The following is an article written by Joy Ditto, President and CEO of the American Public Power Association. For another perspective on public power, see today’s opinion piece by Kenneth Costello.
Dozens of communities contact the American Public Power Association each year, seeking information about public power and the process of creating an electric utility. Currently, many cities are exploring public power as a way to more easily access 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 speech in Portland, Oregon, he argued for public services, saying, “When a community – a city, county, or district is dissatisfied with the service rendered or tariffs charged by the private public service, it has the undeniable fundamental right, as one of its functions of government, one of its functions of autonomy, to put in place, after a fair referendum with its electors, its own government-owned and operated service.
He described public power as a “yardstick” that can be measured against for-profit electricity providers to ensure the best possible service and rates. The criterion can also be used as a motivator to correct out-of-course utility.
In 2022, the importance of public power in American communities is essentialwith nearly 50 million people in more than 2,000 communities (in 49 states and five U.S. territories) served by electric utilities.
Public energy remains a strong player in the sector and a viable option for communities that want to take their energy destiny into their own hands. 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 wanna to go.
Case study: Winter Park, Florida.
The road to creating a public energy alternative can be long and winding. It takes a dedicated community and unwavering leadership – for example, the city of Winter Park, Florida. In 2000, the city’s franchise contract with the utility owned by the incumbent investor expired after years of poor electrical reliability. Buoyed by customer frustrations and the support of local authorities, Winter Park began its municipalization process in 2003 with a study that showed a path to local choice.
In 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 community of Winter Park has finally invested in underground power lines – an essential undertaking for the tree-lined community that the existing utility would not support – and expects the entire system to be underground from here 2026.
Additionally, the community has obtained $3.5-4 million in excess revenue generated by the utility, due to its non-profit nature, which will remain in the community and can be allocated to community preferences.
Case Study: Boulder, Colo.
There are many examples of public energy initiatives that did not result in the formation of a new utility but still generated community benefits. In 2011, Boulder, Colorado 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 the use of renewable energy and continue to offer innovative services without increasing rates or interrupting service.
Boulder City Council proposed two measures in the November 2011 ballot. The first measure allowed for the issuance of bonds to pay for the acquisition of the local distribution system. The second increased the housing tax to pay for feasibility studies and legal advice to proceed with the takeover. Both measures were passed by majority vote. The people had spoken, and the public service was moving towards municipalization.
But the incumbent, investor-owned utility responded to the vote by pledging to step up its renewable energy efforts. The council agreed to suspend its municipalization efforts in exchange for these assurances.
Like Boulder, many communities abandon efforts to form an electric utility because the incumbent utility reacts to the competitive threat and offers valuable concessions. It is important that citizens see that they have bargaining power and alternatives to public service in place.
Since then, Boulder voters have entered into good faith negotiations with the incumbent utility, but the city can opt out of the franchise contract on certain release dates if it fails to meet its carbon reduction criteria. The council could also choose 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 incumbent utilities use to thwart municipalization efforts. In 2018, Decorah, Iowa, residents wanted to cut ties with its historic utility and spur economic development using local energy creation and retention. What began as a pro-community campaign quickly turned hostile, as the incumbent outspent City 5-1 on a misleading and divisive campaign.
Incumbent utilities often misselect numbers and look at upfront short-term costs rather than looking decades into the future. In contrast, utilities consider long-term strategic 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 start with research and evaluation to understand community needs, whether it’s lower rates, improved reliability, or accelerated progress on environmental goals.
Electric utilities all run different routes, locally driven to meet community goals. Some electric utilities have achieved ambitious renewable energy targets, while others are on track to make significant progress in reducing carbon emissions, beneficial electrification and providing customers with choice of distributed energy resources.
Arguing for the public energy option can often feel like David versus Goliath. This may involve costs for feasibility studies, legal fees and public education campaigns. Each community must weigh these financial costs against the consequences of an existing public service whose motivation includes the profit of its service.
When a community tries to “pull the yardstick out,” utilities owned by incumbent investors will often seek to outspend them with communications campaigns and legal action to protect their asset, which has a guaranteed fixed rate of return. . But that shouldn’t be a reason not to take steps to consider the option.
Public Energy is non-profit and aims to provide affordable, reliable and sustainable energy to communities. Utilities give back in many ways, including payments in lieu of taxes. Thus, community efforts to explore how best to manage and structure public services — including municipalization — should not be hindered. They should go as far as the community decides – and the community deserves to be well informed to make that decision.