Public Power Pt. 5: The Perils — Episode 169 of Local Energy Rules

Derek Cressman:

I would encourage people to think about establishing public power as the beginning of a process and not an end. It’s not going to fix all of your problems, but it’s going to give you an opportunity to stay civically engaged so that you can fix them. But if that civic engagement falls away, and if people don’t run and contest, uh, elected board seats, and don’t keep an eye watch dogging the rates and the budget and providing an oversight role and the same way that we have to do with every government entity, well, things can go off the rails and, and institutions develop a life of their own and become insular.

John Farrell:

Welcome to the 5th 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 Publicly-Owned Power, responds to an upswell of interest in city-owned utilities. In addition to clean energy, advocates cite local control, lowering costs, and reinvestment in the local economy among the major reasons they want public, instead of private, power companies.

So far in this series we’ve shared why communities are pursuing public power, what specific benefits are found in the public power model, why it’s hard to win a municipalization campaign, and how communities can make gains even in failure. In this episode, we look at four communities that have public power, but find that it doesn’t always measure up to the ideal. It’s a cautionary tale that, no matter the formal ownership arrangement of your utility, communities must stay engaged in working toward an affordable, democratic, and equitable clean energy future.

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

Many advocates of public power see it as an opportunity to capture the ideals of energy democracy, from equity to local self-determination. But like many institutions, even publicly-owned utilities can fall short of their ideals. Public institutions may behave more like their private, for-profit counterparts. Services may still be expensive and exacerbate historical harms to communities of color. Elected or appointed board members may lack the experience and knowledge to challenge the leadership of entrenched staff. For this episode, we share stories from four places where the shortcomings of public power are often on display as much as the promise: California, Arizona, Nebraska, and the Southeastern United States. We explain how these public power utilities have presented a challenge to local advocates and leaders, who are trying to bring affordable, clean energy to their communities, and how they are using the democratic structures of public power to push back.

One area where public power utilities sometimes fall short is high energy costs. Although customers of public utilities often pay lower rates than those of large investor-owned utilities, electricity bills remain unaffordable for many households, especially low-income households. That’s the case in Sacramento, California, which is served by the Sacramento Municipal Utility District, or SMUD — one of the largest public utilities in the country and one with an acronym that doesn’t do much to burnish its reputation.

 

Energy costs were a concern for Fatima Malik, who unsuccessfully ran for a seat on the utility’s board of directors in 2020. She explains how many families in Sacramento still struggle to pay their electric bill today, and how SMUD isn’t doing enough to help.

Fatima Malik:

Since the pandemic, you know, we’ve all been home more, we need electricity, especially to manage the hotter and colder temperatures. And so I think as, as I think about what was important to me then, and, and it’s still important to me today is the cost of energy, right. And who can afford it. And pretty soon it’s gonna become a luxury. I’ll start with the equity piece right here in SMUD territory, as you know, it’s a public utility, during the pandemic and even now brown and Black families are affected at a disproportionate rate with the increased burden of energy costs, housing burden. And I think that we have not resolved that when one in three SMUD customers are behind on their utility bills.

And they’re at jeopardy of having their power shut off and, or now power shut offs have begun this year that were a little delayed during the pandemic. And so it’s this wave of emergency, and almost I’ll say disaster, situation that low income families specifically brown and Black families are experiencing. And we haven’t resolved that, right? There’s this band aid of, you know, energy assistance programs. But I mean, when you’re SMUD bill is four or $600 a month, and you get assistance for how many months, it’s not solving, you know, the larger issue here.

John Farrell:

Derek Cressman, a current candidate for the SMUD board of directors, also sees the challenge of high electricity bills. He explains that part of the reason why low-income Sacramento families are particularly burdened by energy costs is because SMUD charges high fixed fees to all households, no matter how much electricity they use.

