Matters of Judgment

Abstract

Preceding sections introduce the process of pricing energy delivered by the electric and natural gas utilities. Guidelines and opinions are directed toward executive decisions governing internal operations. Decisions governing external relationships are for the most part left unexplored, leaving a gap between internal utility decision-making and external decisions applicable to other sectors of the economy. But even the most meticulous internal operations fall short if a company’s external relationships are deficient. There is a gap between internal and external in the earlier chapters. To narrow this gap, Chap. 12 addresses an often overlooked phase of management’s responsibilities: its decisions on outside issues. Chapter 12 is not intended for technical readers only. It is written to be read by a wider audience, by those who are affected by business or governmental micro-economic decisions, which means all of us. Chapter 12 has three distinct parts. The first addresses those who, directly or indirectly, contribute to the preparation of the company’s published business reports, particularly those of a financial nature. It points to frequent loose or inaccurate statements often found in these reports which are misleading and should be avoided. These are basic guidelines, intended to be instructive for those who originate the reports as well as for those who read them. The second part goes beyond basics. It aims at the top executives of businesses of all sizes who fashion the policies of their companies. Here good judgment in decision-making is of vital importance to the operations they control. As a prime example of a failed policy in the utility sector, this part cites the California energy crisis, where ill-fated decisions by executives of two major utilities led to the disastrous bankruptcy of one of the companies and the near-bankruptcy of the other. The third part is directed toward upper-level government executives who are responsible for the nation’s macro- and micro-economic policies. It reviews the 2008–2009 recession, and highlights the short-sighted decisions of the nation’s financial heads whose leadership (or lack thereof) permitted the recession to develop. The message for all three addressees is the same: be judicious in your decision-making, for its results may be greater and more far reaching than you realize.