Public Power Pt. 2: Community Benefits — Episode 165 of Local Energy Rules

John Farrell:

Welcome to the 2nd episode in a special series of the Institute for Local Self-Reliance’s Local Energy Rules podcast focused on public power; utility companies owned by the cities they serve. This series, called The Promise and Peril of Public-Owned Power, responds to an upswell of interest in city-owned utilities. In the first episode, we shared interviews with leaders from six cities who explained why their communities were pursuing public power as an alternative to service from the incumbent monopoly utility: local control, lowering costs, cleaner energy resources, and reinvestment in the local economy.

In this episode, we talk about the rewards. Ursula Schryver, Vice President of Strategic Member Engagement and Education at the American Public Power Association, explains the general benefits of public power. Interspersed with her interview we have the success story of Winter Park, Fla., a community of about 30,000 just outside of Orlando. City Manager Randy Knight explains the city’s successful switch from a private to a public utility, nearly twenty years ago. We also share stories from cities that have exercised their public power to advance clean energy.

I’m John Farrell, director of the Energy Democracy Initiative at the Institute for Local Self-Reliance and this is episode two in our multi-part series, The Promise and Peril of Public-Owned Power. It’s a production of Local Energy Rules, a biweekly podcast sharing powerful stories about local, renewable energy.

John Farrell:

When I began my conversation with Ursula, I asked how she ended up — and has stayed — with the American Public Power Association, which exists to serve its municipal utility members. In her reply was an interesting fact: most Americans don’t even know there are cooperative, private, and publicly owned utilities. Ursula discusses the latter, often called municipal utilities (because they’re owned by cities) or sometimes known as “public power.”

I’ll take just a minute to explain the two alternatives to municipal utilities. Most rural communities are served by rural electric cooperatives, where the utility is owned by the members that receive electricity from them. Along with municipal utilities, these two types of consumer owned utilities, municipal and cooperative, serve about one-third of U.S. electricity needs. The remainder, largely serving folks living in urban areas, is provided by for-profit companies owned by investors. Confusingly, some state laws refer to these utilities as “public utilities,” which is shorthand for publicly-regulated — in other words, there’s a state agency, often called a Public Utilities Commission, that is charged with overseeing their business. This podcast series was inspired by communities that are served by these so-called public utilities, often disappointed by public regulation, and who are seeking something better.

Ursula goes on to explain the typical benefits of having a city-owned, municipal utility.

Ursula Schryver:

I kind of stumbled across the job. 25 years ago, I was working for another trade association and, back in the day, we looked for jobs in the newspaper <laugh> so I, I saw this position and I came in and interviewed and at the time I didn’t even know there were different forms of electric utilities. I just knew I was served by an electric utility, just like, I think a lot of people in the country don’t realize that there are different types of utilities and different options out there. I just got here at APPA and just really kind of fell in love with the public power business model. You know, our members are great people, they’re from small towns, they’re hardworking people that care about the community. And it’s just a great business model and great people, honestly, both here at APPA and throughout our membership. And I interact with our members all the time in different aspects of my job. So I think that’s really what’s kept me here and is, you know, tend to be here for a while longer as well.

Public power utilities, they are community owned electric utilities, not for profit entities of the local government that provide reliable low cost electricity to more than 49 million Americans. There are 2,011 public power utilities in the U.S. in 49 states and five U.S. territories. The only state that does not have a public power utility is Hawaii. Public power serves many large cities like Los Angeles, Seattle, San Antonio, Jacksonville, but the vast majority of our members and of public power utilities serve small communities with about 80% serving communities of 10,000 or fewer and 70% serving communities of 5,000 or fewer. So there’s a lot of diversity as it comes to size, type, location. Public power utilities are very unique in their own right. Each utility is different. Each utility focuses on the interest and the needs of their individual community, which can be very different depending on where you are in the country.

