The 'firm' is Brazos, which was run as a not-for-profit co-op.
Here's a statement from the CEO who resigned describing a precursor event in 2014 and suggesting how the DoE should proceed to make a repeat less likely:
This is the side of privatisation that gets ignored. When private companies screw up, who gets left with the bill? Private companies have no incentive to be ready for really big problems because they know they’ll get bailed out, or just not have to pay.
It's actually well understood that privatisation for platform industries is bad, privatisation for businesses running on top of platforms is good.
Networks and infrastructure = little to no competition. Eg. networks naturally settle in a optimal geographical ___location and utilize economy of scale then. Can't compete with that. So don't privatise platforms. Rather - make them monopolistic and make them share the revenue with public using a monopoly tax. AT&T model.
Translated to programmer speak: society's OS (law,defence,policing,roads,energy,networks,sewers,etc.) should be uniform and near monopolistic to maximize economy of scale.
Society's Apps (businesses) running in the ecosystem of the OS should be private, numerous and competitive as much as possible.
Occassionally you stumble upon a private business which develops a new network model and after some time it should be refactored from being an App to be part of the OS (eg. twitter).
The "deregulated" energy industry is built around that exact principle you're talking about, both in the US and the EU. The "platform" is the grid, which delivers electricity from plants to homes and businesses. Because competition in this area is limited, these companies are regulated monopolies, whose infrastructure decisions and rates are closely supervised by a government energy board. These entities work as part of a regional transmission organization, a highly regulated entity that ensures stability of the grid as a whole (https://en.wikipedia.org/wiki/Regional_transmission_organiza...).
Generators and users of electricity operated on top of that platform. Generation is a competitive market--many entities can be delivering power into the grid, and the product is fungible. Users don't care where the electricity comes from, just about the price. Electricity generation is therefore quite suitable for market mechanisms.
What happened in Texas was not an example of a privatized "platform" failing. The platform (the grid) was fine. Instead, adverse weather events caused a shortage of the product (electricity) running on top of the platform. Put differently, this is not like a scenario where Texas decided to privatize roads and things went sideways. It's like a scenario where packages didn't get delivered on Christmas because COVID caused an unexpected spike in demand for package delivery, as well as an unexpected shortage of drivers for delivery vehicles.
I thought energy generation is still regional in practice -- loosely, the further it goes, the more expensive -- and private co's deciding to cheap out on weather protections showed the king has no clothes in this case? grid sounds nice and platform-y, but when you zoom in, similar to us telcos: not quite as stable and abundant as the lobbyists advertise for any given region when you look.
as an intuition, a solar panel farm in some isolated arizona desert doesn't help folks in maine. conversely, as neither region has that many local suppliers, a few private businesses making rational personal $ decisions to not supply in critical scenarios will put all citizens at risk when those scenarios happebs.
(written as someone living through periodic wildfires allowed through similar market optimism.)
> thought energy generation is still regional in practice --
ERCOT serves over 26 million customers in Texas. That's more than large enough to have a highly functioning market.
> and private co's decided to cheap out on weather protections?
What on earth makes anyone think that government-owned power generators in Texas would have invested in weather protections? The sewer systems around the country are publicly owned, yet the public utilities "cheap out" on capacity and routinely dump massive amounts of raw sewage into local waterways during big rain storms that happen every year or two. People are attributing to the structure of the market a failure that's more about the inability of entities in general (public or private) to deal with black swan events.
RE:market size, esp. proportional to texas land mass, that's not obvious to me. But I'm writing that as a not-an-energy person, just someone who spent an afternoon googling years ago to understand why energy operations people viewed things like solar/wind/etc. as local, not national. Finance and other non-operational people can certainly work more abstractly.
RE:Weather, when gov-funded climate change scientists collectively predicted adverse weather phenomena would continue accelerating in accordance to global warming, and a lot of communities have been living through it? I started hearing about that 10-20 years ago, it's not news. Next you'll tell me that continued beachfront erosion merits gov bailouts of insurance companies because we couldn't predict that either..
Big rainstorms are not news, yet most public sewer systems are totally unequipped to deal with them. Hot days in summer are not news and yet Amtrak is unequipped to deal with them (http://blog.amtrak.com/2015/06/heat-restrictions).
Around the country, there is a $4.5 trillion infrastructure backlog.https://www.asce.org/templates/press-release-detail.aspx?id=.... Almost all of that backlog is on the plate of public entities (road works, sewer works, bridges, etc.) Where do you live that the government has actually addressed crises that it faces in the present and has time to pro-actively address stuff scientists are talking about happening years in the future?
Yeah, maybe competent and pro-active bureaucrats at a government power utility would have avoided this problem. It also could have been avoided by running power plants on unicorn manure, which I hear has natural anti-freeze properties.
This feels like rapidly shifting goalposts from my statement about energy being local and the local private energy companies cheaping out because they could
Yes, a lot of people live in denial. In security-related areas of all kinds where the ROI is largely unobservable loss prevention, that's why leadership-level people know to ask for budget immediately after any incident... because important stuff doesn't get funded or enforced otherwise.
And agreed, I'm not a superfan of Amtrak. There's a wide spectrum on how to do things. The more I learn about any individual one, the more I learn that most things appear broken from the inside, so I am both consistently awed things work in the daily case, and know that left alone, they won't in the edge cases.
> This feels like rapidly shifting goalposts from my statement about energy being local and the local private energy companies cheaping out because they could
It's not shifting the goal posts. A company that feeds into a market with 26 million customers is not so "local" that a free market can't work. That's bigger than most countries. And you've offered no evidence that a public utility would not have "cheaped out" on weatherization.
> Yes, a lot of people live in denial. In security-related areas of all kinds where the ROI is largely unobservable loss prevention, that's why leadership-level people know to ask for budget immediately after any incident... because important stuff doesn't get funded otherwise.
Disaster after disaster happens, and important stuff still doesn't get funded in the public sector. There is a $100 billion shortfall in water system funding: https://www.infrastructurereportcard.org/cat-item/drinking_w.... Did the Flint water crises have any effect on that? No. Because political entities that are accountable to voters for water rate increases aren't any more willing to invest in risk mitigation than private companies.
> And agreed, I'm not a superfan of Amtrak. There's a wide spectrum on how to do things.
Most public infrastructure in the United States is run like Amtrak. The D.C. Metro had to shut down automated train control (self-driving), which was a feature built into the system in the 1970s, because they had let the track sensors deteriorate so much. We had to shut down the subway in D.C. for weeks at a time a couple of years ago because it was literally killing people. New York's subway system is in the same sorry state: https://www.vox.com/policy-and-politics/2017/7/11/15949284/n...
I don't see why solar in Arizona would not help Maine.
If Maine has a shortage, they aren't going to get power directly from Arizona, but couldn't they get power from New Hampshire? If New Hampshire doesn't have any spare capacity, couldn't they still supply Maine and get some from Massachusetts to cover for what they send to Maine? And if Massachusetts doesn't have any spare, can't they similarly go ahead and supply New Hampshire, making it up with power from whoever is next west of them, ultimately ending up with Arizona's extra solar power allowing Maine to get through a shortfall?
Is it only because there's US East and US West? I.e. Maine and New Hampshire can share power generation, and Arizona and New Mexico can share power, we just can't share across the East/West divide, wherever that is?
> The Eastern Interconnection and the Western Interconnection are the largest. Three other regions include the Texas Interconnection, the Quebec Interconnection, and the Alaska Interconnection. Each region delivers power at a nominal 60 Hz frequency. The regions are not usually directly connected or synchronized to each other, but there are some HVDC Interconnectors.
It would seem that an important part of the "market" is missing, namely the ability of consumers to respond to price signals. If every customer could set a maximum price and automatically be cut off when the price goes higher then the load shedding would be automatic, with the available power going to those willing to pay more, presumably because they need it more or can afford it.
That assumes that disconnecting from the grid is a viable option. During this issue, disconnecting from the grid had a substantial chance of causing your pipes to freeze and burst. I wouldn't hold my breath that your insurance will cover that if you turned off your own power.
One of my takeaways is that you really don't want people trying to attempt DIY heating systems. There were ~450 calls for carbon monoxide poisoning, related to people trying to heat their homes with non-electric sources or sources that worked at all. A lot of people tried to run camping stoves indoors. Others ran generators indoors. I believe a girl died because her family tried to stay warm in the car in the garage with the door closed.
> with the available power going to those willing to pay more, presumably because they need it more or can afford it.
I vehemently disagree with this. Wealthy customers should not be able to push the price of electricity high enough that others can't afford to heat their homes. Letting the market figures it out means that those with financial means get to make a choice about what to do, while the poor are universally shoehorned into the worse of the two options.
A significant part of the base load is inelastic demand. People need to heat their homes. People need their refrigerator to work so their food doesn't go bad in a time when you may or may not be able to get groceries. People need to charge their cellphones so they can let their family know that they're okay.
I don't think we really disagree. My point is that the market won't function unless demand can adjust to prices. Right now there is no mechanism to allow it and the market can't possibly work.
If there were, as you say, it still might not work. But there were a lot of pictures of empty buildings with lots of lights on, etc. so there are inefficiencies. And if customers were automatically switching off (or simply reducing their own usage) as prices went up maybe prices would never have gotten so high. Ideally it would sort of be a fine-grained "rolling blackout" where priority is determined by what a customer chooses to purchase given all the variables that only the customer is aware of. That's a functioning market.
I agree that it may be completely impractical to make it work for electricity.
Road networks are a great example. Just assume the hypothetical position of a competitor. Where are you gonna build a competing road in, say, NYC? Each block only has 4 sides, and each of them already has a street.
