The Movement to Take Back Control From Monopoly Electric Utilities — Episode 154 of Local Energy Rules

Seth Berry:

Clean electricity is how we get out of the climate emergency. All of that needs to flow over the poles and wires. Those poles and wires are a monopoly. Because of the last 150 years or so of the evolution of that industry, we have allowed it. Without really thinking about it, without really noticing, we’ve allowed it to go globalize.

John Farrell:

Powerful monopoly utility companies frequently put up road blocks to expanding renewable energy, especially when it’s not under their control. This episode of Local Energy Rules shares three stories of communities fighting back with audio from an event hosted by the Institute for Local Self-Reliance in January, 2022. It features Maine Representative Seth Berry and Senator Rick Bennet discussing the Our Power campaign to transform Maine’s awful big utilities into consumer-owned ones. It also features Jean Su from the Center for Biological Diversity who discusses how antitrust law can save local solar from utilities’ anti-competitive behavior. And finally, Mariel Nanasi from New Energy Economy explains how grassroots organizing can halt big utilities from getting even bigger in a rare victory against utility tie-up in New Mexico. The full event video is also available on ILSR’s youtube channel. I’m John Farrell, Director of the Energy Democracy Initiative at the Institute for Local Self-Reliance and this is Local Energy Rules, a bi-weekly podcast sharing powerful stories about local, renewable energy.

Stacy Mitchell:

Hello everyone. Welcome today. My name is Stacy Mitchell. I’m the co-executive director of the Institute for Local Self-Reliance, and I’m super excited about today’s event. I’m excited to welcome all of you. We had over 700 people register for this event, which is just incredible. We are making a recording today, so there’ll be video of this event that we’ll post on our website and our YouTube page. We will email it out to everyone who registered, so we encourage you to share it with your networks and with people who weren’t able to attend today. ILSR’s mission is to challenge concentrated corporate power and to build thriving, local, equitable communities. We’ve been engaged in energy policy work since our founding in 1974. If you’re interested in learning more about that work, it’s really just an incredibly exciting time in the energy sector. A lot of important change going on, and a lot of important opportunities. I invite you to check out our energy democracy initiative, which you can find on our website. We publish reports. We produce a weekly podcast and newsletter, and we’re very active working alongside grassroots organizations across the country, building coalitions and working to build an equitable, decentralized, democratic energy future.

The reason we wanted to host this event today… Because as I said, it’s just a really incredible important moment in the shape of the electricity sector and we wanted to have a conversation about how our electricity system is structured and how the structure that we have now, the structure of investor-owned monopoly electric utilities, which may have made sense a hundred years ago, today is really at odds with the public interest, is really working across purposes with building a carbon-free future with rectifying racial inequality and with building strong local communities and a vibrant democracy. The good news is that there are some just really incredible grassroots initiatives going on across the country in which people are coming up with innovative ways to challenge control by monopoly utilities, and moving towards implementing new policies that would completely restructure the electricity system and really change the structure of ownership, of scale and decision making within the electricity system. And do so in ways that would very much align our electricity sector with the public interest.

Today’s event is a chance to meet some of the cutting-edge leaders and to hear about what they’re doing in a number of different places across the country. If you’re coming to this conversation because you mainly focus on energy issues or climate issues in your work, I think today’s event’s going to offer a chance to hear and explore how some of the frameworks and the thinking around anti-monopoly and anti-monopoly policy tools may be useful in what you’re doing. If you’re coming to this from doing work on antitrust and anti-monopoly, I think the energy sector is a really intriguing case study, particularly in helping us think about how to govern network industries, how to govern infrastructure. I think there’s some really important insights we can glean here as we think about what are the public policies we need to govern new forms of infrastructure, including in particular, the tech platforms, Google, Amazon, Facebook and so on.

The run of show today, just to give you a quick overview of how today is going to work, we’ve got two really terrific panels. Each is going to be about 25 minutes. In the first, hear from two state lawmakers from my home state of Maine, who led a successful effort in the legislature to pass a law that would allow our dominant investor-owned electric utility to become a consumer-owned electric utility. That law was vetoed by our governor. The lawmakers we have here today have joined with a set of citizen leaders and are working to put that on the ballot in 2023. It’s really an incredible campaign called Our Power. That’ll be the first panel. And then for the second panel, we’re going to broaden out and talk to some cutting-edge thinkers and advocates who are working to address utility power in other parts of the country, including challenging utility mergers and using antitrust law to go after some of the predatory things that monopoly utilities were doing.

Finally, I want to thank Jess Del Fiacco, ILSR’s communication manager, who’s been instrumental in pulling together this event. And with that, I’d like introduce ILSR’s other co-director, John Farrell, who is going to moderate the first panel. John is the director of our energy democracy initiative. Welcome, John.

John Farrell:

Well, I’m so glad to be here with you, Stacy. I’m here from my basement office, my COVID retreat. If I’m shivering on screen, it’s because it’s cold here in Minnesota, -10, but I’m also shivering in anticipation of this conversation, which I’ve been looking forward to for a long time. What’s going on with our power and with the other panels I’ll be talking to is really a transformational conversation that’s happening in the electricity sector that is tying into this broader conversation about corporate power. In the electricity sector, specifically it’s the culmination of almost a decade of exploration by cities, by communities, by states on this idea of who owns the energy system and how can communities have more choice. We’ve been tracking, at ILSR, lots of places that have done municipalization campaigns, public power takeovers that have looked at ways, in California and Illinois and other states where cities can take control of energy purchasing, but without getting too much into the weeds.

I just have to say that this, really, what has been discussed in Maine with Our Power really is transformational in terms of talking about the platform of the utility system as a platform, as this idea, as a place where people might be able to transact, to innovate. Entrepreneurs and businesses could really help us solve the naughty and thorny, clean energy and energy reliability and affordability questions of the 21st Century. And they’re doing that in a really novel and exciting way, that I think is the evolution of a lot of these other efforts that have been building up. I am very pleased to welcome Senator Rick Bennett and Representative Seth Berry to join me for a conversation about Our Power. Seth and Rick, thank you so much for joining us for this conversation today.