Derek Cressman:

SMUD has adopted a rate structure of very low rates, but very high fixed monthly fees has the highest fixed fee of any utility in California, public or private, $23 a month. PG&E right next to it is $10 a month. So that’s a regressive fee, you know, regardless of your income, regardless of your household size, you’re paying that same fee. SMUD, I think is confusing equity with equality. Their argument is, look, everybody uses the grid. Everybody’s gonna pay the same equal fee for the grid, but we don’t all use the grid equally. Right. You know, you can have a mansion out in Carmichael or some of the wealthier parts of Sacramento county, five or 6,000 feet swimming pool, whatnot, putting way more strain on the grid than a small studio apartment in affordable housing in downtown or Midtown or whatnot, everyone’s paying that same fixed fee.

It’s a little bit like charging a bicycle or a, you know, Toyota Prius carpool, or a semi truck, the same toll to cross a bridge, cuz you’re saying, well, you’re all using the public infrastructure, but yeah, we’re using it in radically different ways. And SMUD brags about this rate structure. They say we’ve devised this fee to ensure that we get sufficient revenue, even from people that are doing a lot of conservation or a lot of self generation. And so it’s put in place as a disincentive to rooftop solar and other distributed energy. And also quite frankly, as a disincentive to spending a lot of money on conservation, cuz you’re not gonna save as much on your bill as a PG&E rate structure with higher rates, lower fees.

 

John Farrell:

Local clean energy like rooftop solar, electric vehicles, and energy efficiency could help lower families’ costs while fulfilling utility reliability goals, but SMUD has been hostile to these distributed energy resources.

Fatima Malik:

My hope and goal and dream right now is that communities that are disinvested, that are disadvantaged, need to be part of producing energy, both for themselves and for their neighborhoods, right. Because neighborhood economies are really necessary right now. And I think it would help SMUD to achieve all of their goals. But unfortunately, SMUD is really focused on solar farms and they’re getting ready to eat up like thousands of acres of just, you know, pristine, natural land to build these solar farms and batteries, which serves them, but not the public or the people that need it the most.

Derek Cressman:

And I was quite frankly shocked, two, three years ago when I explored putting rooftop solar onto my house and called an installer that had done one for one of my neighbors. And they came and informed me that they had a financing model called a power purchase agreement where they would install a rooftop solar system on my house at zero cost to me, I’d enter into a contract with them to purchase power from them at a cheaper rate than SMUD for the next 20 years. And that program made electricity very affordable for people who can’t afford a 20 or $25,000 upfront cash payment to install their own system. And sadly, what the contractor informed me at the time is they were gonna have to discontinue that program if SMUD changed their net metering rates. And in fact, that’s exactly what happened. SMUD did make that change and they have discontinued that program. So, I think we’re gonna see a real contraction in rooftop solar and distributed energy in SMUD territory with the exception of new homes that now have a statewide mandate to have solar installed with them.

But I think that’s a big mistake for any utility, particularly in this age of electrification where, due to climate concerns, we need to electrify our homes, you know, with heat pump water heaters, heat pump air conditioning and heating units, and moving onto electric vehicles, we’re going to need to double or triple our electric production. And that either means we’re gonna use a lot of open space for utility scale solar and wind projects or we’re going to need to push towards a distributed energy model. And I’ve been disappointed that SMUD has been basically taking the same hostile posture towards that as the investor owned utilities all across the country, because they are all viewing it as competition to their monopoly on providing electricity.

John Farrell:

Derek notes that the financial incentives for SMUD to oppose distributed energy like rooftop solar aren’t so different than for an investor-owned utility beholden to Wall Street shareholders.

Derek Cressman:

SMUD, and I suspect other municipal power companies across the country, are highly reliant on the bond market to finance their transmission lines and power plants and projects like that. And so getting a good bond rating is crucial for them. And it’s very clear that the bond market is not that different from the stock market in how it views distributed energy as competition, right? Because the bond market doesn’t make any money when somebody installs rooftop solar, but they do make money if there’s a utility scale installation, that’s put through financed by bonds. And so oddly enough, there are similar financial pressures on municipal utilities as what’s coming from wall street, it’s just the bond market as opposed to the stock market. So that was an eye-opening revelation to me, but it does help to explain a lot of SMUDs hostility to rooftop solar or other distributed energy.