You could maybe compete on interstate highways or other long-area bits. Maybe. That's stretching it.
Build a competing water supply network to each house? Another set of sewers? Electricity distribution? Hell no.
IMHO all of these things should be communal property & development. The preconditions for free market are not met, it's not possible to compete; so the whole market equation falls apart.
Hand the operation & maintenance out to some company or whatever, there it's possible to compete. But not the actual physical infrastructure.
Seems to work fine in Japan for railways - there are three different rail connections from Tokyo to the Narita International Airport for example, each run by a different company (at the same time, we have 0 rail/subway connections to the Prague Airport:P).
Same thing in many other places - in Kyoto there is big and nicely build station by JR and, Transport Tycon style 200 meters from it another big station by IIRC Kintetsu.
Or in the middle of Tokyo, the Minami Senju station is effectively three station - One on the JR Joban line, one on Tokyo Metro and deep bellow another one on the Tsukuba express line.
So its definitelydoable, even in the most densely populated of places, at least with rail.
Also when you compare with places that have little to no competitionon the rail network you can clearly see the lack of service quality resulting from that. Well, if you get any service at all. :P
I just found this [0] paper about the development of the Tsukuba Express, one of the more recent train lines into central Tokyo.
Land owners whose land is taken away are given new plots of land that are smaller, but closer to stations. These smaller plots are worth more than the original land because they are now near (future) train stations.
That's really clever idea, no wonder they can get it to work, thanks for the article!
BTW, that's something else I noticed in Japan - train stations are almost always hubs of commercial and often also cultural activity - there are shops, hotels, good restaurants and often also galleries, event spaces, monuments and even the buildings themselves are often architectonic masterpieces (for example JR Kyoto station, just check it out!). This definitely helps with passenger numbers and keeps the whole thing sustainable not to mention profitable.
In comparison Czech & Slovak railway stations (Prague, Brno, Bratislava) are often run down, dirty, fregvented by questionable people who aren't going to ride the trains and any shops or food places are cheap low quality ones. As a result one tries to spend as little as possible on these train station, let alone spend there any money for the few sub-par amenities available.
It's really strange why it is like this, given the missed commercial opportunities, seems to be much better in other european countries (Vienna, Eindhoven, etc.).
In Japan, the train companies own the land immediately around the station to develop themselves, so the incentives line up to provide both good transportation service and things people actually need near the stations.
I feel like all these urban-Japan examples are more "only in the most densely populated places" rather than "even". If demand is high enough then you can absolutely support multiple competing routes: they all get enough passengers to survive, and the denser coverage is beneficial. It's when you get a bit further out and into smaller or less dense areas that it starts to get tricky -- different private railways end up complementary to each other as they serve different suburbs but are the only railway for most of the places they serve.
"yes, but:" the lines don't provide the same service along their path. Just because you can get from some point in Tokyo to NRT airport on 3 different services doesn't mean that these 3 services are competing on everything else. Same for the different lines and companies in other places.
I would actually consider this an odd example of "long-range" transport.
I don't know if NYC infrastructure is a good example.
The second avenue subway was the most expensive subway in the world on a per mile basis. Considerably more expensive than Paris or Tokyo
> The estimated cost of the Long Island Rail Road project, known as “East Side Access,” has ballooned to $12 billion, or nearly $3.5 billion for each new mile of track — seven times the average elsewhere in the world
Similarly, the fare only covers around 50% of the operating costs which hardly seems fair for NY state taxpayers that pick up the expense despite receiving no benefit.
The competing services for infra in NYC are cabs, car pools, private buses, bike rentals, scooters, subways. For getting into/out of the city, you have a number of bridges. For instance, I can take Lincoln tunnel, Holland Tunnel or ferry. It would be great to have more options and obviously its not easy to build tunnels, but private ferry and water cab services could be expanded
I don't understand why so many people assume that public transport needs to cover cost with fares. It provides immense public utility, even to the people who don't use it. It makes perfect sense to subsidize it. And it's not like taxes on cars pay for all their externalities.
I don't understand why so many people assume that others should pay for the services they consume.
Why should a relatively poor upstate new york taxpayer be paying 50% of the fare of some young finance bro going to work?
Also removing prices removes information. For instance the ferry costs something like $15 per rider to operate compared to around $5 for subway. With both trips at the same price to the consumer, you make the marginal rider indifferent to the two in terms of price where it would be beneficial to have that information to save money and divert resources to the more effective mode
I don't think the flow of money is from Upstate NY to NYC. And to take your example to it's logical conclusion, we'd end up in an AnCap paradise. Why should I pay for ANY socialized good or service that I don't use. Such as roads to places I'll never go, schools my child doesn't attend, and medical procedures that I don't need?
Size is important in that regard. I have less of an issue paying for socialized goods on a local level than I do at a much larger level. I'm willing to help a neighbor out, but less willing to help out someone on the other side of the earth. Local level is also more transparent and the officials in charge are more likely to be held responsible. I have more access to my mayor than I do my governor.
> roads to places I'll never go
Gasoline tax and toll roads are a good way of linking those who benefit to those who provide the good.
> schools my child doesn't attend
A lot of people move out of high tax neighborhoods when their kids graduate high school. I don't think school should be tied to real-estate anyway because it creates really perverse dynamics (people without money end up going to the worse funded schools). So that model doesn't exactly work well right now
> medical procedures that I don't need
I buy health insurance voluntarily and gladly pay for medical procedures that I don't need on the off chance that I need an expensive medical procedure in the future
Right, the better estimate of how economical transit lines are would be fares + gain in property value from the presence of the lines. (Or, to get the units right, fares/year + gain in locational rental value/year.)
Or to look at it another way: assume some genie offered to dismantle the NYC train/subway system for free. Assume you're the government and only care about maximizing revenue. Would that be a good deal? Of course not, even if the system wasn't self-sustaining from fares.
Don’t they already do that through more expensive registration fees? “Apportioned” and (sometimes) commercial plates cost more than Joe Shmoe driving a Civic.
> The estimated cost of the Long Island Rail Road project,
> The competing services for infra in NYC are cabs, car pools, private buses, bike rentals, scooters, subways.
You're conflating the infrastructure with the service on top of it. The equal comparison would be railroad project to motorcar roads & bridges. And the latter also have their share of cost overrun stories...
(Also, bridges are the rare case where a ship can compete. But, well, every rule has its exceptions.)
Oh and the fact that it's (even unreasonably) expensive has no bearing at all on the argument. There ain't gonna be some competitor building their own railway line regardless, or especially since the first one was so expensive.
Its an interesting example, subways seem to have some minor room for competition, so the argument against privatization based on "there cannot be competition" does not quite apply.
Even here though, there is a coordination problem to ensure various companies remain mutually compatible.
Competition on public transport is limited by the fact that you often need a cohesive network to get from A to B via C & D. If multiple companies cooperate on crossover ticketing and align their schedules, yes, it can work. Even more likely to work is a model where a central authority opens tenders for specific services, and transport companies can compete on that.
Then again, I don't think it's viable to build subway tracks and tunnels to compete. Even if you have space under the earth, there may not be space for more stations, and good station locations are important too.
That's actually land monopoly problem. Ie. whoever came first to claim the land has exclusive use rights on it forever, or as long as his descendants go.
It's yet another monopoly problem even though it doesn't look like it at first glance. Each house basically sits on a piece of mlonopoly for the parcel below it, preventing others from use.
It's not much of a big deal in general, but in congested big cities, it is a problem. It's the cause of high rents (by Ricardo's law od rent).
The solution is also a kind of monopoly tax - land value tax (LVT). You pay yearly percentage of the market value. Achieving almost optimal allocation instead of current hereditary one.
Establishing "market value" is the rub. Texas for example, does not make real estate sales prices public. This has a lot of perverse effects, one of which is deep-pocketed commercial interests have pummeled public assessors until commercial property is tacitly way undervalued for tax purposes, yet is openly sold for much more than the purported tax basis.
I've heard of a system I found interesting (but alas, can no longer find a reference to link) to competitively establish tax basis on commercial real estate (I wouldn't want this on natural person owner-occupied residential). You claim whatever tax basis you want. It gets published in the open. Whoever can put up completely unencumbered cash over the barrel for that basis + 7% or more though, can purchase the property. And by unencumbered, I mean not even investor syndication. Real, natural person, outright first and only lien on the cash, absolutely no liens tolerated against the property tied directly or indirectly to the cash.
Cash goes into government-controlled escrow. Current owner has one year to pay difference on one year's worth of new imputed tax basis represented by the escrowed cash, and continue from that point forward with the new basis. If the owner comes up with it, the bidder loses 6% of the cash (or whatever the real estate industry commission structure is at that time in that locality) to the local government as commission to facilitate the price discovery. Bidder can increase bid at any time by adding to escrow account, until either current owner "sells" to bidder (and escrow releases 100% to the current owner, no commission), or bidder walks.
I haven't sat down to really pencil it out, but I'm sure if someone did they'd find a way to game such a system, since I figured it otherwise would have been put into use.
Is there more "game the system" necessary than to say I have no right not to sell? This strategy is just privatizing, and then trivializing, eminent ___domain.
Isn't it possible to just make assessments for the entire block? Count the population density, commercial density, foot and car traffic and base the land value tax on those indicators.
> I haven't sat down to really pencil it out, but I'm sure if someone did they'd find a way to game such a system, since I figured it otherwise would have been put into use.
There is one major consequence: investor/VC backed/mega-rich major chains would instantly drown out family owned and small businesses that can't compete with gentrification. This is already a plague with Walmart and Amazon absolutely flattening local economies, your proposal would make it an epidemic of yet-unimaginable scale.
