Electricity Tests the Operating Model

A proposed utility increase forces owners to connect actual bills, pricing, payroll, contracts, and margin before approval arrives.

The number on the page is 57%. A California utility wants regulators to approve it, and every owner with payroll due should feel the chair get a little harder beneath him.

Pacific Power, a Berkshire Hathaway electric utility, is asking for a 57% rate increase. If approved, the proposal would raise the typical residential power bill by $120 a month.

That language sounds procedural. Clean. Almost bloodless. The request enters a regulatory system, receives a case number, gathers documents, and waits under fluorescent lights while serious people discuss it in serious voices.

Outside that room, somebody has to find the money.

The residential figure is the one we have: $120 a month for the typical customer. A company account carries its own usage, rate classification, billing cycle, and operating demands. No responsible owner should use the residential figure as a substitute for his company’s bill.

He should still understand the warning.

Every regulated rate increase becomes an unregulated decision inside someone else’s company.

The owner must decide whether to raise prices, reduce payroll, postpone hiring, cancel equipment, cut his own compensation, or accept thinner margin. The regulator signs one decision. Thousands of owners make the rest alone.

The Polite Verb

Start with the verb: asking.

Pacific Power is asking California regulators to approve a 57% rate increase. “Asking” sounds gentle. A child asks for permission to stay out late. An employee asks whether a meeting can move to Tuesday. A utility asks for approval through a process backed by filings, attorneys, experts, and the knowledge that customers cannot simply drag an extension cord across the state line.

Regulated utilities have legitimate costs. Equipment fails. Infrastructure ages. Employees expect paychecks. Customers expect the current to remain available when they press a switch. Reliability carries a price, and pretending otherwise belongs in the same file cabinet as perpetual motion machines and painless tax increases.

The owner reading his P and L statement has legitimate costs too. His employees expect payroll. His landlord expects payment. His insurer has a due date. The bank has no spiritual gift for patience. Customers still compare his price against every competitor they can find.

Yet his request works differently.

He asks customers to accept a higher price without a state proceeding protecting the conversation. They can leave. They can delay. They can choose a larger competitor, a cheaper alternative, or no purchase at all. His authority ends at the proposal.

Regulatory grammar is marvelous that way. The utility asks, the regulators deliberate, and the customer discovers his bank account has been volunteered for civic duty.

A 57% request also changes the owner’s planning horizon before any decision arrives. He has to prepare for an approval, a rejection, or some other outcome within the regulatory process. Each possibility affects his budget differently. Waiting for the final bill leaves him negotiating with arithmetic after the arithmetic has hired counsel.

I have spent enough hours with spreadsheets to know my first instinct is to add another tab. Apparently, executives store courage in tabs. One for forecasts. One for scenarios. One colored red so everyone understands that red numbers are more serious than black numbers.

The spreadsheet helps. The decision still belongs to a person.

If Pacific Power receives approval for the proposed 57% increase, an owner cannot send his customers a regulatory order and expect applause. He has to explain his own price, deliver value at that price, and accept the consequences.

The People Behind the Stamp

Next comes the authority: state regulators.

Pacific Power is asking them to approve the 57% rate increase in California. That distinction matters. The increase is proposed. It has yet to become an approved rate in the facts before us. A request carries ambition. An approval carries force.

Regulators sit in an awkward chair. Customers want reliable service and manageable bills. Utilities want rates that support their obligations and plans. Political pressure hovers around the conference room like an executive who says he is only there to observe, then speaks for forty minutes.

I do not envy the assignment. I also refuse to treat it as sacred.

State regulators possess concentrated power over a basic operating input. Their decision reaches homes through the monthly bill and companies through operating expenses. That deserves more scrutiny than a stack of polished slides and vocabulary engineered to make enormous numbers sound housebroken.

A regulator can approve a rate. He cannot approve a customer’s willingness to pay the company that passes the expense along.

Government can authorize a cost without creating the revenue required to carry it.