Seth Berry:

Thanks for having us.

Rick Bennet:

Wonderful to be with you.

John Farrell:

I just want to start off by asking a question, the generic question for people who might not be as familiar as I have been in following the Our Power effort. What is this really about? Why did this idea of a consumer-owned utility that would open access to the grid system, why did the legislature feel compelled to step in and to restructure the state’s electricity market in Maine? Rick, I was hoping to start with you.

Rick Bennet:

Sure. Well, I hope you go over to Seth because Seth really has been the leading light in this amazing battle that has turned into quite an amazing movement in Maine. The reality is that we’re undergoing so much change in the world today. I mean, people feel lost in the traditional institutions that we’ve relied on to govern our activities, whether that’s in the banking sector, the power sector, the university sector, the media. And at the same time, we have an immense opportunity to democratize our decision making. And so, it’s interesting that in this area of power where we need to have a grid, which is more responsive and more elastic and more flexible, where electrons are moving in all directions, not just from one big power source out, but from many, many thousands of power sources around and feeding into the grid, we still have this antiquated system of governing our actual grids. We rely on these investor-owned utilities in Maine for most, but not all, of the grid management in Maine. These investor-owned utilities have proven unworthy of the job. I also have to say, somehow along the line, the main owners and managers of Central Maine Power Company and the old Bangor Hydro, which is now Versant, suddenly we wake up one day and Central Maine Power Company is owned by a Spanish conglomerate named Iberdrola, which in turn is the largest owners of the Norway Oil Fund and the government of Qatar. The old Bangor Hydro isn’t owned in Bangor, Maine anymore. It’s owned by the city of Calgary, Canada, 100%. We have this distant ownership. We have an unresponsive failing on every scale, in fact the lowest rated power companies in the country because of reliability problems, cost problems. And so, we come to this point where this isn’t just about electric power, it’s about power of people for self-determination to control the grid themselves and make it a grid for the future. That’s really what this movement has become, more than just about electrical power, but really about political power.

John Farrell:

Seth, I loved it. If you have more to add to that… But also, could you talk a little bit about why there’s this specific focus on ownership and control of the grid platform? Rick already alluded to this, that we’re talking about absentee ownership in a way. You have these utilities, these private companies, they’re not even owned by entities that are within the state of Maine, within the United States. In the proposal that Our Power put forward in the legislation, in the ballot initiative question, it really focuses on this idea of consumer-owned utility that will have open access. Can you talk about how that addresses this issue of power and why that’s such an important piece?

Seth Berry:

Sure. First of all, it’s just so great to be here with all of you. I’m honored and proud every time that Senator Bennett and I get to work on this together. I think it’s important to note for folks that aren’t familiar, senator Bennett was the president of the Maine Senate in a previous lifetime. He’s now the lead on the environment and Natural Resources Committee. He’s also on the board an internet services provider, a fantastic, scrappy business here in Maine, among his many other impressive credentials. I come at it from the other side of the aisle. I am a former democratic legislative leader. In front of you, you have a Republican, former State Senate president, and a democratic former House majority leader. We have joined in this effort because so much is at stake.

I think, John, your question goes right to the heart of it. This idea of a nondiscriminatory platform provider and this concern about monopoly is pretty hot right now in the information space. People kind of get that. They’re like, “Facebook is take over. This is a problem.” there, there are two major cable companies and they have a stranglehold. They’ve agreed not to compete with each other. They have a monopoly in their areas. Cell phone services are much better. So as we’ve seen the information highway be purchased and increasing toll plazas is put up on it and really a huge negative impact on our very democracy, which depends on good information. We’re familiar with that. That’s more in the public eye.

But there’s this other thing happening, which also has to do with poles and wires, and it is electricity. I would argue that every bit is much as at stake. Because if you think about it, how do we decarbonize? How do we save the planet? We all know that the planet has very few seconds on the clock left if we don’t do something drastic, and that involves electricity. We need to shift to electric vehicles. We need to shift to heat pumps to heat and cool our home. Clean electricity is how we get out of the climate emergency. All of that needs to flow over the poles and wires. Those poles and wires are a monopoly. Because of the last 150 years or so of the evolution of that industry, we have allowed it. Without really thinking about it, without really noticing, we’ve allowed it to go globalize. We’ve allowed it to conglomerate. We’ve allowed it to become the province of the few in order to extract value from the many. And so, this is about power. It is about money. It’s also very much about climate.

If we’re going to decarbonize, we know that we need to shift to consumer ownership because it works. Because if you look at the first six communities in the US, the only six that I know of that have actually fully decarbonized, all six of them were served by consumer-owned utilities. I can rattle off the names if you like, but four of them just happen to be in conservative parts of the country. Consumer-owned utilities, by the way, are not a new thing. They serve 28% of America right now. Some are co-ops, which serve the rural areas. They were the the last to get service because the big boys didn’t want to cover them, wasn’t profitable enough. So, thank you, FDR. Munis have been around for even longer. They’ve been around since the very dawn of the electrical era. Between the muni’s and the co-op’s 28%, those are the places where they have turned to it, that have decarbonized fully successfully, gotten to a hundred percent renewable electricity. In the large utility space, I think of SMUD, I think of LA. They’re the leaders in getting to a hundred percent renewables as well, and they just happen to be consumer-owned. It’s not an accident. It is very analogous to the information space. If you want a utility that isn’t intent on preserving and protecting its stranglehold on that highway of electricity, just like the information highway, then you need to have the right motives, the right incentives, and not perverse incentives. Right now, all the incentives are about protecting what they have, maintaining the status quo, making sure that that transition is frankly as expensive as possible. And that’s not going to help us if we’re trying to get there. I’ll stop there, but have a lot more to say, John.

John Farrell:

I’d love to actually get into this a little bit more. One of the things that you’ve already highlighted, in terms of the benefits of this approach, is that we can meet some of the climate and clean energy goals that we hold collectively easier, whether it’s in transportation, whether it’s in building heating and cooling, there are all of these different facets of our economy that can run on electricity. And electricity is something that we know how to clean up and make renewable and make low carbon and make pollution. You referenced this in terms of the way that these businesses operate. They’re for-profit businesses. They’re operating in an environment that encourages them to do certain things and make money in certain ways. Can you tell me about how the flip side of that, how going to consumer ownership brings benefits in terms of trying to get to those broader goals? What are some of the other benefits that you’re going to see, whether it’s in terms of costs or workers or labor, in using this approach to structuring the utility, the electricity market?