Whoever I found this from, they put in the "natural person" and "unencumbered" parts for exactly this reason I suspect. Bidders cannot even have any debt. Zero whatsoever. I'm guessing the one year waiting period is also for creditors to discover and nullify any potential conflicting use of cash they might want to attach? I remembered it as they wanted to zero out as much as possible all leverage from the price discovery.
Like I said, I found the entire idea of a competitive market in price discovery to establish tax basis fascinating, not the specific implementation details.
Housing isn't the problem here but as you said correctly, it's the land ownership that is problematic. If we assume that house owners merely rent the land then it's perfectly fine to build a private housing market since housing needs can differ drastically between citizens. Some need a big house for a large family with lots of children, others only need a studio apartment. Some people want a home workshop or a home office. The market finds a satisfying solution for everyone.
Land ownership is problematic because neighborhood improvements can be extracted via land ownership. The most effective policy against this extraction is to simply tax the land itself and thus turn it into a liability if the value of the land grows. Ideally, property taxes would be replaced with land value taxes.
If land is a liability the only reason why people would purchase it is to improve the value of the land and make it available for productive uses like renting it out to a large number of people.
The fact that it's unique/monopolized doesn't mean that competition is hampered. The building (or land parcel) at 100 1st Ave does not provide a service that is ubiquitously needed by almost the entire populace.
If anything, this strengthens the argument. You can buy/rent/... a different parcel nearby, and this only affects you and your planned use of the building. But you can't switch to a different road network, and this affects everyone in their daily life.
That said, I also agree with the sibling post that this is also a problem, just of a different kind.
> Hand the operation & maintenance out to some company or whatever, there it's possible to compete.
Oh no. Construction, operation and maintenance of electricity and other vital networks (water, gas, sewage, telecommunication) should be done by the government as a government agency with a quality of service mandate and not in form of a profit-oriented company no matter if government owned or private owned / publicly traded - because "competition" and/or a focus on costs is always going to end in price and wage dumping, cutting corners and sometimes in deathly disasters (California fires caused by cutting costs on maintenance, Flint water scandal, Texas infrastructure collaps due to un-hardened systems, ...).
While I agree with your sentiment, this was not exactly a private operator: this was a rural electric cooperative, that intentionally runs close to cost hile holding reasonable reserves. Its voting members were distribution cooperatives, whose voting members are individual households. This is about as sane as a platform ownership as one might have.
The cooperative that went bankrupt isn't the platform that the argument applies to. In fact, you could create another cooperative without much trouble and start a parallel implementation of the same scheme.
This really applies to the power grid itself. Even the power plants aren't covered by the argument, since if you have a reasonable grid, you can build another power plant of any kind you feel viable in some reasonably suitable place.
[Ed. add.: the grid is actually the market. It facilitates the transactions between power plants and consumers.]
If this cooperative was not the platform, what exactly is the platform being discussed?
Why do you could think one could recreate such a large cooperative like this without much trouble? Isn't the likely outcome of this bankruptcy a sale of assets to private equity: a situation that can probably never be reversed?
What do you think this cooperative did if it was not facilitating the transactions between power plans and consumers? I'm confused by your assertion.
> If this cooperative was not the platform, what exactly is the platform being discussed?
The power grid is the platform; I'm not sure how the original poster intended to apply the platform argument to the cooperative.
As far as recreating the cooperative goes: it doesn't need to start large, and I'm reasonably sure it doesn't hold much in assets. My understanding is that this cooperative is simply a collective of buyers who "pool their shopping", so money flows in and back out. A new cooperative may need to work its way back up to bulk pricing, but that should be doable?
I wish our political systems would admit to this. So often I hear one side praying at the alter of free markets and deregulation, while the other condemns any profit making business as greedy. It just seems to me that free markets work absolutely fantastic in some areas and absolutely horrid in others (health care being probably the most notorious example).
I think you are citing a false equivalency. "Any profit = Greedy" isn't as tightly held on the Left as Free-Market principles are on the right. The proof is in the pudding, which states have lost production of a service utility due to adhering to "Any profit is greed!"?
Well, I'll give you a specific example I was thinking of. Nearly every economist agrees that rent control is a bad idea if your overall goal is to make more affordable housing available to the largest possible population [1]. Yet I consistently see arguments in my left-leaning city against increasing density (e.g. with large multi family buildings) as "those greedy developers". Even the whole "Cancel Rent" protests during Covid often portrayed landlords as greedy (literal) rent seekers, despite the fact that some of the largest providers of affordable housing are small landlords at risk of losing their properties. The overall effect of this demonization of profit motive is a severe, and in some places catastrophic, housing crisis.
Yes, this is important. Free markets are just a tool. If there is a more effective tool then you should use that instead. I think it is particularly telling that one side is constantly engaging in corporate welfare when they talk about deregulation. The other side is exhausted from faceless corporations screwing them over. What's needed is more people who are on both sides and understand the whole picture. The idea that only one side is right is simply wrong. You need a wide variety of strategies.
There is this mindset that capitalism is always wrong when the mindset should be capitalism is not always right, which is a completely different perspective. However, I am really disappointed that people don't think about how to make the system work for themselves. Corporate abuse doesn't necessarily have to be the rule. The political environment could be shifted to favor workers instead and to a certain degree this would benefit everyone, not just one side.
> It's actually well understood that privatisation for platform industries is bad, privatisation for businesses running on top of platforms is good
That’s not “well understood” at all. Folks don’t remember how dysfunctional and sclerotic nationalized industries were in the 1950s and 1960s. There is a reason nearly every developed country got rid of them.
Working class people can now afford air travel, you can ship oranges between states without applying for a special trucking permit, almost 50% of Iowa's power generation is renewable, stock market trades went from 80c _per share_ to retail traders being paid to trade, and we still manage to make and enforce rules so that average gas mileage has gone from 13mpg to 26mpg.
I don't agree with Rayiner about Texas, but I don't think you can wave your hands at 60s-70s deregulation and say "lol Milton Friedman". The deregulators were right about a lot of stuff.
> It's actually well understood that privatisation for platform industries is bad, privatisation for businesses running on top of platforms is good.
Cite?
I have lived in two countries, one with privatized market based grid and have not yet had one power failure, one with nationalized grid and producers grid that had daily 8 hours power outages for weeks on end to the point where year on year per capita electricity usage (an important measure for development) was going down.
Anecdotes are not data, but all I can say is that most definitely every nationalised grid does not run better than every privatized grid, and without some data to back your claim I am skeptical.
> It's actually well understood that privatisation for platform industries is bad, privatisation for businesses running on top of platforms is good.
Its well understood by people who studied it well. However, there are still many pushes and arguments for privatisation that do not take these well understood facts into account.
> . When private companies screw up, who gets left with the bill?
In theory, the company is meant to declare bankruptcy (or seek more investment from shareholders) as soon as their books say they are insolvent. A company is Insolvent when it's liabilities are higher than it's assets, even by a single dollar.
The theory is that because the company is required to declare bankruptcy as soon as possible, it should only be slightly insolvent and should be able to repay creditors 80-95 cents on the dollar after liquidation.
Owners or shareholders might even put a company into bankruptcy while it's still solvent (if they predict a future insolvency, or just want to wrap the company up). Creditors might get the full 100 cents on the dollar. Any money beyond that is paid as dividends to the owners/shareholders.
In theory, if a company had incompetent or fraudulent accounting practices and didn't know it was insolvent, or it deliberately traded while insolvent, then the liability of the company is pierced and the owner can find themselves on the hook to the creditors.
Companies are only meant to be liability shields if they are run correctly.
In reality, sometimes events cause a company to lose a whole lot of value overnight. A company could be 100% solvent one month and 20% solvent the next. But as long as the company was following best accounting practices, it's legal. Sometimes the assets of a company can lose value after bankruptcy, or due to the bankruptcy. Especially when the company has put a lot of "good will" or "brand recognition" as assets on their books.
In reality, liquidators (who are also private companies) often don't go after owners responsible for fraudulent accounting or mismanagement. They let it slide.
Perhaps because they didn't detect it, or it was too minor to worry about. Perhaps they didn't want to waste their time trying to prosecute. Perhaps they decided their creditors would get more cents on the dollar by not prosecuting, especially if the owner has very little of their own assets.
I also suspect there is a reputation factor. Owners get to select which liquidator handles their bankruptcy (unless it was court ordered) and if one liquidator gets a reputation for going after the owners for every mistake, then they might get less business.
I've never heard this interpretation of bankruptcy. What I have heard is it's used when an entity can't repay their debts. This is not equivalent to liabilities being one dollar larger than their assets. Normally, bankruptcy doesn't dissolve the entity, it just restructures the debt. Dissolving the company can be done without bankruptcy and I believe is the process you are talking about when a company is fully solvent, but is wrapped up.
In the US, there Chapter 11 Bankruptcy (which is restructuring, as you say) and Chapter 7 Bankruptcy which is the liquidation due to insolvency that I describe here.
Where I live, there is no formal equivalent to Chapter 11, and liquidation is colloquially known as Bankruptcy.
While the terms may vary, the accounting and the general laws are reasonably constant world-wide.
Chapter 11 is a form of bankruptcy that leads to dissolution, but it is not the only way to dissolve an entity. In other words, dissolution can be caused by bankruptcy among many other ways. One of these is paying off all creditors and shareholders. Since this does not require debt restructuring, it would not require bankruptcy.
I do not think this reflects reality. Companies declare bankrupcies when their negative cash flow exceeds their cash reserves and they cannot put off creditors any further. Until then, they are a going concern. Alternatively, they declare bankrupcy when it will best help their owners. Assets and liabilities do not play much into the calculus. Just my observation from decades of startups and small companies and reading the news.