Fatima Malik:

And for me, what’s really fascinating about SMUD, right. Again, if we think about like it’s origin story, right? It’s a beautiful origin story about a hundred years ago, right? When, you know, the voters wanted to not be a part of this private utility company, PG&E. And so SMUD was born and created again as this public utility. And again, you know, under the leadership of David Freeman, as you know, who came from the Tennessee Valley Authority, right. And his legacy of solar and conservation, which lasted about 30 years.

But now if you think about it, SMUD is not that leader that they once were, and, or even that public utility that they once were. I certainly see it operating more as a private company and not really responding to the community of the public or, you know, customer’s needs. And what’s even more fascinating to me is, so just to give an example, I did a little research of my own and five out of seven of the SMUD board members run uncontested. Right? So these seats, the folks in these seats have been there a long time. They’re comfortable. They pretty much are just like by default. And so the person that I ran against, he’s, you know, he’s been on the board 12 now it’ll be 16 years. Right. And when you think about that, and I think about this too, is like, there are no board limits or in terms of term limits, there are no campaign contribution limits.

You want good leadership, but right now our leadership lacks luster. And so when you have lackluster leadership, it’s not good. Right. And so I think we are starting to really realize like, wait a minute, these folks have been here way too long, they’re way too comfortable.

John Farrell:

The Tennessee Valley Authority, which Fatima mentioned briefly, formed during the New Deal era to provide electricity and economic development to several southeastern states and continues to supply electricity to over 150 city-owned utilities and cooperatives in the region. Though TVA is a publicly owned utility, it shares some of the same shortcomings as the Sacramento Municipal Utility District. Maggie Shober, with the Southern Alliance for Clean Energy, describes how TVA has blocked clean energy, while offering communities little local self-determination.

Maggie Shober:

TVA serves a very diverse set of public power entities. So TVA is the exclusive provider for 153 municipal and co-op utilities that serve an area that has a population of about 10 million people. And, and so, you know, TVA obviously has a challenge to meet all of those needs. And what they have been doing lately is using, in particular, very heavy handed tactics, aggressive lobbying, misinformation, all those kinds of things to lock their utility customers into what we call their forever contract. So this is technically a 20 year evergreen contract. So every day it’s a new 20 year contract, where the utilities are really giving up a lot of their, you know, any potential leverage or power that they would have over things like, you know, what resources is TVA choosing to build or retire? Anything related to energy efficiency or net metering has to go through TVA. And it has really put a clamp down on things like rooftop solar in the region. They’ve really absolutely underinvested in energy efficiency over the last decade.

A lot of the local utilities, these 153 utilities have wanted to do their own generation projects of any kind for a long time. And TVA has historically said no. There are sections of the TVA act, I mean, let’s remember that TVA does have its own section in, you know, US Code <laugh>. So it always has to be taken, you know, everything is, is very unique, in that sense. And so TVA you know, has a certain reading of the TVA Act that basically says even a local utility in Knoxville or rural county in Georgia cannot do its own generation. It a hundred percent has to be provided by TVA. So in these contracts, TVA has carved out a minuscule amount of what they call quote unquote flexibility, for these local utilities to be able to do their own generation projects.

If they do ’em with solar, they can meet up to 3% of their average load each year. And even that, they have to go through TVA and get approval for each project. And it’s, you know, again, just a very heavy handed process. There’s not a lot of freedom in that sense. And so that was used as kind of a carrot to get these local utilities to sign the contracts. And we saw, I mean, there’s, I remember one letter for the utility in Knoxville, that the CEO of the local utility in Knoxville wrote that basically said, we are landlocked. We don’t have any other option but TVA, so we might as well sign this contract and get what we can get.

There are four other local utilities that wanted to leave TVA and, and use, you know, form their own portfolio and serve their customers that way, and wanted to use TVA’s transmission system to wheel that power in. And so contacted TVA and said, Okay, how much are you gonna charge us for that transmission? And TVA said, no, you can’t under any circumstances, can you use our transmission system. It is off limits. And TVA took them to FERC, FERC decided in TVA’s favor, but that decision is under appeal at that point.

John Farrell:

In addition to preventing communities from investing in their own energy resources, TVA also has a poor record of listening to its members or customers when it comes to the utility’s electricity generation decisions, developed through what is called an integrated resource plan. During a recent discussion of new power plants, for example, the only way for member utilities to weigh in on TVA’s plans was to file comments in a federal environmental review.

