Monday, January 31, 2011


Tunisia and Egypt and other countries in the Middle East are seeing a new kind of unrest, not led by fundamentalists but by ordinary citizens fed up with the wealthy few who control the major businesses and corporations and whose profits continue to grow while the rest of the citizens see their finances stagnate or decline.

It's a familiar pattern in the so-called "developing world"—but it has also become a familiar pattern here in the richest country on earth. Despite all our national wealth and so-called "middle-class" lifestyles, we too find ourselves at the mercy of corporations that continue to see record profits and a greater share of the wealth going to those who run those corporations, and yet a decline in our finances while we are asked to pay for what these same corporations should be using their profits to pay for.

The horrendous once again rise in oil prices is being explained as a result of the "world demand" for more oil, and yet the oil companies are making greater profits than ever, as they have for what seems like forever. It seems obvious the profits are coming from the raises in prices, just as it seems obvious that despite all our supposed nation's wealth we are still, as Obama pointed out in his State of the Union message way behind many other nations in not just new infrastructure, like faster trains and cleaner energy (and the jobs that go with creating that) etc. but even in just maintaining what we have.

I remember the first time I came back from a European airport into one of ours and realized we were no longer the future, we were the fading past (which began under Reagan in my personal travel experiences and got much much worse under Bush/Cheney).

The people of Egypt are complaining of the corruption that allows a wealthy and powerful few to control most of the wealth and maintain monopolies in certain industries. Hmmmm. Sounds familiar.

A close friend just suffered through a few days of no power in the middle of winter because he happens to live in a part of the country that has one of the poorest performing power companies in the USA, but that didn't stop the top execs from raking in millions or from the company making outrageous profits while allowing their equipment to break down again and again. My friend has power outages every winter and they often last for days.

Where I now live we have power outages every summer which often last for days. At those times, it feels like we're living in Iraq or some other war torn country where outages are a regular occurrence, even though ours are nowhere near as frequent or as bad, nonetheless, they are worse than they used to be, because the infrastructure has not been replaced with new lines and equipment to service them etc.

Below is a reprint of a message from a local elected official in my friend's area, a perfect illustration of how all this works in the form of a summary of the problem. Read it and see if it doesn't sound like the kind of thing that happens in Russia, or Egypt, or...what county do you live in?

Pepco’s Shocking Profits

By Hans Riemer
At-large Member, Montgomery County Council

The first winter storm of 2011 has revealed once again what Montgomery County residents know too well: Pepco is incapable of restoring power outages in a reasonable period of time.

Surprising, then, that Pepco is as profitable as ever.  Just last October -- despite a year of intense criticism about failing service -- Pepco raised its estimated earnings per share for 2010 by up to 38 percent.

The “thundersnow” began on Wednesday afternoon. According to Pepco officials, 127,000 Montgomery residents lost power by the following morning. Forty-eight hours after the storm hit, the Washington Post reported that 64,843 Montgomery residents were still without power – more than the combined total of 42,667 residents without power in all other Washington-area jurisdictions.

As one resident wrote to me bitterly, Montgomery County has become a “laughing stock” in the region. Of course there is nothing amusing about seniors trapped in apartment towers with no lights, heat, or elevator service.

Pepco has offered a variety of excuses for its failure to restore power promptly in the past. The company once blamed its performance on trees, telling regulators that the region has the “fourth most-dense” tree canopy in the nation. But the Washington Post found no support for that claim in a December 15, 2010 article and exposed equipment failures as the real reason for outage problems.

Pepco has also blamed plowing problems for its inability to access neighborhoods. But Montgomery County’s Department of Transportation plowed the vast majority of roads 24 hours after the most recent storm had passed and still more than 100,000 county residents were without power.

The problem is not trees or weather, it is Pepco’s management.

In its December investigative article on Pepco, the Post found that the company’s reliability problems have been steadily growing worse for five years. Its customers have experienced 70% more outages than customers of comparable large utilities and their power has been out more than twice as long. By 2009, Pepco had fallen to the bottom quarter of U.S. utilities in customer satisfaction.

Pepco’s proposed solution to its problems is its six-point “reliability enhancement plan,” in which it intends to spend $51 million annually in Maryland over the next five years, with additional sums for DC.

Where will it get the money? Ratepayers, of course. Pepco wants to increase rates on its customers to pay for its improvements. What the company is not telling the public is that it does not need a rate hike to improve its infrastructure. According to Pepco’s financial disclosure documents filed at the Securities & Exchange Commission (SEC), Pepco’s profits have exceeded $200 million every year since 2004.