"cash reserves" are on the assets side of the balance. Often in smaller companies and startups they may be the only real asset, so when it runs out, the company is insolvent.
The other aspect to liquidation is cashflow. Sometimes companies have plenty of assets on the book to cover their liabilities, but these can't feasibly be sold in a timely manner to pay the creditors who want their money now.
If the company is healthy, a bank will be willing to offer a bridging loan. But if the company is less-than-healthy, the only option might be liquidation.
I didn't cover this about, because in these cases, the creditors are almost guaranteed to eventually get 100% of their money back.
As a couple other replies have mentioned, determining insolvency and when to file bankruptcy is a bit more complicated than this simple comparison. A quick counterpoint - you start a company on Day 1 and put $1 into the company; on Day 2, you borrow $10, but with the costs associated with borrowing, you only net $8 cash; at that point, you have outstanding debt (liabilities) of $10, but cash (assets) of $9; your new company is not insolvent, however - you can take that $9 and generate additional cash flows that allow you to repay the $10 debt in the future. While certainly not common, there are plenty of companies operating that have negative equity - it certainly is an indicator of a company having some challenges, but not an absolute that the company should be dissolved.
The question here is risk management, in monopolistic markets. The company can be run in high risk mode, under the assumption that if the risk realizes it will just go bankrupt and be bailed out. It wouldn't be bailed out in a competitive market, because competitors would pickup the slack, they would capture the market that was left without a service. In a monopolistic market, a normal bankruptcy would leave the market without a service provider, and thus a bailout is needed.
When a politician enacts a policy that ignores some big tail risk, they won’t be in office when it eventually blows up. Who foots the bill in that case? Certainly the politician and maybe their party won’t suffer election losses from it.
I think this is the reason politicians all around the world have been so ill-equipped to deal with Covid - they are used to their decisions having 10 / 20 year repercussions, by which time they're well out of the blame-zone.
This is one reason why having well managed, capable institutions matters so much. Don't get me wrong, democracy is vital to ensure accountability, but it often worries me when elected politicians interfere in the management of specialist institutions unless they are clearly mismanaged. These things can take generations to develop but only a few months years to cripple.
The thing that I find surprising about the US government is that everything is a bill/law. Like instead of the transportation agency deciding to build a bridge, Congress has to pass a law to build a bridge. Does anyone know exactly why it’s set up this way?
The short answer is your idea of how things work in the US is incorrect. Building a bridge certainly doesn't require an act of Congress. Explaining transportation funding in the US is complicated because the responsibility for road building is mostly a state and local government issue and there is a variety of systems from state to state.
Federal funding to help states usually involves two methods. The first is transportation block grants where the federal government gives states money to use towards transportation at their discretion within certain constraints. The other is funding for specific projects. This funding generally involves the state applying to the federal department of transportation for funds toward a specific project. The department of transportation provides these funds out of a pool of money allocated by Congress each year. Congress plays no formal role in how these funds are disbursed. The department of transportation decides using defined set of criteria.
In the past Congress would sometimes earmark funds toward specific projects. This is rare these days as most earmarking of funds is against current congressional rules.
It's funding. If the transportation agency had money in their budget, they could just build it as far as I'm aware. Most transportation agencies don't have enough slush money to randomly build a bridge. Taxes are unpopular, people don't want to spend that much. It also means the cost is localized, so the tax increase would be higher since it's over fewer people.
The way I rationalize it is that despite the fact that it might be a bridge in Nowhere, West Virginia, it will likely have wide-reaching impacts. More trucking routes helps almost everything. If I'm a visitor, I'm going to use the bridge, so I should pay some part of that.
You are ignoring the profit part.
Public company = maybe profits, maybe losses for the taxpayer
Private company = maybe losses, never the profits for the taxpayer.
Is 2008 already forgotten?
"After two straight years of paying $0 in U.S. federal income tax, Amazon was on the hook for a $162 million bill in 2019"
"$162 million is still just a fraction of the $13.9 billion in pre-tax income Amazon reported for 2019 — roughly 1.2%"
How much is your income tax rate?
According to their 2019 annual income statement[0], Amazon paid a total of $2.374B of foreign and domestic income tax on pre-tax income of $13.976B. That's 16.9%, not 1.2%. Is the author perhaps comparing US taxes with global income? (Or perhaps just whatever was left over after paying estimated taxes?) That certainly looks to be the case since they cited US federal income tax while the $13.9B pre-tax income figure is global, and even the domestic portion of the income taxes was $1.360B (9.73% of global pre-tax income), not $162M.
Given the federal corporate tax rate of 21%, the domestic tax numbers work out nicely if we assume approximately 46% of pre-tax income was from the US and the remaining 54% was foreign. Which seems plausible to me, though that is obviously a vast over-simplification and ignores a lot of details. In particular, the distribution of foreign and domestic deductible business expenses may not be the same as the distribution of revenues.
The division between the North America and International segments is based solely on which web site was used (e.g. amazon.com vs. amazon.co.uk), not the tax jurisdiction. The AWS segment is global, and the North America segment includes income from the Canada and Mexico sites. In sort, you can't infer much about what portion of the income is taxable in the US from those operating income figures.
Even considering all North America + AWS income together, since they paid $1.360B in domestic US income taxes that year (not $162M) the percentage would still be 8.37%, not 1.2%. That's ignoring all foreign taxes and the losses from the International segment. Do you consider a minimum 76% error margin to be "pretty accurate"? I sure don't.
Keep in mind, too, that losses from prior years can be carried forward and deducted from current income. That's part of the reason that there were no taxes paid in the two previous years; the current-year income is only part of the story. This is perfectly reasonable when you consider that $3B in losses one year followed by three years with $1B in annual profits equals no net income for that four-year period. Why should there be any income tax liability when there is no income? The alternative to carrying forward losses would be a refundable tax credit for the years with negative income to offset the taxes collected in profitable years, but that would be very easy to game.
At least it was accurate. I don't think anyone here is cheering tax evasion on or denying there are problems There clearly are. Let's at least be honest about it though.
What you can tell from that source is that most of the income is attributable to AWS—which is global—with most of the remainder being from sales at amazon.com, amazon.ca, and amazon.com.mx. Even if we simplify and assume that revenue from sales at amazon.com is strictly domestic, and the sales from the Canada and Mexico web sites are negligible, that says nothing about pre-tax income for the purpose of calculating US income taxes. For that you would need to know what fraction of their business expenses are related to their US operations.
"losses" and expenses like the double dutch irish sandwich the used in earlier years.
We all know that before Trump's tax reform the big players parked their money in Europe to evade the US taxes, but since the reform and Europe's shift in tax regulation companies like Amazon and Apple transfer their money to the US, to pay less taxes.
So the companies count these money as domestic income.
Measured in terms of the amount of money involved, there are huge differences compared to the working population.
Ever heard of progressive tax?
This is the opposite.
Does the fact that some people game their personal income tax make your income tax contributions worthless or irrelevant? I'm not clear what point you're making.
Corporate income tax is the third highest source of tax revenue in the US, at $230bn in 2019. Shareholders also pay capital gains taxes, and companies pay other taxes as well or collect taxes for the government as well like sales taxes.
State expenses have to be paid and if the wealthy don't pay, who is? I guess the one who can't afford an account in places like the Caimans.
And of course Corporate income tax is a hight source of tax money. The larger the share in profits, the higher the share in tax revenue. The question is why isn't it the highest source of tax income?
For your first question: in the TX power market, power producing companies contribute to a fund which will cover for losses if any participant defaults.
Even with that little detail, the rest of your comment seems spot-on. These power producers did not have enough incentive to deal with big problems, because the short term profits mattered more than potential future losses. That’s explicitly at the philosophical core of the TX power market, which is opposed to mandates, and relied on desire for profits and pressure from peers (peers that don’t want to pay extra into that fund) to encourage good behavior.
It’s unclear if that fund will be sufficient to cover all the losses. May yet need a bailout, which is indeed socialization of the losses.
> Private companies have no incentive to be ready for really big problems because they know they’ll get bailed out, or just not have to pay.
Generally speaking I'm on your side - but here? No. This case is an incentive for future shareholders of electric utility ops to keep their company accountable for disaster preparation, so that the shareholders don't lose their investment.
I'm not clear why shareholders aren't on the hook for these cases, on a per share basis. The individual owners can declare bankruptcy instead of the business
There are lots of ways to structure a firm. Some of them involve the sort of partnership that would effectively make the debts of the firm into shared debts of the partners. But others the debts of the firm are just that, and the only thing a debt of the firm can do to a shareholder is make the shareholder's share worthless. In the first case the partner might have to sell their Berkshire Hathaway shares to help the firm pay a debt. In the second case the shareholder doesn't have to sell off the BRK-B, or their house.
Unlike many private universities, rural electric cooperatives are controlled democratically by member-owners. In this case, it was a nested structure: the members were a dozen of local distribution cooperatives. Those distribution cooperatives have households for their member-owners. So, the power to regulate executive salary by households was there.
And the same management team stays in place coming out of bankruptcy. Capitalism is a complete joke. But we got ten varieties of Cheerios so there’s that.
A tax-funded electric firm would surely not share its profits with anyone, and even if it did it would still be at a net loss to the tax payers. (Since _all_ the funding would come from the tax bill - so its entire turnover is socialised.)
A private firm would actually contribute _more_ to our common because it would be a net tax payer.
I always wondered about that. Maybe because I don’t understand what it’s trying to say. I mean profits of companies benefit many, don’t they? Through jobs, taxes, dividends in case it’s a public company and so on.