Seth Berry:

Sure. You want to start off, Rick, or should I?

Rick Bennet:

Sure. I’ll just jump in with a couple of thoughts. This shouldn’t be difficult for Maine people to understand, because as Seth said, there are 2,900 municipal or cooperative, COU kind of structures serving electricity customers today in the country. Well, in Maine, there are nine consumer-owned utilities actually serving some of the most rural parts of Maine, Washington, and Hancock counties, for example, far down east. Those 97 towns, in fact, are served by consumer-owned utilities and they have experienced a much better rates on their electricity, 53% less. They’ve got a much more reliable service, isn’t disrupted as much by storms. I think the proof is already there about the savings that can be achieved and the responsiveness that you can get when you have owners who are the customers. They are going to insist that the company run for their benefit, not for the investors in far off lands.

Seth was also saying, I mean, part of these savings and just because people are nicer because they live closer to the utility or the grid, it’s because of the way that the finance works. Most utilities, because they’ve got captive customers, that natural monopolies, people love to give them very low-risk bonding. And so, revenue bonds can fund much of the capitalization necessary for modernizing the grid with consumer-owned utilities. Those revenue bonds are currently selling at two or three percent. The investor-owned utilities, however, because of Supreme Court decisions from starting nearly a century ago, have baked in returns for capital investments, returns in equity of eight to 12 percent, with some variation. Because of that differential, between the two and three percent and the eight and 12 percent, there is an opportunity to recapture money that ratepayers are now paying in and have savings in the monthly bill, but also to capture some of that money to update and modernize the grid. That’s already been shown. If people are interested in the impact on Maine, particularly, there’s a lot of research available at our website, ourpowermaine.org, in that way.

Seth Berry:

That’s right. I’ll just chime in that we initially began this journey in 2019 with a bill that went before the legislature. That bill turned into a feasibility study. The public utilities commission contracted with London Economics. Our PUC, by the way, they’re friendly with the utilities. That’s who they see on a day-in and day-out basis, so we didn’t have super high. And by the way, London economics, most of their work is for investor-owned utilities. So for that reason too, we weren’t super optimistic, but they came back with a clean bill of health. They said, “Number one, this is constitutional. Yes, you can require that the utility sell to a new consumer-owned utility. And number two, it will save you money.” The chances are, their reference case, their middle of the road assumption was you might see a little bit of an uptick in rates in the first few years, five to seven years, and then increasing savings, lower rates from there on out, and continuing, continuing, continuing to get lower.

That analysis was then reviewed by a Maine-based energy economist by the name of Dr. Richard Silkman. He took it a step further and said, “Wait a minute. You forgot to mention there’s about $4 billion sitting on the books in a reserve account in your own economic model so you got to count that. That belongs to ratepayers, and some other adjustments as well.” He said, “No, you’re going to save $9 billion over the first 30 years alone,” which in Maine is a lot. It might not be as much in California, but we’re a small state. $9 billion, and that’s in net savings. Even after you pay down the acquisition, and you will see ratepayer savings from year one. So, you can reduce rates. You can invest some of that money, some of that savings in building out the grid and modernizing the grid. It’s a win-win all around. We also, in our proposal, allocate some of that to better pay and conditions for workers. We make sure that the utility is required to use union labor, to invest in local businesses and provide some protections for workers. They keep their jobs, their benefits, their two collective bargaining units, so they go to the higher one. It is a win-win all around. Really, you do it as Rick said. You simply do this by displacing a very high cost business model, which has worked okay, I guess, in the 20th century, but is fundamentally broken for the 21st and for the challenges that we’ll face in the future.

John Farrell:

I guess one of the things I’ve been skimming the Q&A… Just want to remind folks that if you have questions, we probably won’t get to all of them like every webinar, but we are skimming through them to try to see what we can bubble up. I’m seeing a few folks mentioning this idea of… Well, two threads here. One is, “Why is public ownership necessarily better?” You mentioned that, Seth, already, a couple of places that are doing good. There’s also plenty of examples of publicly-owned utilities that aren’t necessarily doing great on the measures that we care about, especially around clean energy. How are you thinking about that? The other one I thought was really interesting was, “Why do you want to buy the grid assets when they may not end up being very useful?” I think those are both good questions, and I’m guessing that you’ve thought of answers to both of those as part of this.

Seth Berry:

Yeah. Those are great. Do you want me to take that, Rick, or do you want to jump in?

Rick Bennet:

Well, let me just say there’s… I know there are parts of this that you’re able to answer better, but I would say that accountability is key here. Nobody can guarantee performance, but you can certainly guarantee who’s accountable for that performance. And right now, as mentioned, we have a broken model. It’s built to serve people in distant places, not the ratepayers. The fundamental thing that we’ve got with this model. It’s not a government ownership model. It is a consumer ownership model. The board would shift from a lot of foreign business people to an ownership model where the board of directors for the nonprofit would be elected. Seven of them be elected by the people of Maine, and then six would be elected by those seven, so you’d have a full board of 13 members. In the six that would be elected by the seven would be people to infill skills gaps. And so, we’ve got this model which doesn’t have government ownership. It has no reliability and no reliance, I should say, on the tax payer. It doesn’t have any appointments by the governor or appointments by the legislature. This is an independent, not-for-profit corporation that will then hire a C-suite. A C-suite of executives will run the company. And so, you have that level of accountability where the management is hired to do a job by a board that’s elected by the people. It’s a completely different structure for following power and accountability in the structure itself. I think it’s better suited to actually serving the end-user client and customer.

Seth Berry:

That’s a great answer. I’ll just chime in. Senator Bennett really helped us to give a lot of careful consideration and improvement to the board structure. That is something you absolutely want to pay attention to. It is possible to create a consumer-owned utility that is not well designed, and it doesn’t have good governance standards. We included things like freedom of access, it has to be transparent, conflict of interest provisions, all of that. The elected, appointed, hybrid, I think is a very useful addition as well.