Public power provides a number of benefits to the communities. I’ll just touch on three broadly right now. First being local decision making, which is really the overarching tenet of public power, communities with public power utilities have local control over how the utilities run, the utility’s priorities. This allows the city and the community to set its own priorities, whether that be investing in upgrades to the system, keeping rates low or adding more renewable energy to their portfolio. So it really, it depends on what’s of interest to the community. In terms of reliability, public power utilities have a very strong record of reliability because they focus on core electric operations, including maintaining the electric system and being responsive to their customer owners. They can respond quickly to emergencies because crews live in the community and they have a vested interest in getting service restored quickly.

Customers are their family, their friends, their neighbors, they live in the community. So they don’t have to drive long distances when there are outages. And they’re very familiar with the system because they work on it every day. They’re in that community. Outside of the major events, such as storms, customers of public power utilities are on average without power for less time, about 62 minutes per year, compared to about 150 minutes per year for customers of private utilities. And then in the event of a major outage, public power utilities, and really utilities in general coordinate with each other through a broad network of mutual aid programs. So they can, you know, they go and assist the neighboring utilities after they’ve restored power in their community. And then finally, in terms of rates, public power utilities, I think I mentioned before are not for profit. So they typically have lower rates than private utilities that pay dividends to stockholders. Revenues from the utility are invested back into the utility or into the community. And then residential customers of public power utilities pay about 11% less than customers of investor owned utilities. So for the average U.S. household, that’s about $180 per year or about $15 per month. So there are a lot of other benefits of public power, but those are kind of the big picture ones.

John Farrell:

Michael Wojcik, former city council member in Rochester, Minnesota, explains the basic structure of his hometown electric utility, one that is common for municipalities with their own power company. This public utility model mixes oversight from elected officials with independent operation by a separate board or manager.

Michael Wojcik:

Our city charter, we’re a home rule charter city, specifies that we have a public utility, Rochester Public Utilities, that’s responsible for the electric utility as well as the water utility. And as a result of that, the power is largely delegated to those professionals. They have a five member board of directors of which one council member sits. And I happen to be the council member who also sits as a director for Rochester Public Utilities.

John Farrell:

Winter Park, just outside Orlando in Central Florida, has a public utility like Rochester, Minnesota but that is much newer. Established just under 20 years ago, the city’s electric utility has lived up to the promises of advocates to provide significant benefits to the community (Later in her interview, Ursula even mentions the city’s successful and significant improvement in reliability). Although not in the same order as Ursula listed them, you’ll notice that Randy Knight, the city’s general manager cites all three of the core public power benefits — lower rates, reliability, and local decision-making — mentioned by Ursula Schryver as benefits of his city-owned utility.

Randy Knight:

That’s one of the things I’m probably most proud of is that we made a lot of promises during the campaign. And I think we kept them all, you know, we promised better reliability. We promised we would keep the rates at or below the predecessor’s rates. We promised to begin undergrounding the power lines and we’ve kept all those promises. I mean, there’s been a few times our rates were slightly higher, but for the vast majority of these 16 years, we’ve been cheaper than the predecessor utility. Reliability went from a 360 minute SAIDI, which is the average outage time that every customer experiences during the year down to below 50. And so, I mean, we’ve really delivered on the reliability front and, you know, of course the big part of that is you get those power lines out of the trees. You don’t have that conflict. And it wasn’t easy, but yeah, we delivered on those promises.

John Farrell:

I think I heard at one point, and this was a while ago when I was looking into winter Park’s efforts, that you were able to describe it as like a blinking clock problem that when you have, it was, you know, many but short outages. And so people were walking to go around and reset their clocks all the time.

Randy Knight:

Yeah. That was one of the more effective campaign pieces the political action committee in favor of buying the electric utility put out was that blinking clock, you know, and that everybody could relate to it.

We run a very successful water and sewer utility. Now we already serve you, you know we can do it, we’re already billing you. So, we can bill and we will hire people who know how to run an electric utility to run this one. We did, we went out and we did a national search for companies that could run the electric utility and we hired one. And we have subsequent to that, we brought it in house and they’re all our own employees now, but for the first almost 10 years, we did it with an outside contractor for the maintenance of the poles and wires. We’ve never once subsidized it with property taxes. The revenue of the system, it’s always been adequate to pay the bills. And so we succeeded, but convincing the residents of that was, you know, was the interesting part before the referendum. Cause we had to go to voter referendum to do this. And so we had a lot of public debates where they stood on one side and made those accusations and I stood up there and, you know, said, well, here’s how we’re gonna do it.