In October, 2010, Pepco raised its guidance on full-year earnings from 80-95 cents per share to $1.00 to $1.10 per share, and affirmed  2011 guidance at $1.10-1.30.  Pepco’s outage performance has been declining over this same period.

Pepco’s top eight executives, including its retired chairman, collected $12.7 million in compensation in 2009. They have reaped huge gains despite failed service.

Pepco paid out $238 million in dividends last year and could cut that amount to pay for its capital improvement program. But since its board and management collectively own over 750,000 shares of Pepco stock and its executives have been granted over $11 million in stock awards over the last three years, the company would rather stick ratepayers with the tab.

Pepco’s failure to ask for extra crews until Wednesday’s storm was well underway is yet another sign that it is managed badly. It is galling to think that Pepco’s executives rake in the bucks when service declines and will rake in even more when we pay to fix the problems they created.

Pepco must face a financial penalty for providing poor service. The Maryland Public Service Commission (MPSC) should fine Pepco for every kilowatt hour lost by its customers due to outages. This would set an appropriate performance incentive.

The MPSC should also demand service improvements without the ratepayer increase. Let Pepco’s executives and investors pay to get Washington area customers back to an acceptable level of services. After all these years of increasing profits despite declining services, the balance sheet should not be tipped in their favor yet again.

As a Bethesda resident wrote to me, “When I moved to Montgomery County, I never imagined that I would struggle to keep my baby warm.” I couldn’t agree more.

The time for talking about Pepco’s problems is over. The time to act is now.

[PS: And as my dear friend "Alameda Tom" points out with this link he supplied. Exon's 4th quarter profits "surged 54%" and they still raised the price of oil!]


Anonymous said...

more than 3,400-PLUS wires were down due to this storm

most people got their power back in about two days as soon as Pepco could get into the areas that were 100% blocked by cars abandoned or otherwise clogging roads/arteries to the downed lines

Pepco did a pretty good job...

either blame the morons who caused the clog mes..

like our brilliant Fed Gov't who let everybody go home at SAME TIME thus causing most of the problems..

bottom line...

why not blame God!
another group to blame

those local council/gov't Morons who refuse to allow Pepco to trim trees or to remove dyeing/rotting trees before things snap! like "let's keep our green trees (the 'canopy')for our grandchildren"

more problems with electric transmission when things underground.. explosions, rats chewing wires, etc.
old sewer pipes old wires things just changing....

Lally said...

Sounds like a spokesperson for Pepco. How well the corporations have trained the seals!

Anonymous said...

the governor of Maryland has THE solution...

first start fining Pepco for 'poor performance


take the utilities out of private hands and give it to the government and
let/have The Army Corps of Engineers
run Pepco and WGL and WSSC

isn't that called Nationalization?

The Army Corps of Engineers are the ones who designed and "maintained" those New Orleans

that failed and destroyed New Orleans...

what's YOUR solution? go to another movie and let a computer solve the problem?

Lally said...

Investment in equipment, training, new technologies and more people on the job. As the article above proves, like most corporations Pepco makes enough profit to do all that and still pay dividends and CEO salaries, only not to the extreme post-Reagan levels, or at the expense of service to its customers.

And for those who are always yelling about "the free market" let utilities and energy companies compete fairly and openly so customers can choose the ones with the best records and results.

There, that was simple.

Anonymous said...

yeah "easy".. if not a bit naive/simplistic..
where, pray-tell, is this (phantom) "copetition"
going to come from..... China?


just imagine all those college students being re-trained to be able to climb telephone/power poles and string wire in freezing weather...


might as well send out a computer to do this work...

JIm said...

Liberal naivite' is sometimes beyond belief, particualrly when it comes so close on the heels of the worst recession since the Hoover/FDR Depression.

"like most corporations Pepco makes enough profit to do all that and still pay dividends and CEO salaries"

JIm said...

Pepco percent earnings to revenue was 2.62% in 2009. For evey $100 of revenue they earned a net after taxes of $2.62. I assume that would be prima facie evidence of corporate greed to a liberal.

Lally said...