But just stepping back a bit, taking it to the highest level. Yes, there are these nonprofit consumer-owned utilities and these for-profit investor-owned utilities. It is true that there are better investor-owned utilities and worse consumer-owned utilities within those two families. They’re not all created equal. In a way. I think a business model is like a tool. It’s potentially a very powerful tool. The part of the purpose of the investor-owned tool is to make money for shareholders. In fact, it’s their number one fiduciary responsibility. They would be doing a bad job on the board if that was not their top priority. That is removed from the consumer-owned model. They don’t have to worry about profit. Their focus is on people. And perhaps, if you make it so, it’s about planning. The people part matters. Their number one focus is people. If I’m a consumer-owned utility in rural Nebraska, I might not be asked by my constituents to care about the climate. But you know what? If my constituents do ask me to care about climate, I can put my full attention on that. I don’t need to think about how I’m going to maximize the future profit of this enterprise. I can go full on to decarbonization, to adjust transition, what I like to call a full, fast, fair, and friendly transition, which is in fact what we have to do. It is absolutely critical that we do this. The proof’s in the pudding. I mentioned the communities that have done it so far. I think that’s a good indicator that the business model is the right tool for the challenges that we face today. Do we need to pay attention? Can we create it and then walk away? Of course not. We need to pay attention. Democracy is a participatory sport, not a spectator sport. And a democratic institution, like a consumer-owned utility, needs tending.

The other question was about why the grid… I almost took the question to be, “Is the grid going away in the future?” I don’t think it can. I think there are too many lower income, vulnerable communities that can’t simply put a solar panel on the roof and walk away. I think we also have to be cognizant that we use a lot of energy right now, not just in electricity. But to displace petroleum, to displace natural gas, to displace, number two, oil, to displace coal, we’re going to have to create a whole heck of a lot of grid to interconnect, to avoid situations where an isolated part of the grid goes down, like it did in Texas. I mean, you, you need a robust grid. You need transmission. It’s not all local microgrids and distribution, but that is a big piece of it. And by the way, we can do more with decentralized solutions if we do have a consumer-owned model, simply because you don’t have that built-in incentive to build out more transmission and get that high rate of return that Senator Bennett mentioned.

John Farrell:

I want to make sure that we check in with you to describe where this campaign is at right now, in terms of the referendum. I just wanted to add one little piece too I think that’s important for folks to understand about the proposal, which is that the Pine Tree Power Company, this consumer-owned utility would also have more open access, that it’s not the monopoly in the traditional sense of other consumer-owned utilities, where it’s the only player that can offer services. I think that open access model really changes the nature of it, because the accountability isn’t just through your board, it’s through the other players. It’s through the other folks that are participating that can bring energy services to the system. So with that in mind, tell us a little bit about how this campaign is going. You mentioned that there was work at the legislature. How has that transformed to go to the ballot? What does that look like? What’s that environment like? What’s the struggle here? What is your hope for it?

Rick Bennet:

Before we do that, John, I just wanted to mention one other thing which, in Maine, as in a lot of other places, there is a separation between this transmission and distribution side of utility and the generation side of utility. We already have separated that years ago in Maine. And so, what we’re talking about here is the control of the grid itself, which is a natural monopoly, which is the poles in the wires and the transformers and all of those things. And so, it’s different in other communities where the generation is also part of the mix. I’ll let Seth though talk about where the campaign is at right now.

Seth Berry:

Yeah. That’s a great note, Rick. I’m glad you brought it up just to keep people clear. We are looking at generation as well. There’s a wonderful book that I’ll recommend to people that maps out how generation can be a part of this as well, and even can be consumer=owned. But where are we? I mentioned that in 2019, there was a bill that led to a feasibility study and the following legislature in 2021, with the lead co-sponsor being Senator Rick Bennett and a wonderful bipartisan team, including actually an independent tribal member as well, the legislature. We put forward a bill. There was a ground swell of support from across the state. People are excited about this, an overwhelming testimony and support. We then had a vote of the House and a vote of the Senate that in each case was bipartisan and was successful, was more than half, getting it to the governor’s desk. The governor didn’t then veto it, although she said some nice things about the concept and does clearly have some real concerns about having the worst performing utility in the country, bar none, by every standard, customer satisfaction, high rates, worst reliability in the nation, so she gets that. She just expressed some concerns about implementation. Although we disagreed, we said, “Okay, governor. We’re going to take it to the people directly. We’re going to go out and get the signatures.” And that’s what we’ve done.

 

Our Power coalition, and you can learn lots more at ourpowermaine.org, has gone directly to the people, exercising Maine’s constitutional right to. The ballot question, the citizen initiative. We have already, just in the last 11 weeks, collected 73% of the signatures needed. That’s a high 40 thousands, 46, 47,000 signatures. That was during the very peak of the pandemic here. Hospitalizations were twice as high as they had been. We had volunteers out in the cold, because you couldn’t do the signature collection indoors for the most part. No corporate money, a lot of small dollar donations. But it’s really been an astonishing, impressive, unprecedented effort. We’re very proud of what we’ve done so far. We are aiming for the 2023 ballot, so it won’t be on the ballot this year. It’ll be on the ballot next year, 2023. That gives us a lot of time to educate voters to finish up with the signature collection. We hope to network with other like-minded individuals around the country, because I know there are many folks out there working on similar things, including on this call today.

John Farrell:

I just want to, again, thank Representative Berry, Senator Bennett for joining us for this conversation about the efforts in Maine. Remind people that there’s an after party for folks who want to learn more about the campaign after this webinar ends in a little over half an hour. Thank you again. I just want to invite my co-executive director, Stacy Mitchell, back so we can get ourselves set for our second panel. Thanks again, Seth and Rick.

Rick Bennet:

Thank you, man. I’m honored to be with you.

Seth Berry:

Our pleasure. Hope folks stay on for the after party.