Maggie Shober:

TVA is retiring two coal plants in Tennessee going through a process to replace them and have proposed to put a new gas power plant that has to be fed by a new gas pipeline outside of Nashville. And Nashville Electric Service NES, the Municipal Utility Board, the Nashville City Council and the Nashville Mayor have all written to TVA and said, Don’t build this gas plant, replace it with solar and storage and other clean resources. And I will say with that, they had to go through the NEPA, TVA has to do the NEPA, National Environmental Policy Act, NEPA process for all of its decisions. So these three, you know, Nashville entities actually had to go through the NEPA process to make their voices heard to TVA.

I think TVA would say, well, anybody can write us a letter. But as far as formal processes, TVA does say that they are, they do have and will have a sort of special, special meetings where all of the local utilities that have signed these forever contracts can have, you know, little mini meetings and conferences once or twice a year, to talk through their concerns and basically provide feedback to TVA, learn a little bit more about what TVA is doing. We assume these are going on. I don’t, I mean, it’s not public when they happen, what the agendas are, what the topics are, who’s attending, where they are, none of that is available unless maybe, you know, we get it after the fact through a FOIA like a year and a half later.

 

When TVA does an integrated resource plan, which they’re required to do every five years, TVA will have, at least where they’ve done it in the past is they’ve done an an IRP working group that meets monthly and kind of talks through different parts of the IRP. TVA staff present and get feedback. TVA picks who all is on those, that working group, and typically has one or two environmental organization folks. We’ve heard, just a side note on that, we’ve heard that they have a sort of unwritten policy that no one that’s actively suing them can be on those. And so now, I think they’re gonna struggle to have any locally involved environmental groups because that pretty much blocks out the whole of that group.

But there do tend to be a few representatives from the local utilities on the IRP working group. They tend to have folks from, TVA serves a few large industrial customers directly, so they tend to have those folks represented as well. We’ve found that those forums are a little bit more of a kind of box checking mechanism for TVA to say they’ve done stakeholder involvement rather than, you know, something that is truly an effective way for anyone with concerns to get a say into what TVA includes in their IRP.

Their board of directors votes to approve or disapprove the IRP. I don’t know of any board member ever not voting for the IRP. So not only have they all passed, but I think they’ve all been unanimous.

John Farrell:

Maggie links weak board oversight and accountability problems at TVA to governance changes made in the 2000s. However, she notes that the structure of the board, reporting to Congress and the President, was a problem even before the changes instituted with the 2005 Energy Policy Act.

Maggie Shober:

The governance of TVA was actually changed in the Energy Policy Act of 2005. Before that, TVA was governed by a three person full-time board that was nominated through the president and confirmed through the Senate. And that meant that, you know, TVA was really more reflective of the federal government.

We haven’t seen much evidence in the past from, you know, either Republican or democratic administrations or, you know, Republican or Democratic representatives or senators once a person is on the TVA board, they’re kind of on their own. I mean, the administration is not, you know, meeting back with them or checking up with them and saying, Hey, are you guys, you know, making sure TVA is aligned with our goals. And we haven’t seen anything similar for the senators, let alone, you know, the mayors, county executives, and all that are dealing with the TVA utility customers.

John Farrell:

The 2005 changes to TVA’s governance actually reduced, rather than increased, accountability because, as Maggie says, it was meant to more closely model a for-profit investor-owned utility rather than a publicly owned one.

Maggie Shober:

TVA does have a board still, TVA board of directors. They’re a nine person part-time board. And now TVA is run by a CEO set of C-suite executives. So first talk about the board and then talk about the executives a little bit because both are relevant. So the board unfortunately has had a history of primarily being, for lack of a better term, political hacks.

