effectively stripped the Public Utilities Regulatory Authority (PURA) of much of its power, the best they can do in this moment is make sure the utilities don’t add hidden costs to their own.
Fair enough. But it’s time to talk about the other factors in this scenario. Let’s look hard at the three horsemen of the inequity apocalypse: deregulation, executive compensation, and anonymity.
“Regulation” has become the bug-a-boo of business. Capitalism only works, we are taught, if companies are free to regulate themselves. Ronald Regan sold Americans a bill of goods with his flawed “trickle-down theory” which basically said that if government leaves business alone, business will pass along savings to the people. Instead, trickle down became a torrent of inequity that vastly, dramatically, and dangerously widens the wealth gap.
Economists around the world have exposed “trickle-down” for the snake-oil it is: the International Monetary Fund (IMF) found “that increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20 percent results in lower growth—that is, when the rich get richer, benefits do not trickle down.”
But higher costs do. Eversource needs to find ways to blunt the damage to consumers. It’s both lazy and unimaginative to say they simply have no choice.
What about executive compensation? While it’s reasonable to expect a CEO to make more than the lowest worker on the company food chain, the ratio of CEO-to-worker pay has become nothing less than sinful.
According to the Economic Policy Institute, compensation for top executives has soared by 1,322% since 1978, while average workers’ pay rose just under 18%. At the height of the pandemic, America’s top executives were paid, on average, 351 times as much as a typical worker. In 1965, that ratio was 21-1.
So while it has become common to cry “socialism!” whenever someone questions how companies operate, we should be asking: when did it become OK to reward CEOs so extravagantly that we now have puffed-up King Midases running the show?
And the third plank on this teetering bridge of inequity is the effect of monopolies. Only in a few Connecticut towns do consumers have a choice of utility, and the larger a company gets, the more unresponsive it becomes. If your local liquor store owner suddenly raised prices the equivalent of $80 per month, as Eversource and UI want to do, you’d ask why, and you’d probably take your business to that store’s competitors. Your choice would force that company’s leader to reconsider the price-gouging.
So can we look differently at how we do business in order to avoid a new Gilded Age?
First, we must sincerely and deliberately wean ourselves from fossil fuels. Yes, this is often said to nodded heads, but the latest COP27 Climate Summit shied away, once again, from taking this step. Unless we commit to developing alternative energy sources, we will forever be held hostage by the vagaries of “supply-and-demand,” of which these proposed hikes are a byproduct.
Second, we must recognize that the 2010 Supreme Court decision known as “Citizens United” was deeply flawed — companies do not and should not have the same rights as humans.
Third, we need to revisit the idea of legislating regulation which, when enacted sensibly, protects people, the environment, safety standards, and innovation.
Fourth, we need to enact more policies that reflect a desire to support small, independent businesses instead of kowtowing to mega-corporations out of fear they will leave the state.
Fifth, we should look for incentives (“rewards”) for companies that have a smaller, more reasonable executive compensation-to-worker pay ratio.
Sixth, we need to raise the top marginal tax rate for the uber-wealthy (and this comprises most CEOs — including those of Eversource and UI) so that they pay the same rate as poor and working class people pay. Right now, in Connecticut, people earning less than $45,000 pay nearly four times the tax rate paid by Connecticut’s wealthiest residents.
Seventh: while funding security nets like LIHEAP and other pools to help cash-strapped families helps in the short-term, it is not the answer. Preventing rate hikes in the first place is the only sustainable solution.
Eighth, we need to bring the various players together to look hard at a system that got us here, as the chair of the Energy and Technology Committee has wisely suggested. Otherwise, we continue to prop up a structure that makes the rich richer and the poor poorer.
And finally: to all those who say “government should be run more like a business.” Please stop. This line of thinking is one of the factors leading to the looming, unconscionable rate hikes being requested. In fact, government does not exist to make money: it exists to protect and educate the public.
If, however, we truly want to run the State of Connecticut like a business, we must start with the recognition that government’s “shareholders” are the people it represents. Becoming one of those shareholders has nothing to do with the ability to buy government stock; it has to do with the shared right to a single, free vote. And in Connecticut, that means 3.6 million equally deserving shareholders who range from the desperately poor, to the struggling, to the moderately comfortable, to the middle class, to the well-off, to the obscenely rich. And if our government wants to serve this wildly varying group of shareholders, it starts with putting Eversource and UI in their place.
Christine Palm is State Representative of the 36th District comprising Chester, Deep River, Essex and Haddam.