That gap lands on the owner. He has to collect enough from customers to cover payroll, taxes, leases, insurance, debt, supplies, and electricity. If revenue falls short, a state stamp does not restore the missing dollars. The owner cuts somewhere, borrows somewhere, or closes something.

This is where people who have never carried payroll begin offering lyrical speeches about businesses “absorbing” costs. Absorption sounds painless. A balance sheet absorbs costs the way a wall absorbs a collision. The wall remains standing until the impact exceeds what was built behind it.

Employees live behind that wall.

One of them checks a direct deposit because rent is due. Another has a medical bill folded inside a desk drawer. Another hopes the next performance review brings enough of a raise to stop moving balances between credit cards. These people rarely appear in regulatory vocabulary. They appear in payroll registers with exact names and exact amounts.

An owner who prepares early protects more than his own return. He protects the ability to keep promises to people whose plans rest on Friday’s payroll.

Fifty-Seven Percent Has Edges

Then comes the number: 57%.

Pacific Power is seeking a 57% rate increase from California regulators. The figure deserves to stand alone for a moment because percentages have a habit of becoming decorative when buried inside formal language.

Fifty-seven percent has edges.

It cuts into gross margin. It alters pricing assumptions. It changes the cost attached to each hour of operation. For a company using electricity throughout its facilities, equipment, systems, lighting, climate control, and security, the utility account reaches across the organization.

The exact company impact depends on the company’s own bill and operations. Owners need their statements, rate classifications, usage patterns, contract obligations, and pricing data. Guessing from the typical residential increase of $120 a month would be lazy. Ignoring the proposed 57% increase would be worse.

Rising power bills hurt a small business through a chain of decisions. The utility account rises. Margin tightens. The owner reviews prices. Customers react. Sales volume responds. Payroll and capital plans move next.

None of those steps occurs in a vacuum. A price increase can preserve dollars on each sale while reducing the number of sales. Holding prices can preserve customer relationships while weakening the company’s ability to hire, maintain equipment, or withstand another cost increase. Cutting labor hours can protect cash while damaging service and exhausting the employees who remain.

There is no painless lever. There are only levers whose consequences differ.

That is why the owner should build a utility scenario before California regulators make their decision. Pull the last 12 months of company utility statements. List each billing period exactly as billed. Separate fixed charges from usage-related charges where the statement identifies them. Record unusual operating periods instead of smoothing them into oblivion.

Then connect the account to operations. Which locations use the most electricity? Which hours matter? Which products or services require the most facility time? Which customer contracts lock prices in place? Which agreements allow price changes, and under what terms?

The goal is a decision map. If the utility account rises, the owner already knows which prices receive review, which contracts require negotiation, which expenses can move, and which promises remain protected.

Delay is a pricing decision made by someone too polite to call it one.

A company that waits until cash gets tight still makes choices. It simply makes them under pressure, with fewer options and a louder bank balance.

The Word Doing Heavy Labor

Now look at the description: typical residential.

If California regulators approve Pacific Power’s proposal, the typical residential power bill would rise by $120 a month. “Typical” is carrying a briefcase full of assumptions. It describes a reference customer. It does not describe every household, and it does not establish the change for a company account.

The typical customer is a statistical relative nobody remembers meeting. He is always available for a filing and never available to explain why your own bill looks different.

Still, the residential figure matters because owners, employees, and customers live somewhere after business hours. A $120 monthly increase for the typical residential bill reaches personal budgets. People adjust spending when recurring obligations rise. Companies then meet those adjustments through sales patterns, wage conversations, and requests for flexibility.

A worker facing a higher household utility bill has not become disloyal when he asks for more pay. He is trying to keep his obligations current. An owner facing higher company costs has not become greedy when he reviews prices. He is trying to keep the organization solvent.

Both men can be telling the truth at the same time.

That is the part economic arguments often flatten. One side selects the struggling household. Another selects the utility’s obligations. Another selects the business owner. Each turns a complicated person into a cardboard exhibit.