John Farrell:

We’re going to take a short break. When we come back, we’ll hear from Jean Su and Mariel Nanasi about the power of antitrust law to defend local solar and the ability of grassroots organizing and relentless advocacy to stop anti-consumer utility mergers. You’re listening to a Local Energy Rules episode featuring three stories from ILSR’s January 2022 event on democratizing power.

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Stacy Mitchell:

That was terrific. So interesting. I’m really struck, John, about… I think Representative Berry’s statement talking about the importance of figuring out ownership structures that are really aligned with the outcomes that we want to see, but that doesn’t obviate the need for nurturing those structures and having democratic oversight, and really useful, I think, way of framing and thinking about not only stuff in the electricity sector, but really across the economy and how we think about policy making. Excellent. And with that, I am going to introduce our next panel. I’m going to moderate this panel, and John is going to get to join as a speaker on this side. Let me introduce our two other panelists. Really terrific. Mariel Nanasi is the executive director of New Energy Economy based in New Mexico, which works to transform the energy system and foster a just transition to a renewable future. And Jean Su is the energy justice director and senior attorney at the Center for Biological Diversity based, I believe, in Washington, D.C.

Welcome, both of you. I’m so glad you could join. Just a reminder to everyone in the audience. We’ll have the second part of the discussion for about 25 minutes, and then all of our panelists are going to come together for a wrap up. I want to turn first, I think, to you, John. I was hoping that you could just zoom out a little bit and talk about how it is that policymaker structure the electric utility sector a century ago. That structure may have made sense at the time. I don’t know. But today, it seems that it’s really at odds with what we want to see. And I want to hear what changed, what’s different now, what changed over time. I think that there are people who may be listening, who are not involved in the electricity sector, who would say, “Well, these are regulated monopolies with public commissions that oversee them. Doesn’t that solve the problem of having a functioning sector? Can you give us a big picture overview?

John Farrell:

Yeah. Well, I’m so grateful that Mariel and Jean will be here to give specific examples of why that regulatory structure is not sufficient in order to oversee these companies. But when we set on this adventure of building an electric grid the idea was, essentially, that in order to build the grid, you didn’t want to build two grids or three grids. It wasn’t really a great idea to have a competitive enterprise in terms of stringing poles and wires to all our homes and businesses. And it was going to be enormously expensive and that you needed a lot of capital to come into the space in order to do that. The initial titans of the industry, Samuel Insull, was the right hand man to Thomas Edison, helped to essentially negotiate with state legislatures to say, “Hey, look, if you protect us from competition so that we have easier access to financing, we can then build out the grid less expensively and serve more people more effectively.” The trade off will be, these companies then get their guaranteed profit overseen by the public, these private companies. But in return, they’re going to offer something of high value to the public, which is access to reliable and affordable electricity. And for decades, as long as you are willing to accept the asterisk of the environmental impact that we were ignoring from that model, it worked terrifically. We built out one of the engineering marvels of the 20th century, which is to say we connected most folks to the grid. Thanks to the federal government, in the ’30s, we also connected rural homes and businesses that were left out from that initial wave. And we built ever larger centralized power plants that were lowering the cost of electricity. So decade by decade, you actually were paying less for electricity than you were the decade before.

 

That all came to a halt in the 1970s, where essentially we ran into the wall of the economies of scale of power plant construction, that it became actually more expensive to build bigger. There was a breakdown in the model where folks assumed, who have been in the industry for decades, that energy use would just keep growing and they would always have a market to build more power Plants. What we had doing is, in the last 50 years, almost, we’re paddling upstream to get the things that we want, whether it’s energy efficiency or renewable energy, like solar energy, or access to the markets for community solar or other ways of developing energy.

All of this is going against the flow of the incentives for the utility companies. Seth and Rick mentioned this in the first panel. Their incentives are to build more infrastructure to serve the electric customers. And the thing is that we don’t need them to build it in the same way that they’ve been doing it, but we haven’t restructured the rules of the market in order to encourage them to do something different. In part, because they oppose us when we try to do that. We’re in this situation right now, where we’ve got a hundred years of flow in this river. And every once in a while, we’re trying to paddle to the shore or paddle somewhere different, but there’s just so much momentum behind it, whether it’s the institutional inertia of the utilities themselves, or the legal and political power that they have over the decision making process. And that’s led to what some of these hopeful moments though, in what we’re seeing, whether it’s in Maine or New Mexico and Arizona and other places, of ways that we can fight back against that flow.

Stacy Mitchell:

That’s great. Jean, I was wondering if you could just help us think about what does that actually mean on the… Talk a little bit about some of the examples and ways that you’re seeing utility power play out. What are the problems? What are the things that they’re blocking and doing at the ground level?

Jean Su:

Yeah, absolutely. I think one of the premises of the current power system is what people will call a regulatory compact or compact. What that is, essentially, is that we gave a ton of private companies a guaranteed monopoly over servicing territories. And with that was, as John was saying, democratizing the grid. We didn’t want to build two just overlapping grids. So with that, the compact was, “Hey, you’ve got a guaranteed set of customers. You’ve got a guaranteed revenue. And in exchange for that, we are actually going to govern you and put utility commission to regulate you, essentially” What’s happened is that we now have a pretty broken system in terms of regulation, and that have not been able to combat exactly what John was talking about. We have a system where we have pretty significant regulatory capture, where regulators are either coming from the utilities or being guaranteed jobs after with the utility that they are regulating. And it really becomes a situation where we have the fox guarding the hen house, in a lot of ways.

The conclusion of all of that and the result is that we don’t have a system that’s fighting for our public interest anymore. We have a system that is actually benefiting private corporate interests or the utilities’ interests. We see this in a bunch of different ways. There are significant examples of energy violence that we see in our system. We have a system that is majority fossil fuel right now. Who suffers the most? The disproportionate amount of communities of color in this country who live disproportionately close within three miles of a fracked gas plant and a coal plant. Those are the people who are suffering from that dirty energy system.

