So they are limited in their RoR on capital expenditures. Are they limited in their capital expenditures in the first place? That is, if they overspend on everything they build, do they make more profit than if they engineered things more carefully? I assume there must be some limitation here or they would use gold instead of copper in their MV transmission lines...
It sounds similar to the insurance industry. The more they pay for medical expenses, the more profit they are allowed to keep. Bad incentives all around.
At least with health insurance most companies purchasing insurance for their employees have at least 2 companies to choose from, which gives some incentive to keep costs down. With power companies, there seems to be little market pressure, making any benefits of being privatized minimal at best.
I think technically CPUC approves at least a subset of expenditures, but yes there's the weird incentive where wasting money can actually increase profits
There is very little reason for private utilities to exist in California, especially PG&E (none of them are great, but PG*E is especially bad), which keeps funding lavishly to lobby against expansion of public utility coverage areas, committing homicide, and going bankrupt only to be resurrected in an endless cycle of nonsense.
Sure there would be; raise funds: tax, pay profits: reduce tax / tax breaks. The real differentiator is in the ability to choose who your shareholders are with less scrutiny.