And you know, I said, I don’t know how to run a police department, but I have hired a police chief to run the police department. I don’t know how to run the water sewer utility. I hired a director. I don’t know how to take care of a golf course, but we can do it cause I hired the right people to do it. And we can do the same thing with an electric utility. And we’ve been noted in Winter Park for our strong customer service through the residents. And so that local control and accountability message carried the day. And ultimately when we did go to referendum, it was a 69% vote in favor of buying it.

John Farrell:

Randy also specifically mentioned the coordination benefits of having the utility in house as a public department rather than a separate company.

Randy Knight:

So one of the, I won’t say unexpected, one of the things we said on faith when we were trying to convince people is that if we own our own electric utility and there’s a hurricane, all of our resources are gonna be dedicated just to Winter Park. Whereas when you’re part of a giant utility, we were 1% of the predecessor utilities system. And so keeping their workers in Winter Park after a hurricane was, we had no control over that. And so we talked about, we may only have 14 people in our electric utility, but all 14 are gonna be working in Winter Park. You know, from the time the first outage happens until we get the last customer restored and that worked way better than even we anticipated, because not only did we have our linemen, we also had our forestry crews that we controlled and our street crews that can push the stuff out of the way.

John Farrell:

Michael Wojcik echoed Randy’s sentiments about the benefit of a publicly owned, local utility.

Michael Wojcik:

Because we are a publicly owned utility, we have a total commitment to the public, and that means that what drives an investor owned utility doesn’t necessarily need to drive a public utility. In our particular case, the community has spoken up that they want us to be a clean energy leader. There’s certainly more that we can do on that. And we don’t have to go to an investment panel to look at what the potential return on our investment is. We also have a group of citizens that care deeply about the environment here in Rochester. We’re a scientific community. We understand that climate change is real. That it’s a threat and it needs to be addressed. And we can prioritize that in terms of how we do business. And finally, by having a public utility, we have the ability to envision what we want that utility to be in the future with services they’re going to deliver. We’ve traditionally delivered water and electric, but there’s a great demand for a broadband source that is local, competitive, and fair to the public as well. This is another thing that we can do with both to enhance our communications, allow for a smarter grid in the future, but also serve the needs of the community.

John Farrell:

In our conversation, Ursula described additional benefits of having your utility run by local people, including (as Michael said) local accountability as well as a focus on economic development for your community, and a focus on customer satisfaction:

Ursula Schryver:

Looking at it broadly, there’s a higher degree of accountability and transparency and public power citizens have an opportunity to participate in public meetings. They can vote elected officials in and out of office if the utility’s not being run in a way that reflects community priorities. You know, citizens run into the general manager of the utility in the grocery store. I was just on a call with,  the city of Ann Arbor is exploring municipalization. And we had a speaker from Burlington, Vermont, one of our members on the call and he was, he mentioned something about, he was at the grocery store the other day and somebody came over to him and mentioned, Hey, you’re doing a great job on so and so. So it’s just, you don’t do that as a customer of an investor-owned utility. You don’t run into the CEO, just at a baseball game, you know, so there, there’s definitely a higher degree of accountability and transparency there. I mentioned affordability and low rates, but those are very important in terms of economic development, both in terms of keeping the community stable, but also bringing in new business because of the low rates and higher reliability. There’s very strong statistics in terms of customer satisfaction as well, just because we’re focused on the customer. That’s our one and only mission. We’re not looking at profit. We’re looking at how do we best serve our customer in every way. And then definitely in terms of environmental stewardship and leadership, we’re seeing more of our members investing in renewable energy, distributed energy resources, all these new technologies to address the changing customer expectations out there.

John Farrell:

Georgetown, Tex., is another municipal utility that checks the boxes on the benefits of public power, but with the added focus on renewable energy. Although the city currently sells its renewable energy credits to reduce electricity costs, the electricity supply is primarily met by contracts for wind and solar power. Mayor Dale Ross explained why the city felt like its investment in renewable energy was in alignment with the city’s goals as a publicly owned utility.

