Leonard Hyman & William TillesLike banking, the electricity business operates on a confidence-based model, relying on continuous influx of investment for financing operations, paying dividends, and retiring debt.
The surge in electric vehicle and appliance sales, coupled with increasing service interruptions, raises concerns about consumer confidence in the reliability of the electricity supply and the need for assurance that consumers will commit to electric-based solutions.We all know that banking is a confidence game. As long as depositors believe that the bank has enough money in its vaults to pay them, they leave their money in the bank.
Now the electricity business, at least in the United States, also depends on confidence in two ways. Start with its financing model, devised long ago by Samuel Insull and his contemporaries. In its original form, it resembled a gigantic Ponzi scheme and still does to some extent. The electric industry does not generate enough cash from operations to pay for new and replacement plant. It must sell debt and common stock every year in order to raise the extra money.