 

We also have energy violence in the form of unaffordability and energy poverty. We were able to track this year, the millions of families who were disconnected during COVID for failure to be able to pay. And at the same time, the increasing shareholder profits that all the top corporate utilities actually made this year. They could have taken just less than one percent of the executive compensation and shareholder returns that they got this year for COVID and put it towards saving the over one million households that they cut off, but they didn’t, and regulators didn’t force them to do that. I think the last type of energy violence that we’re seeing is, of course, the violence that comes from climate disasters. People are unable to actually keep on their connection during hurricanes, floods, wildfires, and heat domes right now. Distributed energy is a way that we can actually make energy truly resilient. All of those pieces are coming together to solidify monopoly power in this country. It’s also stifling the absolute clean energy transition that we need and the rooftop and community solar that we need to combat those types of energy violence, and actually work in the public interest.

Stacy Mitchell:

We’ve got this situation of ownership, models and market structures that don’t work. And we’ve got a captured regulatory oversight system, captured regulators. You were involved in a case in Arizona that looked to do an in-run around, as I understand it anyway, a relationship between the state’s public utility commission and an investor-owned utility there. You were involved in this case that used antitrust policy to actually go after some of the predatory behavior by that utility that had been supported by the public utility commission. I know there are lots of ins and outs of the case, but could you give us an overview of the approach that you took and we’re trying to do and where the case stands now?

Jean Su:

Yeah. It’s great that people are tuning into ILSR who’s at the forefront of thinking about monopolies and how this works. We are at the vanguard right now of applying antitrust law to the utility sector, which for so long has been immune from antitrust bombs. Essentially, just to back up a second, the whole point of antitrust, the thrust of creating these laws, was to actually protect our democracy. It was to ensure that corporations did not have greater voice over our democracy than everyday citizens. That is the background, and that’s why we need to break up large monopolies because we don’t want our regulators and our politicians to be controlled.

What we’re doing right now is seeing how that type of law, antitrust law, can challenge pretty egregious behavior from utilities, where they are cutting out their competition. How can we do that? The case in Arizona is super interesting. The Salt River Project is a public utility, but it’s actually been found to operate like an IOU and a corporation. This is very common, so a lot of people on this call will hear this pattern and it’ll ring very true. SRP, Salt River Project saw that there was a threat to their revenue from rooftop solar, because suddenly people are generating our own power and we are biting into their revenue source. So what they did, is that they jacked up the rates for rooftop solar customers by 65%. What that did is it dropped the amount of applications for rooftop solar by 96%. So basically, it gutted rooftop solar in Arizona, in that territory. That is classic anti-competitive behavior under antitrust, because you have a company launching an anti-competitive action and literally obliterating the competition, so we used antitrust law in this case. Very interesting background. But right now, it is currently sitting before the ninth circuit and we are still waiting for a decision. But if the ninth circuit actually finds that, yes, this was antitrust violation, then this can actually open a huge area of case law to use antitrust against utilities and how they are trying to cut out competition.

Stacy Mitchell:

That’s terrific. That’s really exciting to hear. Mariel, I want to turn to you. Part of how we’ve gotten to where we are is we’ve had a ton of utility mergers over the years. We now have these giant utilities that span multiple states, in some cases as we learned earlier, owned by big global conglomerates, real lack of accountability to the places that they serve. Your organization challenged a utility merger late last year, which is pretty extraordinary. I’m wondering if you could tell us a little bit about what happened and what decision that came down. I’m really curious particularly about the basis of saying no to this merger. And also, as I understand it, it’s the same conglomerate that owns our electric utility in Maine, so a small world.

Mariel Nanasi:

Yes. Thank you so much for having me. I’m really honored to be here. Avangrid, Iberdrola, yes, the same company that has high rates and the highest forced outage rates, that means brownouts on blackouts in the country, sought to merge with the Public Service Company of New Mexico, that’s PNM, in an $8 billion merger. But Avangrid and Iberdrola could not overcome their own track record of outages and unreliability, diminished service quality, more than 63 million in penalties and violations in Maine, in New York, in Connecticut, and they failed to abide by our commission’s own rules and laws. They basically came in and said, “We got so much money. Kiss the ring right here. We’re coming in.” And we were like, “Not so fast.” Just one note to activists to create networks and connect to people nationally and internationally because Representative Seth Berry was critical. He actually wrote an affidavit that we ended up using as part of our fight to actually bring in Iberdrola, the parent company. They wanted to just have Avangrid, but we argued, “Well, but Iberdrola is literally pulling the strings.” And so, it was actually the affidavit, the declaration by Representative Berry that helped win the day in court. The hearing examiner and the commission found that the risks and harms significantly weighed any benefits for ratepayers, which was an enormous, enormous victory. The hearing examiner, some people call them an administrative law judge, and the commission found that the merger was not in the public interest, which essentially, just so you know, is a very low bar. But we worked and worked really hard to show that this company in particular was unworthy of coming into New Mexico.

I’d like to just tell you one important story that really relates to what Jean had said before. Iberdrola and Avangrid testified that their goal was to you use PNM as their beachhead. It’s a military term to land. And from that landing, attack can be launched. So under cross examination, the Avangrid CEO admitted that their purpose was to consolidate renewable production for their own financial growth. It was not only the extraction of our resources, but literally the export of that money out, not only to wall street, but to Spain. So this is exactly what Jean was talking about. They wanted to consolidate the market, get rid of any competition, and then Jack up rates, and then sell to wherever they wanted. Literally, they said that they chose PNM to get a southwestern platform in the form of a government-protected monopoly for which they could make further acquisitions and sell our renewable energy for their private profit. Of course, all of us are in favor of renewable energy, which will shortly dominate the grid if we’re going to survive, but not for the exploitation of a foreign company with such a bad track record.

 

I’ll just say one last thing. One of the things that they wanted to do is create these “baby affiliates” that then could buy up all the rest outside of PNM’s beachhead. And the commission found that they didn’t have the resources to police, not only Avangrid, PNM, but all those other baby affiliates that they said that they were going to create for the umbrella company, Iberdrola.

Stacy Mitchell:

Well, congratulations on that. That’s really terrific. I’m curious a little bit about the politics around that. I mean, a lot of the utilities, and I think Avangrid did this in this context. They make promises about, “We’re going to build a big solar, renewable power production. We’re going to offer these jobs,” these sorts of claims. I don’t know if this is true in New Mexico, but in some cases, it seems like people get hooked on those ideas and are willing to jettison concerns about ownership, about control, about oversight, all of the democratic qualities that you’re talking about that emerged in the commission’s decision. I’m just curious how that played out with other organizations and groups in New Mexico.