 

<laugh>, folks that don’t have any training in any energy space. They’re not trained as regulators. And perhaps most importantly, they don’t have any independent staff. They are staffed by TVA itself. And that has led to a very captured board that essentially has, you know, rubber stamped a lot of what the executive staff do. Mm-hmm. <affirmative> and then those TVA executives, all of the TVA CEOs since, you know, this was put in place, have come from large IOUs. Interestingly enough, they all have a background somehow with Progress Energy. I don’t know the connection there. But they’ve all come from the IOU community and it, it does seem like to us that they get into this role in TVA and say, Hey, you know, we, we couldn’t do what we wanted to necessarily at the IOUs cuz we had these state regulators we had to answer to. We don’t have that situation here at TVA. We can kind of do what we want. And then especially lately over the last few years, the board has been completely overwhelmed.

John Farrell:

In our full interview, Maggie also provided some suggestions for reforming the Tennessee Valley Authority to make it more accountable to the communities it serves. That interview will be released in the coming months.

John Farrell:

We’re going to take a short break. When we come back, we hear about the shortcomings of public power in Arizona and Nebraska, where local clean energy advocates have had to struggle against anti-democratic behavior and the inertia of utility culture. You’re listening to episode five of a special series of the Local Energy Rules podcast, the promise and peril of publicly owned power.

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John Farrell:

Unfortunately, the Tennessee Valley Authority isn’t the only public agency whose level of accountability falls short of expectations. The Salt River Project Agricultural Improvement and Power District in Arizona is a state agency that provides electricity to much of metropolitan Phoenix. Because it’s not a private company, it is generally exempt from oversight by the state’s utility regulators. It has a 14-member board of directors elected by agricultural landowners. As Autumn Johnson of Tierra Strategies (a public interest public advocacy firm focusing on Arizona energy policy) explains, the Salt River Project or SRP seems to struggle with its identity, alternatingly wanting to be seen as a public entity or not, at its convenience.

Autumn Johnson:

While SRP very much calls itself public power, which the sort of laws that apply to other state agencies, they kind of pick and choose which ones they think apply to them. So they, for instance, they don’t think that public record laws apply to them, for example. So, there’s a separate lawsuit going on right now for the state equivalent of the Freedom of Information Act is applicable to the Salt River project. So, you know, and like while we were there for a press conference last week, we’re not allowed to be in their parking lot or on their property,  which is, you know, pretty different than government agencies and whatnot. So it is a little bit nuanced about when they are and when they are not a public agency

John Farrell:

This dual identity issue for Salt River Project came to a head in the past few months, when four of the utility’s board members filed comments — as individuals, not in their official role — before the state’s utility regulators, opposing the utility’s proposed gas power plant expansion.

Autumn Johnson:

Essentially a year ago, Salt River Project announced that it was going to be doing a massive gas expansion next to a historically black community. And their board voted to approve that. They took that to the line siding committee, which had passed, and then it lost twice at the utility commission. And so that’s currently on appeal. During the process of that, a number of board members submitted a letter to the docket of the public utility commission, kind of in the public process of soliciting public comment, and four board members, and they put in the letter that they’re writing in and their personal capacities and not as representatives of the board, wrote in to again, voice their opposition to the project.

That letter was submitted to the docket publicly after the vote to deny the permit had already taken place, but before the reconsideration. And that was back in June and there’s been quite a bit of behind the scenes kind of kerfuffle since then. This week’s board meeting was sort of the first real public kind of behind the curtain look at what’s going on. And they decided to not only censure the board members for filing that letter to the Corporation Commission, but also revoke their committee assignments for the remainder of the year.

This is another kind of, I think, example of sort of cherry picking when you are or not a public agency. So for instance, if you are in the legislature or you are at the corporation commission and you are in the minority, there definitely is no prohibition on you being able to speak on any issues. It happens all of the time. So obviously members of the legislature often speak out for or against policies. Even if they’re minority, the members of the legislature indeed also wrote to the docket regarding the college expansion project, just like members of the board did. Mm-hmm. <affirmative> Members of the commission often are in the minority, and then they’ll go down to the legislature and talk about issues. So there isn’t that I’m aware of any other kind of elected role in which if you’re in the minority, you’re, then that the argument is therefore that you’re no longer allowed to talk about it. At the board meeting, the board said that it was because it undermined the credibility of the board, that that was kind of the line that they used. And so apparently minority board members, even speaking in their own personal capacities, if it’s not in alignment with the decision of the utility and or the board, is the problem there, which obviously has some free speech implications, I think. This sort of campaign to punish and or attempt to silence or silence in the future, not just board members, but also people, stakeholders and people in the advocacy community, is an attempt to chill dissent for future issues.

