Western utility economics puzzle former Communists
Branko Terzic is a managing director at Berkeley Research Group, and a nonresident senior fellow of Atlantic Council’s Global Energy Center. He served as commissioner on the FERC, and on the Wisconsin Public Service Commission, and as CEO of Yankee Energy System, Inc.
Sometimes even the simplest of concepts can be confusing when set in a different cultural context.
A few decades ago I was a regular lecturer for a series of training programs for utility managers from the former communist states of Central and Eastern Europe and the U.S.S.R.
The program was funded by the U.S. Agency for International Development, the World Bank, and the European Bank for Reconstruction and Development. The training took place in Vienna, Austria.
One highlight was that I co-lectured with Professor Vernon Smith. In 2002, he won the Nobel Prize in Economics.
The weeklong course included lectures on modern business accounting, economics, revenue requirement, cost-of-service and rate design. The lectures were all in English. But the English language skills of the all-male, mostly middle-aged, former communist party members were poor or nonexistent. Several of them brought translators.
Under the communist system, public utility services were paid for by the state-owned employer as part of employee housing. Or, if billed to a residence, the bill was based on pricing principles far removed from any notion of the cost of the services.