Mariel Nanasi:

Well, Avangrid repeatedly said we were the only one who opposed them. Well, we were. Even press people, they were like, “Mariel, why are you fighting this? You’re going to lose. Money talks.” And I said, “Well, we have to speak the truth and talk about energy democracy, really.” We also elicited a lot of evidence. I’ll just give you one example that made the papers. Three, count them, three PNM executives stood to make $29 million from the merger. You compare that to 480,000 residential New Mexican customers, so current PNM customers. You know what they were going to get? Less than those three people. $1.54 a month. It was that kind of information that we not only elicited, but then we… Of course, one of the other things is to, which Jean is also extremely good and Center for Biological Diversity is, take it out of the little confines of the legal case and to inform and educate people. We were on the front page of the newspapers on a regular basis, sometimes as much as once a week, to talk about these kinds of inequities.

The question really that we should be asking is, are we going to… If we’re going to survive, we have to transform the grid and it’s got to be a hundred percent renewable. We’re on the cusp of not only transferring the electric grid for our electricity but, as Representative Berry said, to transform it to meet the transportation needs and the housing sector needs, so we are going to increase renewable usage by a lot. And the question is, are we going to replicate the exact same system of inequity and inequality and of racism, and then literally export the profits to Wall Street at 1%? Or are we going to shift that model? Are we going to have our power and stop the violence?

Another point that I made in the hearing, also to Jean Su’s point, was literally the Monday after the hearing was supposed to end, PNM was set to disconnect ratepayers, 21,000 rate payers from electricity. Meanwhile, they’re throwing out millions and billions to the executives and the shareholders. And one of the things, what they said was, “We’ll eliminate about half of the COVID disconnect notices.” And I literally just asked, “Why not all of them? You’re doing an $8 billion merger. Why not just eliminate the COVID disconnects?” And they were just like, “Uh-uh (negative). We can’t do that.” It’s that kind of thing, over and over and over again. That’s the real day-to-day violence. Because when that orange notice comes into your mailbox and you are literally concerned about, “Should I have food on my table or have electricity?” That’s not what we want to do for a just society. I just read that during COVID, child poverty, including food insecurity has gone up. And meanwhile, PNM made $190 million in profit just last year.

Stacy Mitchell:

Wow. Wow. John, I’m going to turn back to you just with a short closing question as we reflect on these really incredible fights and insights that our panelists have brought today. Are there transformative ways we can get out of having constant rear guard fights with utility companies over… In California, there’s this big thing around… They’re really trying to change the rules of net metering in order to stymie distributed solar. How do we think about this big picture, and how do we move in a way that that is more transformative? I mean that not only in the context of how electricity is structured, but how do we think about some of the points that Mariel and Jean have raised around the way in which monopoly utilities take advantage of racism and further racism in order to augment their power.

John Farrell:

Yeah. I’m going to take a stab at an answer to that question. I just want to emphasize for folks. If you like what you’ve heard from Mariel or from Jean or from Seth and Rick, three out of the four have been guests on ILSR podcasts, our Building Local Power or Local Energy Rules podcast, sometimes to talk about the very issues that they were here to join us to talk about today. So if you would like to hear them speak more at greater length, you can do that on our website. We are a nonprofit, as many other groups here. You can donate to help support this great work at ilsr.org/donate, at New Energy Economy, the Center for Biological Diversity, or Our Power Maine. Please check out the work that they’re doing if you support and like what they’re doing. You can do that financially, as well as by joining this podcast and learning more about it.

To try to tackle that very large question, Stacy, in terms of wrapping up, I think I would just say this. To go back to my river metaphor, we have to change the way that the entire system is flowing. The problem that we have right now, especially with investor-owned utilities, but not solely with them, as we mentioned before, that we can have even examples of public power that are running in a problematic way, is really how do we break down the institutional power that these organizations have and disperse it? Jean, I think, did such a great job of highlighting the importance of antitrust in all of this, that the purpose of that law was to protect our democracy from concentrations of power. That can be private power, as we have with investor-owned utilities. It can also be public power. One way we can do that is to not let one entity own everything. At some places they’ve restructured and already broken apart, like who owns power plants, who owns the distribution system. In some places, like New York, they’re talking about restructuring how companies earn money.

Rick, I think, mentioned that we have these really high rates of return that are almost guaranteed from monopoly utilities, and we pay them for things we don’t want them to do anymore, like build giant power plants. We need to change that. Hawaii has moved to a system of almost entirely performance-based regulation. It’s very new and we don’t know if it’s going to work very well, but there’s a lot of hope behind that, and at least we’re doing the right thing. And then, there’s what Our Power is trying to do, which is honestly, I think one of the best things, which is to say, “Let’s break up this utility. Let’s create a consumer-owned core of it. And let’s also do that with the idea that we’re going to allow lots of other entities, not just this utility, to make the decisions about how the system runs.” So, like lots of folks building rooftop solar or energy storage, or homes and businesses, community solar, all of the kinds of things that allow people to make decisions independent of the utility that shrinks not only like the market share of that utility within the electricity sector, but then all of the political power that comes with that of having the monopoly, of the relationships with regulators, the virtually unlimited amount of money they can have for the legal fights to promote their own mergers, to reward their executives.

All of these things come back to this idea that we’ve concentrated the power in this market within these particular companies. We need to attack it directly whether that’s even just rhetorically, like noting that and these fights in California and saying, “Look, the utility wants to quash rooftop solar because it’s a threat to their market share, to how they make money building transmission lines and building substations and transformers.” Those are the things they want to do that they profit from. So of course, they’re opposed to this. Or by bringing to the table real substantive reforms, like in Hawaii, like in this, it’s called a high DER proceeding in California. I don’t want to get into the weeds, but talking about how do we restructure the system to reduce the power of those institutions.