The ordinary man is carrying several roles at once. He receives a residential bill. He earns a paycheck. He buys from local companies. He may supervise employees, own shares through an account, support relatives, or operate a company. The same proposed 57% rate increase reaches him through several doors.

His concerns deserve respect without sentimental theater. He wants reliable electricity. He also wants enough room in the monthly budget to cover housing, transportation, insurance, debt, and the needs of people who depend on him. There is no romance in moving one bill later because another arrived higher.

Owners should expect this pressure to enter compensation discussions. Prepare those conversations with numbers. Show managers what the company utility account actually costs. Show how pricing changes affect revenue. Show which contracts restrict immediate action. Protect confidential information, but refuse the fog of “challenging conditions.”

People can handle hard facts better than polished vagueness. Vague language makes employees suspect the executive office has built an escape hatch for itself.

One Hundred Twenty Dollars

Then comes the household figure: $120 a month.

Pacific Power says the proposed 57% increase would boost the typical residential power bill by $120 a month. That is a projected effect tied to the requested increase. It is neither an approved charge nor a business-customer estimate.

It is still a serious recurring amount.

A household cannot solve a $120 monthly increase through one dramatic gesture. The bill returns. Recurring costs demand recurring cash, which is why owners must distinguish between a temporary expense and a permanent change to the company’s cost structure.

A one-time repair can come from reserves. A recurring utility increase changes the model. It belongs in prices, productivity, capacity decisions, facility choices, or some combination supported by the company’s actual numbers.

Owners often attack recurring costs with temporary cuts. They freeze a purchase, delay maintenance, cancel a gathering, or leave a position vacant. The cash looks better for a period. The utility account continues arriving.

That is financial camouflage.

If the Pacific Power proposal receives approval, affected owners need to determine whether the approved structure creates a recurring cost increase for their own accounts. They should use the final approved terms and their actual bills. Until then, they can build scenarios around the proposed 57% rate increase without pretending a proposal has already become an invoice.

This distinction separates preparation from panic.

Preparation uses current statements, current margins, current contracts, and defined scenarios. Panic takes the $120 monthly residential figure, multiplies it against a business account without justification, and circulates the result through the leadership team with twelve exclamation points.

Nothing improves a budget meeting like unsupported arithmetic wearing formal shoes.

The owner’s review should reach three places.

• Pricing: Identify products, services, or contracts whose current margins cannot carry a higher company utility account. Review renewal dates and notice requirements now.
• Payroll: Model labor decisions separately from utility decisions. Avoid using employees as the first automatic offset for every increase on the P and L statement.
• Capital: Review equipment, facility, and operating investments through the company’s actual usage and financial return. Demand numbers from vendors. A green label and a glossy presentation remain poor substitutes for cash flow.

These categories connect. A delayed capital investment can preserve cash while extending higher operating costs. A price increase can protect payroll while affecting demand. A payroll cut can preserve short-term margin while weakening execution.

The owner’s job is to see the whole account before choosing which line carries the burden.

Margin Is Where Promises Live

The Pacific Power request eventually reaches one word the formal process rarely makes personal: margin.

The proposed increase is 57%. The stated residential effect is $120 a month for the typical power bill. For an owner, the critical figure sits inside his own P and L statement: the margin remaining after he fulfills the promises required to operate.

Margin gets treated as though it were excess, a suspicious pile of money guarded by a man in an executive office. Sometimes it is generous. Sometimes it is a thin strip between solvency and a humiliating call to the bank.

Margin is where promises live.

Payroll lives there. Repairs live there. Taxes live there. Debt payments live there. Raises, training, reserves, equipment, and generosity live there. A company with margin can respond to trouble. A company without it spends every week one surprise away from a conference room nobody wants to enter.

Stewardship requires enough margin to serve people tomorrow. It also requires honesty about what customers receive today.

An owner should never hide a lazy price increase behind Pacific Power’s proposal. If his own utility account rises, he should know the exact effect before invoking it. If his prices already lag the value delivered, he should correct them honestly. If waste inside the company is consuming cash, he should address that before giving employees a speech about sacrifice.