In the run up to the 2008 financial crash, banks, property developers, landlords and others were making a ton of money. I was a student, so was not making any money. Then in 2008 all of that came crashing down and many of these companies got bailed out using public money. I graduated and had to pay an added bailout tax.
So, while they were all benefiting and making money I didn't see any of that money (privatise the profit), sure some of it got paid out in taxes, but clearly not enough, since:
When their businesses started to fail, I, who didn't make any profits from them, had to pay extra in taxes to save these companies. (socialise the losses)
They only saw upside and no downside, I only saw downside and no upside.
Sure, they paid taxes while they were profited, but my life didn't change much before vs after the crash, in terms of what the government was providing. So the government provided the same to me when they were supposedly earning extra in taxes as they provided when they needed me to pay extra in taxes to bail out the companies. That doesn't sound like the taxes paid by the companies really made much difference (and that difference was easily wiped out by the bailouts anyway). Same goes for any jobs created: would have been cheaper to use the bailout money to pay these people directly (pre crash) than to give them job and let them wreck the economy, and then we have to bail them out anyway.
One of the most egregious examples of this that I like to use is in natural resource extraction, mining, deforestation, etc. When mining companies start a project to dig a quarry (in Australia), they are meant to set aside funds for rehabilitation of the environment when they are done, this should come out of the profits from the endeavor. I consider destruction of the environment a socialised cost. Unfortunately, quite often, these companies will avoid rehabilitating the environment and misappropriate those funds, and then pay out massive bonuses to the few executives that could make it happen. Some of these areas will not be habitable for native wildlife for decades because the process is destructive and leaves the area toxic. The Flint water crisis is a specific example of this in America that really is affecting people. While I think you are technically correct, I don't think you considered the scope of the issue of privatizing profits and socialising losses.
> Maybe because I don’t understand what it’s trying to say.
When a business venture is doing well, it pays generous salaries to executives and avoids taxes. When the business venture fails or creates grotesque havoc through incompetence or bad principles, a government of cronies will use tax-payers' money to pay for the consequences.
The business venture continues its "mission" and its perpetrators continue their careers.
Think of the extraordinary sums of money given to corporations "too big to fail".
All of those jobs would have still existed in a public utility. How many dividends do you think the average Texan got from the various power companies in Texas?
How do you think the taxes paid by those private utilities will stack up against the massive harm caused by those utilities trying to preserve profits and reduce liability in a crisis? How much do you think it will cost Texan tax payers to dig themselves out of this hole?
Nope. They file bankruptcy. And the bill is left on the table. Only profits (divident) go to investors. If a company becomes insolvable the investors are shielded. Similar to when a company operated against the law: profits were taken by investors, now they can sink the shop when the law suits start.
> If it was a public utility it would be tax payers. That would be socializing losses.
No-one is arguing against that! In both cases the tax payers pay. Just in the privatized case the investors got the profits out year after year, and now threaten to sink the shop in order to get bailed out: that's what sets privatization apart from operating as a public company.
Yes, but many investors will have bought their share in the company, and that is worthless.
Whether they had enough money paid out through dividends in the run-up to that point or not is situation dependent - the company could not pay dividends at all.
> many investors will have bought their share in the company, and that is worthless.
That's just part of the risk. We're now talking about the bill that is still on the table. If the "investors" were fully responsible for their "investments" they would not have worthless shares, but they would have to pay up for what the company still owes. That their risk stops at "shares being worthless" is exactly what I mean by them being shielded.
I learned the energy firm was a coop: they have no shareholders.
But the discussion is still interesting, well at least to me :)
If they invested $100 made decisions that cost $150 and now lost their entire $100 investment, they are shielded against the $50.
Hence, anything that has real costs higher than their invested stake has effective costs for them at their invested stake. They are shielded to some extent. Especially for low probability high cost events.
This is exactly the point of a limited liability company, but it comes with slightly perverse incentives.
Some times smaller companies do stuff that makes them a lot of money but also creates debt or legal liabilities (transgressing some environmental laws or not paying taxes). When they go bankrupt later the "investors" already took the proceeds out by dividends. This certainly happened a lot.
Shielded doesn't necessarily mean that they are protected from all losses. Limited liability means that the liability is limited by the investment that was put in: they can lose up to their investment, but no more.
> With limited liability the investors are never liable for the debts.
Yes, assuming you meant "shareholders" rather than "investors"—creditors are also investors, having put money into the company with the expectation of a return, but would not be liable for borrowers' debts regardless of limited liability. It's the shareholders who are shielded from liability to the corporation's creditors. But the creditors know this and accept the risk as a cost of doing business with a limited liability corporation. If they don't like the corporation's prospects they are not obligated to extend credit.
> . When private companies screw up, who gets left with the bill?
The share holders (which often includes the leadership). Their shares drop relatively quickly to close zero.
I think, however, that this is not enough.
Share holders of a company should be liable as individuals for the damages the company causes in case the company cannot pay.
This would strongly encourage share holders to pressure the CEO (which is also usually a share holder) to run the company in a sustainable way.
Also if the CEO does "gross mismanagement", share holders should be able to sue them as individuals, but from the point of customers, share holders should pay.
The only reason "stonks can only go down to zero" is because we have put in rules in the system to make it that way. When a company fills for bankrupcy, the risk for share holders is limited (to their original investment).
If we change the rules and make share holders accountable, then stonks will definetly be able to go way below zero and share holders will need to foot a bill here, potentionally leaving them all bankrupt.
Once that happens, then customers might still be left in debt. IMO at that point employees of the company should start footing the bill. Many employees look away at wrong business practices because there is nothing in for them in trying to push for change and doing the right thing.
If everyone involved with the company would be personally liable, most companies would be run very differently.
I get what you're saying, but limited liability has been a thing for quite a while now. It would be hard to find a few billion dollars to make a new car plant if you could lose more than you put in. But also there are already "piercing the veil" laws where you actually are liable for your business if you commit fraud.
Perhaps it's worth a rethink, as it's been a while since the 1800s when capital was scarce.
So who is paying who? Am I just transferring money from my 401k to someone else’s and then they transfer it back since we both own shares in index funds?
Going to $0.00 is plenty of incentive for shareholders to demand accountability. It makes no sense to me to somehow go even lower than that. And why would shareholders be specifically punished but not creditors? If there is some liability claim how are shareholders not just equally responsible as everyone else including creditors? If Joe down the street buys a share of Enron he’s going to get sued? If Jane who works as the company nurse owns stock is she now getting sued? How does she with her 10 shares effectively make management “less fraudulent”? What leverage?
C’mon.
When a company goes bust or bad things happen, shareholders everywhere lose their investment. That’s a big enough deal as it is.
> If everyone involved with the company would be personally liable...
Liable for what? Are creditors suing shareholders for losses? I guess banks won’t hold shares of companies because then they’d just be suing themselves.
If a company “does damages” and the government failed to regulate the company properly can we sue the government too? What about suppliers? Why draw the line at shares? Maybe everyone who was ever paid by the company should be held liable?
What you’re proposing here could use some work. You’re trying to create a system of infinite liability that just doesn’t make much sense.
> And why would shareholders be specifically punished but not creditors? If there is some liability claim how are shareholders not just equally responsible as everyone else including creditors?
FWIW I also believe that creditors should take more responsibility on the credit they give. We saw in the financial bubble of 2008 that there are many incentives for creditors to provide credit to persons and companies that _they know_ won't be able to pay.
> Am I just transferring money from my 401k to someone else’s and then they transfer it back since we both own shares in index funds?
Putting your 401k into stocks and index funds is a choice you make. Nobody forces you to do that, and you, e.g., put them in bonds instead for lower returns and lower risks, or if you are willing to take more risks, there are Index funds and ETF for pretty much any criteria you can imagine. I personally think that using a 401k with index funds on stock is a great choice given how the market has grown the last 100 years, but many countries actually don't have 401ks (e.g. most of Europe doesn't have them) and they do jut fine.
> What you’re proposing here could use some work.
That's a really positive and kind way to put it, thanks. It was just a thought.
The system of "a company is only liable with its assets" is what we have had for a very long time. There are many scams that exploit this, and a continuous stream of gross negliglence or malice that shows up every now and then when those at fault are able to just walk away and do it again.
Thanks for your thoughtful response here. I want to really dive into something here which is your comment about 401ks and bonds.
Unless I misunderstand what you are intending with your original post (and obviously that can be subject to reinterpretation, modification, etc. - i.e. I don't hold anybody to the original idea when there is room for evolution) - if you put money into your 401k into something like, let's say a total stock market index fund - you could be sued for any company doing anything negligent. Right?
Now you might say - well that's the point. You should do your research. So let's say you're risk-adverse to being sued as a shareholder and only buy stock in the S&P 500.
So the S&P 500 Surely those are good companies, right? Sure. Except now there's only a small exclusive group of companies that get investor dollars. You're funneling money straight into the dominant companies. How could a smaller company ever raise capital?
You may recall that index funds and ETFs are made up of individual companies - actual shares. So to the extent that you have to research every company and know it inside and out so that you aren't exposed to potential lawsuits effectively eliminates all individuals from the capital markets. Only the wealthy would have ownership stakes! 401ks are just a convenient vehicle to help regular people save money - many in Europe and elsewhere opine for such a thing (spend some time on the investing subreddit).
Part of the whole point of this exercise is that you want regular people to share in the success of companies. If you open them up to liability, you defeat that. Jeff Bezos and Marc Andreesen can afford liability lawsuits. You and I can't. The rich get richer.