I think people are actually afraid of utilities and certainly, you know, specific examples of being afraid of SRP. I am personally aware of advocates that they have helped to get fired. I am personally aware of advocates that they have sent, you know, threatening legal letters to like threatening them with potential depositions or subpoenas if, you know, if they’re participating in activities against them, they have subpoenaed members of their own board. There are examples just of late of board members recusing themselves, abstaining or changing votes, after certain activities by s R P that I think by any kind of lay person would be well-characterized as intimidation. So, um, I think the people are legitimately afraid and when that’s the case, there’s even less oversight. A it really is not public power, because it’s not representative of the people

John Farrell:

If the utility can so freely quash dissent, Autumn suggests, it means that even when members elect a new board, they may not get the change they’re looking for.

Autumn Johnson:We had pretty dramatic success getting new folks elected to the board this year. But if the utility is just able to either intimidate the board members <laugh> into silence and or actually revoke, you know, their positions on committees and kind of things like that, it even I think draws an even larger question about is there really any oversight of this public power utility if even the board is not a check on them. What is actually controlling any of their behavior? Are we just trusting them to do the right thing?

John Farrell:

While regulators often don’t have oversight of the public agency’s behavior, Salt River Project has attracted legal scrutiny for anti-competitive actions. About ten years ago, the utility dramatically lowered compensation rates for solar on customer rooftops, compared to nearby utility Arizona Public Service, or APS.

Autumn Johnson:

SRP is in the middle of antitrust litigation regarding its change in rooftop solar rates. Circa about 2013, they changed those rates and then there was a big drop after that time. And if you even look at today, APS rooftop solar saturation versus SRP is dramatically different because the rates are so significantly different and it takes so many more years of having solar on your roof, or it depends, out in SRP service territory, then it does in APS territory. There was actually a ninth circuit decision at the end of January of 2022 that actually found against SRP and remanded back to a lower court that they were engaging in anti-competitive behavior in regards to rooftop solar. They actually relied on a statute that simultaneously SRP was successful in eliminating during our legislative session. So yes, they are busy in a lot of forums doing things to benefit themselves that don’t necessarily benefit either the rate payers or the community.

John Farrell:

Before going on, I’ll note that we interviewed Jean Su from the Center for Biological Diversity about this antitrust suit on the Local Energy Rules podcast back in August 2021.

As Autumn mentioned, the law on which the antitrust suit was based was changed while the case was being heard, due to the utility’s heavy lobbying of the Arizona legislature, behavior more often associated with for-profit than non-profit public utilities.

Autumn Johnson:

This might sound kind of unusual to people who aren’t like really interacting with a lot of utilities, but you cannot understate the influence that utilities have in states <laugh> with policymakers a lot. I mean, there are, they have many, many lobbyists. They do lots of campaign contributions and so there is, there’s some concern there about willingness to push back or reform, you know, at the legislative level.

John Farrell:

Not only is Salt River project a major lobbyist, they also don’t play by the same rules as their for-profit utility peers.

Autumn Johnson:

If you’re an investor owned utility, they are not allowed to use rate payer funds for that. So they have to use shareholder funds. And if you’re public power, you’re using everybody’s bills, they’re paying their bills, and that’s the money that you’re using for all of your activities. And so, yeah, I mean, for instance, with HB 2101, which is the legislation I was talking about earlier, by some counts, it was written by SRP, but all the utilities were supporting it. We had at one point counted over a hundred different lobbyists that were working to get that bill passed. They had hired a lobbyist for almost every member of the legislature, as well as for the governor’s office. So that’s one example. And yeah, even in, it was just an article that was out criticizing utilities for supporting some of these more extreme candidates. Arizona has, I think, made national news for some of the extreme views and the candidates that are now in the primary or in the general that had won the primary. And there was an article that was criticizing APS because of how much money they’d contributed. If you scrolled down, you would’ve seen that SRP contributed $50,000 to the same candidate. So, yes, they are there. It’s less money than APS has to put towards things. But yes, they are very much participating in the political process.

