The public power option should be a community decision
Published May 12, 2022
By Joy Ditto
The following is a contributed article by American Public Power Association President and CEO Joy Ditto. For another perspective on public power, see today’s opinion piece by Kenneth Costello.
Dozens of communities contact the American Public Power Association every year, seeking information on public power and the process of forming a public power utility. Currently, many cities are exploring public power as an avenue to achieve greater access to renewable energy and address environmental concerns. Whether they prioritize low rates, high reliability, or community choice, people care more than ever about how their homes are powered.
In Franklin D. Roosevelt’s 1932 campaign address in Portland, Ore., he advocated for public utilities, stating, “Where a community — a city or county or a district is not satisfied with the service rendered or the rates charged by the private utility, it has the undeniable basic right, as one of its functions of government, one of its functions of home rule, to set up, after a fair referendum to its voters has been had, its own governmentally owned and operated service.”
He described public power as a “yardstick” that can be measured against for-profit electric providers to ensure the best possible service and rates. The yardstick can also be used as a motivator to correct an off-course utility.
In 2022, public power’s importance in American communities is paramount, with nearly 50 million people in more than 2,000 communities (in 49 states and five U.S. territories) served by public power utilities.
Public power remains a strong player in the sector and a viable option for communities that want to take control of their energy destinies. Whether “municipalization” efforts are driven by a desire for lower rates, better reliability, or environmental goals, this option should be explored as deeply as the community wants to go.
Case Study: Winter Park, Fla.
The path to creating a public power alternative can be long and winding. It requires a dedicated community and steadfast leadership — for example, the city of Winter Park, Fla. In 2000, the city’s franchise agreement with the incumbent investor-owned utility was expiring after years of lackluster electric reliability. Armed with customer frustrations and the support of local officials, Winter Park kicked off its municipalization process in 2003 with a study that showed a path to local choice.
By 2005, 69% of Winter Park residents voted to create the new electric utility. Although the negotiation took five years, the benefits certainly outweighed the cost. The Winter Park community eventually invested in under-grounding power lines — an essential undertaking for the tree-lined community that the incumbent utility would not support — and expects to have the entire system underground by 2026.
Furthermore, the community obtained $3.5-4 million in excess revenues generated by the utility, due to its not-for-profit nature, which will remain in the community and can be allocated toward community preferences.
Case Study: Boulder, Colo.
There are many examples of public power initiatives that did not result in the formation of a new utility but still reaped benefits for the community. In 2011, Boulder, Colo., considered local control of its electric utility in response to the community’s desire to move toward green energy to combat climate change. The effort brought together regional stakeholders to research and demonstrate how the city could acquire the utility, increase renewable energy usage, and continue to offer innovative services without raising rates or disrupting service.
The Boulder City Council put two measures on the November 2011 ballot. The first measure allowed the issuance of bonds to pay to acquire the local distribution system. The second increased the occupancy tax to pay for feasibility studies and legal counsel to proceed with the buyout. Both measures passed with a majority vote. The people had spoken, and the utility was headed for municipalization.
But the incumbent investor-owned utility responded to the vote by making commitments to step up its renewable energy efforts. The council agreed to pause its municipalization efforts in exchange for those assurances.
Like Boulder, many communities drop efforts to form a public power utility because the incumbent utility responds to the competitive threat and offers valuable concessions. It’s important for citizens to see that they have negotiating power and alternatives to the incumbent utility.
Since then, Boulder voters have entered into good-faith negotiations with the incumbent utility, but the city can opt out of the franchise agreement at certain exit dates if it fails to meet its carbon reduction benchmarks. The council could also elect to put an opt-out question on the ballot, or citizens can file a petition to do the same.
Case Study: Decorah, Iowa
Fear, uncertainty and doubt are other tactics that incumbent utilities leverage to prevent municipalization efforts. In 2018, Decorah, Iowa, residents wanted to cut ties with its incumbent utility and spur economic development using local energy creation and retention. What began as a pro-community campaign turned hostile quickly, as the incumbent outspent the city 5-1 in a misleading and divisive “no” campaign.
Incumbent utilities often deceptively cherry-pick numbers and look at upfront costs in the near term rather than looking decades into the future. In contrast, publicly owned utilities consider strategic, long-term investments that will benefit the community for years to come.
What do these case studies have in common? Hint: Studying
There are many reasons to explore municipalization. They begin with research and evaluation to understand the community’s needs ranging from lower rates, better reliability, or accelerated progress on environmental goals.
Public power utilities are all on different, locally driven journeys to address community goals. Some public power utilities have achieved aggressive renewable power goals, while others are on paths to making significant progress in reducing carbon emissions, beneficial electrification, and offering customers distributed energy resource choices.
Making a case for the public power option can often feel like David against Goliath. It may involve costs for feasibility studies, legal fees, and public education campaigns. Each community needs to weigh these financial costs against the consequences of an incumbent utility whose motivation includes profiting from its service.
When a community tries to “pull out the yardstick,” incumbent investor-owned utilities will often look to outspend them with communications campaigns and legal action to protect their asset, which has a guaranteed set rate of return. But this shouldn’t constitute a reason not to take steps toward examining the option.
Public power is not-for-profit and focused on providing affordable, reliable and sustainable energy to communities. Utilities give back in many ways, including payments in lieu of taxes. As such, communities’ efforts to explore the best way to manage and structure utilities — including municipalization — should not be stymied. They should go as far as the community decides — and the community deserves to be well-informed in making that decision.
– Joy Ditto