I'm also not sure why bonds would shield you from liability. You're still giving the company money to do these bad things, why does it matter if you have ownership? Hell, maybe companies just issue high-dividend paying bonds and avoid the whole "ownership" liability thing?
I think you're on point with regard to accountability - but that's a current failure of government, not corporations. I'm also not sure about the potential externalities that are caused by making any shareholder liable for a company's bad behavior. From a philosophical standpoint there are a lot of things to consider and I think we'd really have to nail down what specifically the issue is. Certainly workers who work at bad companies should be punished just as much as shareholders, right? Shouldn't the be personally liable even more than shareholders since they make the whole company run? And why would that not extend from management down to the janitor?
> I'm also not sure why bonds would shield you from liability. You're still giving the company money to do these bad things, why does it matter if you have ownership?
Sorry, should have clarified "government bonds" here.
We are hypothetically talking about changing the rules, so we could change them to whatever.
I think the fundamental problems here are a lack of oversight, and also a lack of financial incentive to avoid defaulting in the very long term (as a "mortal" investor, at some point you are going to cash out).
Thinking about the 401k, you mention the S&P500 index, but there are thousands of indices. There could be an S&P500 "proper oversight" index, that filters the S&P500 by some oversight metric. If that gives you 200 stocks instead of 500, and that's too little diversification for you, there could also be an MSCI ACWI IMI "proper oversight" variant as well.
Creating an exemption for 401 and pension plans in general could be an option, but TBH many index funds are big investors in companies, and they do often have a say.
> Sorry, should have clarified "government bonds" here.
Sure, no problem. But what about when the government does bad things and gets sued? At least something to think about.
I think some of the things you're discussing here are still fundamental government enforcement issues. You can create a "proper oversight" index but that doesn't shield individual investors. Facebook would have been part of that, for example, but now things have changed and the company could be open to liability for damages. I think the main issue here is there is too much risk for individual investors - they can't be experts in every stock or research every company - or get out if they start to see a pattern of fraud. So the only people who will own companies will be wealthy individuals and institutions that can fight lawsuits.
I also don't think this solves the concentration of wealth to the top companies. You can be a small, highly ethical company but not be able to raise capital in the public markets because investors are too risk adverse.
In my view, I think if you believe that there is a lack of oversight and a financial incentive to default, then you need to go back and look at how the government enforces rules that already exist before blowing up the entire capital markets for regular people. They seem to work pretty well, overall. Government bonds pay nothing now - if every investor had to exit the market (me and you) we'd just be stuck with useless dollars and no means to deploy them.
If you haven't read it, Fooling Some of the People All of the Time is a great, but also depressing read into this.
Do we prosecute the janitors, too? What about the admin staff? I'm fine with burning HR at the stake, but some fairer minded folks might point out their general lack of involvement in business decisions that affect the public, as a reason to spare them.
The kindest thing I could think to call your idea is naive and poorly conceived.
Do the janitors and admin staff hold shares? Ie do they benefit from the companies profits and do they have power over the board and executive teams?
If not the shareholders, someone in control of the company should be held accountable to avoid a "company in trouble? oh well, just shut it down, debt go poof, start again elsewhere, pocket the profits" situation or a situation where the company does something like damaging the environment. Too often do companies also get gutted to avoid paying out in lawsuits. There should always be people to go after. Probably it should be the board and executive team, rather than "I bought a single share" people. Ideally someone with skin in the game (so either being a shareholder, or maybe high salaries are sufficient too).
Shareholders already do get a penalty. The company gets fined which impacts future profitability and the stock price, thereby impacting shareholders.
Also, most often the shareholders of large companies have no knowledge of illegal behaviour because the responsible stakeholders/executives inside the org are hiding that information. Enron is an example.
What we need is more executive accountability. For example jail sentences to the HSBC execs that knowingly facilitated money laundering for the Sinaloa Cartel. Instead what we got was a mere fine which mostly impacted the shareholders.
Right now, as a share holder I don't really care about what the company does, only that the stonks go up.
There is no financial motivation for me to care. Sure, stonks can go to zero, but I still don't care. I have a very diversified portfolio (5k positions) because stonks go to zero all the time, even if companies don't do anything illegal.
If I were liable, I would have to care, because one position could bring down your whole portfolio. I would only invest in companies with a lot of oversight, etc.
I don't think a system in which the government is in charge of the oversight can work; there are just too many companies. I think every party financially invested in the company must be intrinsically motivated to perform a high degree of oversight.
I'm averse to making a big change like stripping limited liability when there's easier and less complicated first steps: much larger fine size and executive accountability.
I get what you are saying, but you are the one that chooses which index fund to use.
Sure, one could limit this to voting rights, but most big Index funds have voting right on many companies because they own collectively many shares.
One could also limit this to "outside 401k / pension programs", etc.
But if you have a say in what a company does (or can sue them for damages as an investor), you also have a responsibility for what that company is doing.
I don't know what the right solution to this problem is, but in many companies, the shareholders tell the CEO what to do and have no liability. This encourages them to optimize for maximum profits, making smaller "Company sized" damages part of the operating expenses, but without regard for huge damages like in this case.
Which isn't fair either, since it means the damages to these people won't be payed by those who profited from them.
Insurance companies are already worried. I expect them to start writing into their policies exclusions about man made climate change. Which most people won't notice until it is time to file a claim. And then there will be a big uproar.
No single weather event can be reliably tied to climate change, though. Presumably it's on the insurance company to prove that an event falls into an excluded category, so it's a matter of time before someone fights them on it and wins.
Insurance is a business that’s mostly designed for uncorrelated tail risks. It works well for insuring shipping. It works pretty well for insuring against house fires. It can be tricky with natural disasters where the risks are quite correlated, though insurance companies try to prepare for it.
It works poorly for cases where the risks are unknown at the time the insurance is sold and then turn out to be correlated. For example asbestos-related lung disease claims basically wiped out many syndicates at Lloyds (though this was exacerbated by other problems like the accounting practices or underwriters having unlimited personal liability)
As a digression, I used to live in Shropshire and know of at least a few houses built close to rivers and streams that used to occasionally flood the ground floor. The buildings were set up to take this into account, with tiled floors and sturdy wooden furniture.
In one case I know well the old couple living there used to just chase the flood water out of the house with a running hose to clean it out. They sold the house to a young couple who redecorated the whole house and put carpets and stuffed furnishings on the ground floor. A few years later the whole lot was ruined, they sold and moved out. Apparently their neighbours tried to warn them.
Which for the majority of the UK means unpurchasable. With high rents in many places it's getting extremely difficult for a lot of people to save enough even for a deposit on a house, let alone buy it outright.
Oddly I think refusing to mortgage homes on flood plains is actually a good call by the banks. The local councils are just building in whatever idiotic places they like, stripping hills of the foliage which absorbs water to put houses there, then putting even more houses below where all the water now has to flow.
The effects of climate change are expected to be gradually increasing frequency and severity of extreme events. So that's not too hard to calculate probabilities for on the time scale of typical house insurance policies that are renewed annually. It's not going to be one giant storm that takes everyone by surprise.
Isn’t it mind-boggling that under the stress of winter, the same infrastructure that they had yesterday suddenly costs billions of dollars more to operate? Profiting from calamity. The exact opposite of how public utilities should operate.
It's not the infrastructure that (temporarily) costs this much. It's the power that runs through it. There was simply no power.
> Unusually frigid temperatures knocked out nearly half of the state’s power plants in mid-February
They were short on the futures/forward contracts, i.e. they had to provide electricity, but there was none. When shit hits the fan someone has to foot the bill, and here it is them (among other such players).
I mean that the power that is still online doesn’t suddenly cost 500x more to produce. The plants are paid extra for.. not being prepared? This is why regulations exist.
Yes, it did in fact cost 500x more to buy, temporarily. Price is not determined by the cost of production but by supply and demand. Haven't you seen the extent of damage in Texas? What do you think people were willing to pay for electricity to not have this damage?
Otherwise you can have a command-and-control economy, like the Soviet Union had (I'm not being sarcastic). Then a person/group in charge would decide who gets the remaining supply, rather than the price-driven market.
Energy has always been a very delicate piece of engineering, sensitive to short term disruptions. Whether or not that energy is distributed via capitalist markets or not, whether it's electrical energy, gas or oil or whatever else.
Again, this is why regulation exists, in many markets. It’s nothing new and as far as I know how the majority of states operate. As a society we don’t want the vulnerable to be looted in times of need. Equating that to communism, is well, plain stupid, so I’ll refrain from commenting further.
It's worse than that, at the peak of the crisis not only were the capped at $9k/MWh, they were also floored at that price. As in, prices were administratively set to be $9k for a few days. ERCOT can just set prices to whatever they like, and their regulator (the PUCT) directed them to set it to $9k.
It's...not entirely obvious to me that was a good choice. Or even that it was a better outcome than what a deregulated market in wholesale electricity might have done, although we'll never know, since Texas doesn't have one. :)
> The PUC met Feb. 15 to address the pricing issue and decided to order ERCOT to set prices administratively at the $9,000/MWh systemwide offer cap during the emergency.
> "At various times today (Feb. 15), energy prices across the system have been as low as approximately $1,200[/MWh]," the order states. "The Commission believes this outcome is inconsistent with the fundamental design of the ERCOT market. Energy prices should reflect scarcity of the supply. If customer load is being shed, scarcity is at its maximum, and the market price for the energy needed to serve that load should also be at its highest."
Interesting logic. I suppose the idea is that if there's any shortage at all, then it must be because generators don't have enough money, so government should mandate that money be transferred from, in this case, coops like Brazos to the generating companies who failed to weatherise their plants?
Nice for the generators, rough on the people forced to buy power at those prices.