John Farrell:

For an explanation of why some public power utilities behave like private, for-profit ones — by contributing to political campaigns, fighting local clean energy, and ignoring their customers’ needs — we can also look to Nebraska. Unlike other states, every electric utility in Nebraska is publicly owned, including the Omaha Public Power District, or OPPD. Early success with expanding electricity production with hydroelectric power caused the state’s citizens to favor public over private utilities, and eventually the state bought out all remaining private power providers in the 1940s.

Like the Tennessee Valley Authority, public utilities in Nebraska started in part as a way to drive economic growth in the region. However, Creighton University sociology professor Ryan Wishart explains how this single-minded focus on economic development can endanger other goals that the utility or community might have.

Ryan Wishart:

Public power in Nebraska began in the same era where this was seen as a way to drive growth and prosperity. And one of the, I think strategic directives for OPPD is to have rates that are cheaper than the surrounding states. So having power that’s cheaper than everybody else as a goal in and of itself, you could see how there would be ways that that’s gonna run into tension with other goals around sustainability. Not necessarily affordability, right? But if you’re externalizing environmental costs

…the other factor that’s come up in the, with both the power with purpose announcement of the new gas plants and the announcement to extend the use of coal at the North Omaha plant is OPPD was involved in, and they created a special rate to help recruit large data centers.

And if you look in their decarbonization study, you can see a graph that shows pretty much all of the new demand that these capacity issues are coming up against over the next five years or so, is coming from that in new industrial capacity coming online. Can you have this sort of unlimited growth, or does it inevitably come into tension with questions of sustainability and injustice, right? That certain communities have to get sacrificed, that certain costs inevitably get externalized onto the environment. If you’re in a system that is a grow or die economic system that starts to break down if you don’t maintain sufficient levels of growth. Now politically, again,  we’re in a situation where Nebraska is a red state and cheap power for economic growth has been part, I think, of the conversation around public power from the beginning. So this is part of a larger conversation and political debate that’s happening, you know, here locally in the city all the way up to the intergovernmental panel on climate change.

John Farrell:

In addition to self-made constraints, public power utilities — like private utilities — are subject to external forces that can curtail their abilities to respond to local interest. Ryan explains how the Omaha Public Power District had promised to close a coal power plant having negative health impacts on North Omaha, only to have their plan impacted by the requirements of the regional grid operator, Southwest Power Pool.

Ryan Wishart:

Yeah, initially they promised, there was a plan to phase out coal entirely and switch over to gas. It was a little more complicated than that. They sort of started off with wanting to shut it down the plant entirely. And then sort of the compromise was that it would be part of it would be switched to gas. And then later the main remaining units, larger units would be switched from coal to gas. And that was supposed to happen at the end of next year, that all coal burning would cease. But this year, due to a number of factors, the board voted to postpone that until 2026. And that’s, that’s another set of issues that are constraining, I think, energy democracy here that have to do with the Southwest Power Pool and their requirements around baseload generation… that was the first time that we, I remember really hearing about the issue of accredited capacity, and that people were asking, Why can’t you use storage or other things? And part of the answer was that the Southwest Power Pool, which OPPD is a part of, and bound by its its rules, didn’t give other energy sources the same amount of capacity credit as it did for example, those gas generators. But this vote happened relatively quickly. I think the staff initially wanted it to go with just a few weeks, maybe like two weeks. I forget exactly what it was. And the board stretched out for I think a month, for the public to weigh in. But that still wasn’t, a lot of the community advocacy groups that had first gotten involved because of the North Omaha plant couldn’t really get themselves up to speed that quickly on what the Southwest Power Pool rules were and what all these terms and complex regulations really meant.

John Farrell:

Similarly, Nebraska utilities are experiencing delays connecting new energy generation to the electric grid. External interconnection rules, in this case from the Southwest Power Pool, can prevent them from moving the process along.