Obviously these two commenters didn't read the post above or the article linked to in the previous one, or they can't understand them. The facts are pretty clear. The differences in the pay ratio between corporate executive salaries and workers salaries pre-Reagan were minimal and had held steady for decades, but post Reagan have grown exponentially, which just happens to coincide with the degrading of our infrastructure and corporate service (anyone want to trade stories about cable or phone or utilities or etc. services?). There are exceptions, but many of the best companies are squeezed out of being able to compete by advantages thrown their way because they have more lobbyists or make bigger kickbacks or have politicians who once were on their payroll or soon will be (Halliburton and Cheney anyone?), and these are more often Republican than Democrats, though both parties have elected officials who participate in this kind of corruption.

It's weird isn't it that these rightwing commenters don't even agree with me when I leave a comment suggesting true free trade? Or that corporations invest in equipment and manpower that will improve their services and products? It's like they're saying the only thing that matters EVER is PROFITS and that THE WEALTHY GET TO DO WHATEVER THEY WANT!

I didn't even talk about government intervention or running things. Though if you ask me which I get better service from Social Security, Medicare, the interstate highway system, (government agencies I come in contact with fairly regularly) or my cable company, my phone company, and my utilities/energy company? The answer is obvious from my experience, the federal government does a much better and fairer job, and frankly, if I have to live with a monopoly running each of the three latter services—cable, phone, utilities/energy—I'd prefer the government run it (I never had trouble with the Post Office either until the Republicans turned it from a government agency into a semi-private one).

Anonymous said...

e-maii destroyed the post office

those morons who broke up ATT sure gave a healthy boost to "competition"


Comcast OWNS NBC/MSNBC and GE! so much for "competition" and free exchange of information!

as for MY politics... I will NEVER EVER vote for a Republican or a Tea Partier or a right-wing Conservative
I would NEVER buy a Ford OR a Volt even if it was free.

so much for your presumptions and lack of insight

let's see what-is-what in Egypt and what blood-leverage our Gov't will use
or will we "wake up" bothe here and there...

tpw said...

Michael, why do you waste your time with these people? Defending Pepco? You've got to be kidding me. This allegedly non-republican, anonymous, corporate lickspittle should try living in Montgomery Co., MD, and have his power go out for 4 or 5 days because the greedy incompetents at Pepco are working for their bonuses & not their customers, and then we'd see how warm his feelings would be for our corporate overlords. Oh, wait, he's probably on their payroll already, as you've suggested.

Lally said...

I thought for a second it might be fun to actually engage in a little back and forth just to try and see if these two commenters had anything constructive to suggest that might remedy the terrible job Pepco is doing for my friend and many others in his area. But all they seemed to be able to come up with are excuses for the corporate greed and excess and failures of Pepco and make either extraneous observations (the P.O. became a problem long before email was common, but not until the Republicans changed it from a government agency to a semi-private government holding, or whatever they call it now) or incorrect ones (like calling "liberals" "naive"—an old rightwing practice, when the naivete seems to be pretty much on their side, as in "trickle down economics" that led to the dilemma we're all in, unless we're among the .05% of the wealthiest, or the naivete that said we could invade Iraq and be welcomed as liberators and it wouldn't cost us anything because their oil would pay for everything (another nail in our economic coffin hammered in by the trillions spent on that war so far!), or the naivete that says the problems caused by health corporations and insurance companies profiteering that is the third leg of the stool of our economic ruin can be remedied by giving the health corporations and insurance companies more unregulated control of healthcare! Whose naive?

Tore Claesson said...

Obama is right when he points out that the US is falling behind in many areas. Having lived in several countries in Asia and Europe the US actually seem rather run down as far as infrastructure goes. It's hard to be convinced this is the land of the future in comparison. It feels a little like it must have felt for the soviets who were lead to believe the west was a terrible place, and when they came here they realized it was all a lie.
And traveling to Penn Station from our part of New Jersey I can't but help think that Mumbay isn't too bad looking after all. As a matter of fact a lot of India is starting to look rather modern compared to the US.

JIm said...

But the question is, what is the best way to reinvigorate the economy? Obmanomics has produced the most anemic post recession recovery since the Depression. Obama care with its huge increase in regulation, taxes and expenses seems to be in the process of being struck down; if not by the courts than very likely in 2013 with a new senate and hopefully a new president. The US continues to have the highest corporate tax rate, other than Japan, in the free world. Even Canada has cut its rate to half of what the US is. We have a model for Obamanomics and it is Japan with it heavy oppressive corporate tax rate, which has resulted in stunted growth for 20 years. Free enterprise can lead us out of the Obama funk. Government can not, if history is any guide.