I expect they would have mostly been shut down at $1200.
Really it looks like retail electric providers in Texas are structurally disadvantaged vs generators, carrying an unlimited obligation of service vs getting the spot price set to the regulatory maximum.
I recall hearing that it was 29K on Griddy (myself included) before the storm. I've also heard a little over 10K were left to be transferred when it was shut down. I'm not sure exactly how many were exposed to the 4-days of artificially pegged prices.
I've also discovered over the past week that there's at least one more wholesale-rate provider, https://www.octopusenergy.com (specifically, it's OctoFlex plan).
Yeah, that's why I added the qualifier. It seems likely that most of the spot load was going to home heating (with less flexible large loads having contracts).
Of course, now people are going to keep an eye on daily utility prices, to avoid life braking bills.
The superiority of a free market with poor regulations!
I do find it troubling, however, that it’s more often than not used to clear down the ledger of a going concern, and then continue business as usual, same everything, just a new incorporation. You can bet your bottom dollar that they’ll be buying their own assets back on cents on the dollar, reincorporating, putting everyone back in the same positions, and paying some nice fat bonuses out of the capital they’ll be given as part of their dynamic chapter 11 restructure.
I’ve been a creditor on receiverships like this and it’s painful - in my view, if you run a business into the ground, you, your agents, and entities controlled by you or in which you have a substantial interest should be disbarred from operating an enterprise for at least five years. You definitely shouldn’t be permitted to continue in the same enterprise.
Bankruptcy isn’t supposed to be punitive. A company clearing up the books and then being able to generate a profit again in the future is better for creditors than destroying the company completely.
While true, it does enable some strategies in which you purposely run your company with a deficit while paying yourself a good salary until bankruptcy, with no lasting consequences.
And as the previous poster said: you can even "turn the company around" after and pay yourself a massive bonus for making it profitable again.
> You can bet your bottom dollar that they’ll be buying their own assets back on cents on the dollar, reincorporating, putting everyone back in the same positions, and paying some nice fat bonuses out of the capital they’ll be given as part of their dynamic chapter 11 restructure.
What exactly are you looking for a citation for? The GP was stating their strong belief regarding a future event and (I assume) facetiously saying you should bet on it.
The GP makes the claim in such a way that implies most if not all chapter 11 bankruptcies end this way. I was facetiously asking for some evidence from other bankruptcies to support this claim.
Well the electric grid falls in that category of service, like the military where the market is potentially a bad solution. So in this regard. The electric company was able to be negligent to their personal benefit of 1.8 billion dollars of unfunded liability it created. And then they call bankruptcy and that's the end of that chapter.
Calling that personal benefit when they were hit by a massive surge in supply pricing is shifting the blame a bit, no?
Realistically, since the creditors are probably private and the customers, which would otherwise face the loss, are the community, it's actually somewhat the reverse - privatized losses to the benefit of the community (which would otherwise need to pay off the surge in electricity pricing).
> Calling that personal benefit when they were hit by a massive surge in supply pricing is shifting the blame a bit, no?
How is it not personal benefit? This company was essentially acting in the same role as an insurance company for retail customers. They charge a fixed fee for electricity that is above the average price of electricity. When electricity costs less than they charge they make money. When it costs more they lose money. They should have maintained cash reserves from profitable times to handle unprofitable ones. In an extreme situation like the current one in Texas they could seek a loan or already have lines of credit in place to cover any shortfall from their cash reserves. The profit they made went somewhere and it obviously didn't go into a rainy day fund.
If a customer owes money to an electricity company which goes bankrupt, that doesn’t cancel the customer debt. The insolvency firm will sell the debt on for what they can get in order to repay some of the company’s creditors.
But they were benefiting. They have had years of not winterizing their systems, which helped them earn quarter after quarter of profits. Those profits were paid to executives and shareholders, who will not help make up the shortfall now.
They won’t just leave a utility lying dead by the roadside. Going by the last few decades of precedent, its assets will be acquired by a consortium of the current principals, most likely using state provided grants or loans to get things running again.
The argument is essential infrastructure, expertise, etc. - I mean, it works for banks, and surely a utility provider is actually essential infrastructure.
Or like California is it that deferring costs (winterizing in TX and fire prevention and forest clearing in CA) makes executives look good while kicking problems down the road, maybe even decades down the road.
Here in New Zealand the line network operator in the city of Dunedin has underinvested in the city line network, so instead of replacing power poles, they have simply changed the rules so that 2,500+ unserviceable old decaying power poles are suddenly within spec [1]... Meanwhile they are raising prices [2]
I have little doubt that when a major storm hits knocking out 100s or 1000s of power poles, they will simply blame climate change. Yes, the climate is changing, but the reason they will have failed is terrible, terrible management.
I hate this story - the case of Dunedin's lines company (Aurora) is not a matter of simple underinvestment - a decade or so ago the city built an indoor stadium, it cost hundreds of millions more than they originally claimed, and the local rugby community welched on the 'private fundraising' they promised to bring to the table - the city got stuck having to pay for it all, plus rather than making the promised small annual profit it needs to be subsidised to the tune of millions every year.
The stadium is owned by the same city owned holding company that owns Aurora(as well as a couple of other companies) - they effectively balance off the money made from Aurora with losses from the stadium - this allows them to avoid taxes on the profits from Aurora (a perfectly legal process).
However - and here's the real problem - Aurora (and the other companies) were not making enough money to cover the loan servicing - the holding company put immense pressure on the various companies to produce more income (profit) Aurora seems to have done it by reducing the amount of money it spent on maintenance .... now they're dealing with the results from years of missed maintenance and are trying to get the people living around Dunedin (and in it) to pay more to effectively cover that money taken out for the stadium.
Really they need to raise ticket prices at the stadium to cover these losses and make the stadium self funding - at the moment we subsidise every rugby ticket from our power bills and from our rates (property taxes)
Yeah, when the last government was trumpeting a new stadium in Christchurch post-quake as a massive economic boom, I was somewhat dubious. If the rugby franchises want it, maybe they should put their money where their mouth is.
They did put their money where their mouth is, they just had the sense to spend it on a lobbying campaign because it's cheaper to build a stadium with your money than theirs.
> makes executives look good while kicking problems down the road
Nobody wants to pay for things like preventative maintenance. So unless you have a regulator that is going to force you to do so, paying for things like winterizing equipment in TX isn’t going to happen. This is especially true when you can just change providers to whomever is going to give you the absolute lowest rate. So instead of being prepared for a once in a decade storm, a provider is more likely to not be ready and just fold of things get bad. You never see the results of what happens when you are successfully prepared for that rare event, only what happens when things go horribly wrong. So people (consumers included) don’t want to pay for things like maintenance. And regulators (who often answer to the public in some way) don’t want to be seen as being the cause of raising peoples’ bills.
The infrastructure to produce food is pretty vital, but I think it's also mostly market-driven and works well.
I think the issues around power utilities are more to do with a lack of competition, and legislation that creates perverse incentives. (I don't know what the current perverse incentives are, but at least as of 2010, an energy startup founder said[1] that power companies were legislated monopolies that were "restrained to charge a price only up to a certain regulated return on their capital", which meant it was "in the utility’s interest to buy the most capital intensive equipment that the regulatory commission will allow".)
Can you legislate a monopoly and write enough careful regulations to make it do what you want without giving it perverse incentives that will cause some disasters here and there? I doubt this has been solved even in the absence of regulatory capture.
If you don't like the supermarket or farm, you can shop elsewhere. The infrastructure that brings food to our tables is roads and railways, the power grid which brings electricity to refrigerators and freezers, and water and sewage utilities.
A supermarket or a farm are not part of our infrastructure. They may be "vital" but they are not infrastructure.
You (as an individual) can't really comparison shop for infrastructure, unless you want to move.
In your analogy, where the grid corresponds to roads and railways, the equivalent of the supermarket or farm is a wholesale electricity provider or power plant, right?
In Massachusetts you can absolutely comparison shop for specific power plants or sets thereof as an individual, at least to the extent of explicitly picking which generation company your money goes to by default. Of course in the end the way the grid works these companies end up effectively buying electricity from each other as needed... So this analogy only goes so far; supermarkets do not usually buy food from each other, I'd think.
Well, "the grid" is not literally like "roads"; they have all sorts of difference in practice in terms of who interacts with them and in what ways... So equating them in some way is absolutely an analogy.
I wasn’t equating them. I think you might be responding to something else in the thread.
I was pointing out that the parts of our food supply chain that are infrastructure and the parts that are market driven are different parts. The problem with thinking that we have “market-driven infrastructure which provides food” is that the system which provides us food is partly infrastructure and partly market-driven, but that doesn’t mean that the infrastructure is market-driven. The infrastructure parts (e.g. roads) and market-driven parts (e.g. farms) are different parts.
There’s no analogy here, I’m not using analogies, drawing comparisons, or equating things.
Yeah and that is by design. We consider famines as simply unacceptable and thus we make sure that the agriculture sector works, even when it shouldn't. Compare that to countries who are dependent on food imports for basic nutrition. They simply aren't doing nearly as well as the EU or USA.
> The infrastructure to produce food is pretty vital, but I think it's also mostly market-driven and works well.
Have you seen the amount of subsidies that exist for Ag? It's Market based in name only, futures contracts for pork bellies or bushels of wheat is so far removed from the day to day of farming that they might as well be pixie dust to a horticulturalist or a rancher, seldom does that morass of speculation enter into the equation of how and what to bring to Market.
To this day I will never understand what it is they are trying to establish other than a convoluted and hypothetical settlement prices for something that most countries deal with on the international level for international commerce not domestic consumption.