Stacy Mitchell:

That’s great. Let’s bring back Seth and Rick for our final wrap up here. We’ve got just a few minutes left. But I think I want to ask everyone, what really motivates you? What’s one thing that really drives you in this work? What’s the vision and thing that really is why you do this? This part two of the question. If you could say just something about how people who are in the audience, who are listening today, what’s something that they can do to get involved or an initial step that you can offer them? Rick, let’s start with you.

Rick Bennet:

Well, thank you again, Stacy. It’s great to be with you. I think I may have hinted at this in the answer to the very first question. But what motivates me is the need for people to be in control in an increasingly volatile world. We need to create structures where people are actually in control. We can no longer rely on the institutions that historically we’ve turned to, to run things for us. The good news is we don’t need to. We have the tools through all of the craziness of today’s world, involving social media and means of connecting with one another at an individual level. People have shared interests to work across the usual power structures, across the silos and share information, share passions and enthusiasms and get this done. I think we have an opportunity to build a more democratic, small d, future where self-determination is respected, where people are really in charge. But we’ve also seen the downsides to some of these technologies that are allowing that, so we all have to be vigilant. But that’s really what motivates me. I would say, to your second question, people, just throw yourselves in. Find something worthy and get involved with it. I have to tell you, I’ve learned a lot from Seth Berry. I’ve learned a lot from a lot of other people because I’m newly back to the legislature. The world has changed a lot in the 20 years since I was gone. But information’s very accessible. It’s so easy. In Maine, you raise your hand at the wrong moment, you’re elected to the school board. I just think that it’s a great chance for people just to throw yourselves in. And we certainly would love you to throw yourselves in, even remotely, to the Our Power effort. Ourpowermaine.org is where you can connect. Thanks.

Stacy Mitchell:

That’s great. Seth?

Seth Berry:

Yeah. I feel so many echoes in my head of what Rick just said. I mean, the partnership that this is engendered has been incredibly inspiring, working with Rick, working with Mariel, with John and Stacy. ILSR has been an incredible partner. This is building. It’s become a movement here in Maine, but I really feel that there’s a movement incipient in the US as well. The industry has its eye on us. They’re probably on the line here today. They want to crush it, but I think we can crush it. I think we could do this. I think we have something that the American people are ready for, and that many communities are eager to take on. There are so many ways into this idea. What I love about working in this space is that Our Power is about equity and a just transition. It is about anti-monopoly, yes, and self-reliance. It is about climate, for sure. That’s my number one motivation and entry point for myself. And it’s about democracy, and more democratic economy. Every problem that I go to bed at night worrying about, every problem that… When I think about my children, my two sons and… I used to be a teacher… my former students and their children, the next generation, there’s so much to worry about for them. And when I go to bed at night and worry about them and their future and what that plan is going to look like and what their democracy is going to look like, I find an answer in this effort and in this partnership with all of you. So I hope people will go to ourpowermaine.org. That’s my ask. Stay on for the after party because we look forward to trying to answer all of the incredible questions. So many good comments going into the chat and the Q&A, so please stay on with us if you can.

Stacy Mitchell:

Great. Jean?

Jean Su:

There’s a lot of promise to this after party, so everybody really should stay on. A lot of fight here. Yeah. I began my career through climate, working in different parts of Africa and Asia, and I know we have global folks on the line today, which is amazing, so I take this from a climate standpoint. We really, literally, only have the next eight years to significantly radically change our energy system. When I came to the States and started working here, I think there is such heartbreak in how racist and violent this energy system is. It is a form of all the societal issues that we face here, so the fight for climate justice is the fight for racial justice, for societal justice, for gender justice. That’s what keeps me motivated to do this work. We have to keep going because we have no choice. I think for those who want to get involved, you can actually start right now to figure out your energy system and how to change it. This isn’t about decarbonization. This is about the whole picture, so get on in and do it, whatever angle it is, and run. You have Representative Berry here and Senator Bennett, Run, run and make a change, that you can be the decision maker, instead of all of us trying to get decision makers to do the right thing.

Stacy Mitchell:

I love that. Mariel?

Mariel Nanasi:

Dare to struggle, dare to win. Courage is contagious. Once you start fighting, then people want to be and join. I was texting a Representative Berry, and I would tell him when we got something good that happened. He’s like, “You go.” I mean, I have to just tell you, that’s love. I’ve never met Representative Berry. But what does Cornel West say? Justice is love made public. That’s what we’re after. I just want to say that I got into this because I was thinking… I used to do police misconduct work. Not a light subject. I knew about climate, but I didn’t understand the urgency. This is now 12, 15 years ago. And I thought, how can I look at my kids in their eyes and say, “I didn’t do what I knew how to do”? And so, what I’m asking you all out there who are listening is, I don’t know what your talent is. What are you passionate about, and what can you bring? Are you a pianist? Are you a painter? Are you a great computer graphic artist? Are you a writer? What do know how to do? We need you. We need you. This fight is big enough to include your talents. It’s about getting involved. And it’s about making your family bigger than just your nuclear family. It’s about making your family our movement family to create justice in the world. Thank you so much.

Stacy Mitchell:

I am so energized after hearing all of you. Incredible work. I mean, it’s remarkable what’s going on. I want to thank you, all of our panelists for participating. I want to thank everyone who turned out in the audience. If you want to stay connected to ILSR, I encourage you to sign up for one of our newsletters. I’ll drop that in the chat. As John mentioned, we are a nonprofit organization, so all of this work is made possible through donations. You can follow us on social media, but please do engage if you’d like to be involved, both in our energy work and in the anti-monopoly work we do across different sectors of the economy, and in Building Local Power at the community level. Thank you.

John Farrell:

Thank you so much for listening to this episode of Local Energy Rules, featuring three stories of communities fighting back against monopoly utility power, from ILSR’s January 2022 event Democratizing Power. As a reminder, the entire event video is available on ILSR’s youtube channel. Local Energy Rules is produced by myself and Maria McCoy with editing provided by audio engineer Drew Birschbach. Tune back into Local Energy Rules every two weeks to hear more powerful stories of communities taking on concentrated power to transform the energy system. Until next time, keep your energy local and thanks for listening.