PS I still have nightmares that I am back in NJ riding the train to NY. Tore, it sounds like the view has not improved since I left in 1975.

Anonymous said...

I DO live in Mont Co..
things sure have degenerated since Ike got elected... especially the school system it used to be ranked nationally in top two or three..
and ALL services now bleak...

the Mont Co council leans towards the rich up there in Bethesda and Potomac and Rockville


NEVER pay their fair share of taxes...but expect 122 % of the services.

Lally said...

The worst recessions in modern history occurred under Republican administrations, the last two under Reagan and Bush/Cheney. As soon as Obama was elected the right, including commenters on this blog, began attacking him because the economic ruin brought on by Bush/Cheney policies and choices had us still heading toward another Great Depression. The right, including their parrot on this blog, cited the stock market, economic growth and unemployment as evidence that Obama was the wrong man, even though he had just taken the oath as president. But of course since he reversed those downward trends in everything—the stock market has rebounded, growth is where it was at the peak of the best Bush/Cheney years economically (2006) and steep rise in unemployment brought on by Bush/Cheney has evened off and is still lower than unemployment was during Reagan's recession. Is the right now lauding Obama for those achievements. Yeah right. The last comment by the parrot was about corporate taxes, which Obama in his state of the union message called for cutting. A rightwing Republican solution, and is he being praised by the right for doing that? Yeah right. Ideologues don't care about reality, only how they can spin it to satisfy their prejudices. God bless liberal America.

JIm said...

George W
The unemployment monthly average was 5.3 under W. In 2003 the monthly average spiked to 6%. The monthly average for 2008 was 5.8% with a spike to 7.4% in Dec.

Unemployment peaked in 1982-83 under Reagan, the same time the tax cuts were being implemented, dropping steadily down to 5.2% in 1989. Rate cuts and economic expansion cut unemployment significantly—by 4.3%—after it had increased by 2.5% from 1980-2.

Unemployment Rate: 1980-9
Year % Unemployed

1980 7.0
1981 7.5
1982 9.5
1983 9.5
1984 7.4
1985 7.1
1986 6.9
1987 6.1
1988 5.4
1989 5.2
Source: Statistical Abstract of the United States. Table 608.

Thankfully the stock market has come back under Obama. Employment is a work in progress; I suspect because of his war on business and the uncertainty of tax policy. It would be nice if Obama and the Democrats did more than talk about cutting corporate taxes. So far he has talked about cutting the rate but eliminating deductions, maintaing the same revenue amount. I would like to see a meaningfull rate cut down to 25% or less or even better a flat or "Fair Tax" with no deductions except for individual low earners.

PS Speaking of Parrots, are they still hanging out in Maplewood Park. I understand the weather has turned chilly.

Robert G. Zuckerman said...

on a separate but related matter, I wonder if the significantly increased precipitation in our world now, including massive flooding and snowfall, has anything to do with the melting of the polar icecaps/glaciers and increased water in our atmosphere/world? Probably not - the snow is right wing conservative and the rain is liberal socialist, not connected.

Anonymous said...

The claim that "The US continues to have the highest corporate tax rate, other than Japan, in the free world" is half-true but wholly misleading because after tax deductions and credits are applied the effective tax rate is relatively low.

"The U.S. ratio of corporate remittances to GDP, at 2.2 percent, is below the OECD
average of 3.4 percent....Thus it appears that, despite its high statutory CIT rate, the United States takes a
below-average share of corporate income in taxes."

Lally said...

And the unemployment rate under Reagan went well about 10% at its peak according to TIME Wall Street Journal, U.S. Department of Labor, etc. etc. et-endlessly-cetera. This is where I drop out from any attempt to get an iota of admission of the truth from the right once again.

AlamedaTom said...

Hey Lal:

You may want to update this post to include this:

which was released just hours ago.

~ Yer faithful supporter, Willy

Lally said...

thanks Tom, great link.

JIm said...

Unemployment under Reagan peaked at 10.8% monthly rate in December 1982. It averaged 9.5% that year.

JIm said...
This comment has been removed by a blog administrator.
Lally said...

comments are welcome, but no lying about others or cursing others out (no matter how much we all want to at times) or using up a lot of space to quote some biased source material, leave a link and people can go to it or not.

JIm said...

Reaganomics produced the largest peace time expansion in history. Inflation and unemployment fell significantly. GDP expanded at record levels.