I did horticulture with some livestock during my apprenticeship and neither I nor the people I studied under ever made an effort to watch the FTSE when we began a growing season, what mattered more was following food trends like cultivating kale, brussels sprouts, kohlrabi, cauliflower etc... to meet the CSAs or that would command a price premium at the farmer's markets in a B2C business model.
> I think the issues around power utilities are more to do with a lack of competition, and legislation that creates perverse incentives.
Agreed, Texas may tout a deregulated energy market but I wonder when it is all tallied for how many people are actually allowed to offer their energy surplus, because unless Cletus from San Antonio with his 45kW array can tie into the system and sell his energy to interested parties I doubt you can call it a free market, let alone deregulated when only a few vetted and selected participants are allowed to do so.
I think this underscores the need to have your own power source, and I can tell you these storms are not uncommon in Texas: I was there this time last year making my way down to Boca Chica for my SpaceX interview and everything was frozen until about San Antonio, and Texans like Californians, suck at driving in anything but pristine weather.
I drove in from Colorado and snow and ice are typical that time of the year so my car was already weather capable (all seasons, de-icer, good windshield wipers etc...) since November and I had no problem driving in inclines with a manual transmission in completely frozen roads where all the locals had summer compounds on there massive SUVs and their lifted pickups and rolled over or crashed on the side of the road.
I was let go when the local cops realized I could drive in the ice/snow and they saw my Colorado plates.
I foresee this to be the new norm now in Texas now, 2 years in a row is not an isolated incident, it's a trend. And I'm sure I can already see Tesla making moves to bring Buffalo back online to supply Texans with residential solar alongside the Giga in Austin as people were posting on Social Media about sleeping in their Tesla in camp mode to stay warm.
And also I want to say that for all this tough talk about Texas being capable burly people, it's sad to realize that they can be out done by a Southern Californian from the coast with no camping experience and only several years of living in Germany, Switzerland and Colorado. I was embarrassed to see how incapable these guys were proving themselves to be under such a situation and made me realize that the adage of: all hat, no cattle apply to these supposed 'rugged people' for 2 years in a row.
If you can't start a fire in your environment to keep you or family alive you have no business of looking down on anyone and no amount of big talk and posing with guns is going to change that fact that you'd be the first to die if things got really bad.
I lived in the base of Bernese Alps in a cabin well over 300 years old with no running water, electricity or insulation for 2 seasons (Winter and Spring) at ~7k feet elevation where on the warmest days it barely went above freezing most days.
I managed to keep myself alive and take care of 40 grazing cows just fine--the cabin was attached to a barn. The hardest part for was manually pumping the water from the well in the morning and at night until it got warm enough to use the pipes again. And the smell, I can still smell them in my dreams to this day.
> Have you seen the amount of subsidies that exist for Ag?
Yeah, you're right. I think agriculture historically (and in many nations) has been one of the more powerful special-interest groups and has gotten lots of legislation passed on their behalf. As Catch-22 has it:
His specialty was alfalfa, and he made a good thing out of not growing any. The government paid him well for every bushel of alfalfa he did not grow. The more alfalfa he did not grow, the more money the government gave him, and he spent every penny he didn’t earn on new land to increase the amount of alfalfa he did not produce. Major Major’s father worked without rest at not growing alfalfa. On long winter evenings he remained indoors and did not mend harness, and he sprang out of bed at the crack of noon every day just to make certain that the chores would not be done. He invested in land wisely and soon was not growing more alfalfa than any other man in the county.
Still, in spite of the distortions to the market, my impression is that it's still a functioning market, the barriers to entry are not very high, there's sufficient competition, and we are not in any danger of shortages. (Finding healthy food at a decent price may be another matter...)
> Still, in spite of the distortions to the market, my impression is that it's still a functioning market, the barriers to entry are not very high, there's sufficient competition, and we are not in any danger of shortages. (Finding healthy food at a decent price may be another matter...)
I take issue with your conclusion, just look at the consolidation by the massive Ag-corps owned by big Pharma. Monsanto's purchase from Bayer is cause for extreme concern, but Dupont and Novartis via Syngenta are another massive corp which in tandem with Nestle repersent a large segment of food and water in the World, as well as seed stock.
The barrier of entry is hard, depending on which crop and partly why I got into Ag (biodynamic horticulture with an emphasis in hemp), but I'm proud to say that we have solved that problem in the US.
As for the price of food, we have never had cheaper food, actually and I'd argue this is holding back many more to enter the sector--prior to COVID we were making amazing progress in making more young, first time (small) farmers.
With that said, we are in a much better place then when I started all of this back in 2008, where farmer's markets were fringe and tech money flowing into a company like whole Foods was unthinkable, so I'm bowing out and letting the younger bucks take the helm and eagerly anticipate better results then what my generation did.
Honestly, there are few usages of the terms "deregulation" that aren't bastardized.
It very rarely refers to a removal of laws. Deregulation can mean a change of laws, change of regulator, establishing a regulating consortium... etc. One deregulation doesn't necessarily have anything in common with another.
We've reached a meta stage where "deregulation" means the types of policies favoured by the deregulation camp.
It's not like Texas' grid is actually unregulated. They have their own regulatory structure. It's just kinda sorta supposed to behave like a unregulated grid would... if that sort of thing was actually possible.
Extreme results in extreme conditions are more or less intentional. It's never going to be economical to prepare for 10 year events to avoid a few days of lost revenue. That, in deregulation-camp terms, means that it is a bad investment and wasteful.
The whole pricing debacle is a great case in point: "ERCOT triggered the squeeze when it pushed up spot-market rates to $9,000 per megawatt hour"
On one hand, the heart of the "deregulation" idea here is that "regulation" destroys pricing systems. On the other hand, what kind of a laissez faire market has a body that sets prices? In this case, it seems like there is a price regulator that is trying to replicate a failure in pricing systems... when demand and supply curves don't intersect and price goes to infinity.
PG&E's budget has a line-item veto by their regulator CPUC, who are just as happy if not more so to defer maintenance because they're mainly interested in not letting anyone's bills ever go up. They're investor-owned but not really privately controlled.
The free market is great at incentivizing companies to solve problems - but also to later "unsolve" solved problems so the company can keep their high profit margins even after the solutions have become trivial (see also Gillette, printer companies, out-of-patents drugs). The market solution to this "should" be that a competitor can undercut someone doing that, and drive them out of business - but why would anyone bother doing that, if the reward is to conquer a commoditized market that by all rights shouldn't be all that profitable, and isn't after your price war. If you have the chops to do that, you'll probably go into some other more profitable market instead (in that vein, hats off to that new drug company backed by Mark Cuban, if they end up actually doing that with generic drugs). Or someone does it, then gets an offer they can't refuse, so the upstart gets acquired by the incumbent, who can go back to exploiting their captive audience.
Brazos is a co-op, and is not part of the competetive retail market operated by ERCOT. They own their own generation and distribution, but are part of the grid for reliability purposes.
I'm not aware of any mechanism that could force their customers (who are also the owners) into that market.
Elon Musk making the move to Texas specifically to avoid the regulation that would have helped stop this from happening, would be kicking himself right now if he was in any way affected by this or consistent in his beliefs.
I am for evidence-based regulation, not picking and choosing which regulation is good or bad based on your own broken philosophy, or whether it is good for your business.
> to avoid the regulation that would have helped stop this
Actually it was the regulators themselves who were responsible: the Public Utility Commission of Texas - the government organization that is explicitly set up to prohibit price gouging - deliberately set the price to the highest possible price for the entirety of the storm.
I suspect he is not actually that smart - his interview with 60 minutes, for example, made him seem childish and foolish. These incidents just haven't been widely publicized. But the way Musk's name gets casually mentioned in tv shows reminds me of Trump.
You don't have to be born in America to be President, but you do need to be a natural-born citizen.
Of course, the idea of amending the Constitution to remove that requirement to clear the path for a particular candidate (not that long ago, Arnold Schwarzenegger was mentioned) has come up before; current restrictions won't necessarily apply indefinitely into the future.
Is your distinction that it has to be USA territories - colonies like Guam, Puerto Rico? - but not necessarily USA proper, so military bases and consulates count (?) but could be termed 'outside USA' or is something else going on here?
Iirc, when John McCain (born in Panama) was running against Obama, Congress passed legislation clarifying that people born on military bases abroad still counted as natural born citizens for electoral purposes.
McCain wasn't born abroad any more than if he had been born in D.C.; he was born on a US Naval Base in a US Territory.
Also, a statute passed when he was running for President almost certainly could not have any effect on whether or not he was Constitutionally a natural born citizen.
I wasn't arguing that he was anything but a natural born citizen of the US, merely noting that legislation to clarify that case, in particular, was passed at the time.
Legislation was not passed; a nonbinding Senate resolution was passed (legislation requires both Houses and either signature by the President or a veto override.)
No, the distinction is that “natural-born citizen” is a phrase in the Constitution about which there is some debate about it's exact meaning, but the dominant understanding is “citizen by law at birth and not later naturalized” rather than “born in the United States”.
>dominant understanding is “citizen by law at birth and not later naturalized” rather than “born in the United States” //
OK, that didn't clarify much for me, I'll have a look myself. I'm guessing now that there are other ways to be a citizen when born abroad, like 'born to USA citizens and repatriated within 5 years' or somesuch.
Here's a statement from the CEO who resigned describing a precursor event in 2014 and suggesting how the DoE should proceed to make a repeat less likely:
https://www.energy.gov/sites/prod/files/2014/08/f18/karnei_s...
It suggests the problems were systemic and interconnected, but at least some parts of the industry were aware of them.