Executives have a remarkable ability to discover “shared sacrifice” immediately after preserving every privilege near the top of the org chart. Employees notice. God does too.

Faith changes the quality of the decision. It places truth ahead of spin, stewardship ahead of vanity, and people ahead of the executive’s desire to appear invulnerable. It also rejects cowardice disguised as kindness.

Keeping prices artificially low while the company weakens helps nobody. Customers receive unstable service. Employees inherit uncertainty. Vendors wait longer. The owner grows resentful and calls it dedication.

If higher utility costs require higher prices, communicate the increase directly. State the effective date. Identify the products, services, or contracts affected. Explain the relevant operating cost without inventing a company-specific percentage from Pacific Power’s 57% request. Give customers the notice required by their agreements and the dignity of plain language.

Some will leave. That loss hurts. Some will stay because the company has kept its word, delivered competent work, and priced the service with discipline. Trust rarely appears as a line on the balance sheet, yet its absence shows up everywhere.

Build the Decision Before the Bill

Pacific Power’s request now sits with California regulators. The proposed increase is 57%. The stated effect on the typical residential power bill would be $120 a month.

An owner has work to do before any final regulatory decision.

First, collect the company’s utility statements for the last 12 months. Use the bills themselves. Bank withdrawals show cash movement, while utility statements show the charges behind it.

Second, place those statements beside monthly revenue and gross margin. Look for periods when utility usage and revenue move together. Identify periods when the account rises while production, occupancy, or sales do not. Those mismatches deserve questions.

Third, read every customer contract that limits price changes. Mark renewal dates, notice periods, and pricing provisions. A company cannot rebuild margin through contracts its leadership team has never read.

Fourth, prepare more than one pricing response. An across-the-board increase is easy to announce and hard to defend when cost exposure differs across products, services, locations, and customers. Put the pressure where the actual economics support it.

Fifth, decide which commitments receive protection. Payroll dates. Tax obligations. Critical maintenance. Contractual promises. The list should exist before cash tightens. Panic has a habit of cutting whatever is easiest to see rather than whatever is least valuable.

Sixth, assign ownership. Someone on the leadership team should monitor the Pacific Power proceeding, maintain the utility scenarios, and update the pricing calendar. “Finance is handling it” is how important work becomes an orphan with a spreadsheet.

Seventh, speak with employees before rumor becomes the company’s most productive department. Share confirmed facts. Pacific Power has requested a 57% rate increase. California regulators are considering the request. The stated typical residential effect would be $120 a month. Company-specific decisions should follow the company’s actual bills and any final approved terms.

That level of precision protects credibility. It also keeps leaders from using a proposal as a convenient excuse for decisions they already wanted to make.

Owners should resist two forms of vanity. The first says, “We will absorb everything,” as though depleted reserves prove moral greatness. The second uses every cost increase as permission to gouge customers. Both place the owner’s ego ahead of stewardship.

Provision requires strength. Strength requires margin. Margin requires prices connected to costs, value, and risk.

The Pacific Power request has yet to produce the final bill described by the proposal. Still, the number is sitting there: 57%. The residential projection is sitting beside it: $120 a month for the typical bill.

Somewhere, an owner will place his latest utility statement next to a payroll register. He will open the pricing file, move the cursor into a blank field, and sit there longer than he planned.

Down the hall, the lights will remain on.

What to do about it

Pull the last 12 months of utility statements for every company budget you influence. Record each billing period, fixed charge, usage charge, and unusual operating period, then place the totals beside monthly revenue and gross margin.

Read customer contracts for renewal dates, notice periods, and pricing provisions. Build separate scenarios for an approved increase, a lower increase, and no change, then identify which prices, expenses, and capital plans receive review in each case.

Use confirmed facts in conversations with employees and customers. Keep the proposed 57% increase and the projected $120 typical residential effect separate from the company account, and explain decisions with actual bills and final approved terms.

At home, assign any recurring increase a recurring source of cash. Put the latest utility statement beside the payroll register or household budget before the lights stay on at a higher price.

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