Dale Ross:

What we decided was we wanted two things to happen. One, we wanted to eliminate volatility in the market in the short term. And we also wanted to have an energy source that mitigated regulatory and governmental risk. And the only thing that fit those two items was wind and solar.

So we bought our way out of our existing contract and signed a 20 and 25 year contract with wind and solar. So we have, we know what our price is gonna be all the way until the year 2041. And so cost certainty is certainly important to us, and there is no cost, there is no escalators in this 20 to 25 year contracts that we’ve signed.  So that’s why we decided to do it. That’s how we were able to do it. At the same time that we were negotiating with wind and solar providers, we were also negotiating with natural gas providers. They would only commit to fixed pricing over seven years, and that didn’t meet our long term strategy. We wanted 20, 25 year contracts.

What we wanted to do is we wanted to have control over our future. And this is one of the things now we are, we did assume the risk, but we felt like we were very capable of assuming the risk over the long term. And that’s what we’ve been able to achieve so far. And others can do the same thing.

We’re very Republican. They’re very Republican city, county, and state. I think that is a shocker. You know, the first city in the country that was a hundred percent renewable was Burlington, Vermont. And the mayor at that time was Senator Bernie Sanders. And so I think everybody has this preconceived idea that renewable energy and clean energy is this liberal, progressive, primarily democratic thing. And what we did is we just, we put the silly partisan national politics aside and made the decision based on the facts. And the facts led us to wind and solar energy was the best fit for our city.

John Farrell:

Speaking of Burlington, Vermont, I spoke with the city’s mayor, Miro Weinburger, and the director of its municipal utility, Darren Springer about the role of public power in its success. The mayor jumped right in:

Miro Weinburger:

Well, I think it was maybe possible to do with a different structure, but probably would have been much less likely. I think it’s not an accident that it was a city with the publicly owned utility that got there first. And I say that because you know, I’ve come to think there were really two essential ingredients to reaching the goal. One was political will. It was a decision back in 2004, first for the city to stop purchasing nuclear energy and to replace it with a goal of getting to one hundred percent renewables. That was the essential first step. The city was only buying approximately 25% renewables at that time. And in 2014 a decade later, I had the really privileged honor of being the mayor as we completed that journey and purchased a hydroelectric facility that got us over the final, that milestone, that threshold, that political will was essential. It was sustained throughout that decade period of time. The other element of it was excellent technical expertise at the Burlington electric department. I think with a city owned utility, the directness of, of setting a goal that is at some level political, easier to achieve than probably would have been likely in, some kind of corporate setting where you have to balance that kind of goal maybe more explicitly or in, in different ways against a shareholder profits and whatnot. So I think it’s no accident.

John Farrell:

Burlington has had its municipal utility since 1905, when the city formed a municipal light department due to dissatisfaction with the investor-owned utility. So the city was already familiar with the benefits of public power, including affordability, before its transition to renewable energy. As it turns out, the two were more closely related than even city leaders expected, as Miro explains.

Miro Weinburger:

One of the institutions that took note when we got to the a hundred percent renewable threshold was our credit rating agency, Moody’s investors services. They actually issued an opinion soon after we got to that threshold noting that our a hundred percent renewable portfolio was a credit positive because they saw it as insulating Burlington Electric and its customers from the volatility of the fossil fuels markets. And so that’s I think, in so many ways the story of moving towards renewables is a surprising story. I think people expect it to be one of meeting government subsidies and handouts and costing more and again, I think when you get into the details you find that this is actually a financially sound direction for utilities and their customers.

John Farrell:

Although Miro expressed that the city’s renewable energy aims were made easier by owning its own utility, he also generously offered that it didn’t have to be that way.

Miro Weinburger:

I think we started the conversation by saying I think that the nature of publicly owned utilities, Darren is sitting right here at the table with me. He is a mayoral appointee. It is easier for a community that has that kind of structure, I think, to move forward with these kind of societal goals. But it is by no means impossible for private utilities to achieve the same results of course. And there certainly are many ways in which those utilities can be influenced and can be urged and mandated into pursuing the same type of outcomes.

We have a great example of that here in Vermont. The largest electric utility in the state is not the Burlington electric department. It’s something called Green Mountain Power. They are an investor-owned utility and they have perhaps been even more aggressive than BE has been over a longer period of time at embracing innovation and taking provocative steps to move towards climate goals. So it’s certainly possible in different structures. I think people just have to kind of do the political analysis. They have to map it out, they have to figure out where the pressure points are, what the levers are to bring about change with their utility and they can get there in any system.

John Farrell:

While it may be true that other ownership models CAN lead to communities reaching their goals, Rochester council member Michael Wojcik emphasized the value of having a locally owned utility.

Michael Wojcik:

There’s always people that are willing to give you a big check or do other things to acquire your service territory, but the freedom for innovation, the freedom for leadership, the ability for citizens to decide your energy future is something that you get with the municipal utility. So if you have a municipal utility, you have something that’s absolutely golden and don’t ever give up that opportunity, no matter how good the sales pitch is to do that.

John Farrell:

Ursula Schryver also offered that public power is meant to be a local decision, and didn’t presume that it was the right fit for every community.

Ursula Schryver:

When it comes to the municipalization piece, we represent our members directly. So we don’t advocate for communities forming a public power utility where there is a resource to provide information. So communities can make an informed decision, but we don’t say public power is right for every community. It’s a local decision that, you know, which really speaks to public power. It’s a decision that you have to make locally decide if it’s right for your community. And then we’re there to assist in terms of information, education, putting communities in touch with other communities that have gone through the process and formed a utility or even communities that have gone through the process and decided it wasn’t right for their community. So it’s, we’re not, we don’t have a vested interest in, you know, public communities forming a public power utility. We obviously, we believe it’s a great business model. There are over 2000 public power utilities out there doing a great job every day, but it’s not necessarily for everyone and more than anything.

All three: public power, investor-owned utilities, and co-ops all have a purpose. They all have their role. They all serve their customers. They’re honestly, they’re all in it to, you know, serve their customers the best they can. And I think just having the option is important. You know, that, like you mentioned before, it’s having that ability to form a public power utility. If you’re not getting what you need, that’s really what it’s all about. And there may be a time if a public power utility isn’t serving its customers properly, then they could be acquired by a co-op or an investor of utility. I think it’s just that having that checks and balance is really an important thing for customers. They have a say, they have an opportunity to change things if they’re not satisfied with what they’ve got currently.

John Farrell:

As we’ll discuss in our next episode, Ursula provides one caveat to this notion of public power as a check against poor performance by an incumbent utility — the incumbent can exercise a great deal of power to oppose a public power takeover attempt.

Ursula Schryver:

Biggest disadvantage in terms of the municipalization process is the fact that the incumbent utility is not typically a willing seller of the system. They’re going to fight the municipalization effort, 99 times out of 100. Going to spend money on a communications effort to scare people not to pursue it. And then legal battles as well, just dragging out the process. We’ve seen this in so many of the efforts that we’ve seen. So it’s a time-consuming process, it’s costly, but if communities are committed and they have done their research and really understand what their goals are, then it can be very successful.

John Farrell:

Thank you so much for listening to this episode of Local Energy Rules, the 2nd in our multi-part series, The Promise and Peril of Public-Owned Power. To learn more about public power and the over 2,000 cities with city-owned utilities, check out the website of American Public Power Association.

On the show page, look for links to Local Energy Rules podcast interviews with leaders from other public power communities, as well as additional ILSR resources on public power and municipal utilities. On the website of the Institute for Local Self-Reliance, you can also find every existing city-owned municipal utility on our Community Power Map.

Our next episode in the public power series, in two weeks, explores how cities form public power utilities. I’m joined by attorney John Coyle, who has represented numerous cities in their public takeover efforts. He describes the barriers to overcome and the four key ingredients that are necessary to make municipal campaigns successful. Local Energy Rules is produced by me and Maria McCoy, with editing and sound production 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.