Ryan Wishart:

I don’t know if your podcast listeners are familiar with the backlog that’s occurring in those permitting of new generation sites. So they’ve been construction delays, local opposition has slowed down some of their plans for deploying solar, the gas is going on track, but it’s been slowed down. And these interconnection studies are something that, you know, I think a lot of community members are really frustrated about, but there is some truth that it’s out of the, some of that decision making power is out of the utilities hands. And there are severe consequences if they try to simply go against those rules… That has been difficult for elected board members and also the public and advocacy groups to really understand and be able to respond to, particularly along the timelines in which it’s happened in the past.

John Farrell:

Responding to these outside requirements and entities can cause public power utilities to act like for-profit utilities. According to Ryan, the common pressures that apply to public or private utilities shape utility decisions as much or more than their ownership model.

Ryan Wishart:

where organizations are either regulated by or dependent on resources to a common, other institution. They have to configure themselves in such a way to be able to respond to the demands of that organization that has coercive power over them. So with, we’ve talked, I talked about the SPP sort of one example, right? Where these sort of higher regulatory institutions that require the production and submission of reports, various kinds of accounting… There’s professionalization, if people are trained in the same institutions. And I, you know, in some ways I kind of expected to see more of that. Then I have, thus far, I’m still getting started in the research in some respects of if people at a public power utility are looking to the Edison Electric Institute or their research arm for what the best way to run a utility is, and they’re getting information from that’s designed around the model of a investor owned utility, that would be be another source.

John Farrell:

Due to these failings and to OPPD’s efforts to increase its fixed fees, Omaha residents have led a successful campaign to elect new members to the board of their municipal utility. Liz Veazey, an active customer of the utility whose experience includes working for national go-solar group Solar United Neighbors, describes how they made the change.

Liz Veazey:

There was an increased interest in, from local advocates, folks involved with the Sierra Club, League of Women Voters, and others to really push back and elect better people to the board and recruit better people to run for the board. And since then, I would say that, you know, the people of OPPD have elected clean energy and climate champions in basically all of the seats except for one. And basically everyone was opposed to the fixed fee increase.

John Farrell:

But even when local advocates successfully elect a new board of their public power utility, it doesn’t always result in the changes they sought, as new board members run into ingrained organizational cultures. Ryan explains how the Omaha Public Power District went forward with a proposal to increase its fixed fee and impose a new rate structure despite public opposition in the first place, and why the new board members haven’t been able to overturn the policy.

Ryan Wishart:

I was at the public hearing over the rate restructure decision. And nobody, there’s a packed house and it went on for hours and nobody at the hearing spoke in favor of it. So it seems that it was overwhelming public opposition, at least from what I saw. And it went through anyway. And so of the board members I interviewed, the majority of them said that the fixed fee decision was part of the reason they decided to run for office. So I asked ’em about, you know, what they thought their biggest achievements of their campaigns goals were and what their, what things that they’d had the least success with. And so many of them, actually, that was one of their explicit campaign goals, was to sort of reverse or roll back that increased fixed fee and declining block rate.

And a lot of them spoke about that. This has been sort of their biggest disappointment, is their inability to do that. Some had been swayed, they said by, staff counter arguments about the complexity of the billing process. One indicated that, you know, it might actually be better for low income households to have more predictability in their bills, which is a, a big shift from, that was major point of contention over the issue was the studies that OPPD discussed during the debate, Acknowledged that it was gonna disproportionately increase the bills of low income, low use households while lowering bills for larger users. But, you know, I think it highlights an issue of the mismatch between the level of expertise and the complexity of decision making around public power that, you know, board members historically didn’t necessarily have any real background in energy or sustainability before this, this sort of raft of new candidates. It’s a hard thing for them to push back when staff tell them that something is either technically infeasible..

John Farrell:

Liz suggested that even when the board is in tune with the community, there are barriers in the utility culture that might prevent them from making substantive change.

Liz Veazey:

Board members at times are worried about pushing too hard, too fast, and like if a bunch of staff leave that can leave the organization in a really challenging place. So I’m frustrated about some of the decisions, but I can see that like that is a slow thing to change, staff culture and that it is important to sort of bring staff to some degree along and get them bought into some of these big changes. And I think that that’s happening, but you know, it’s slow.

Ryan Wishart:

There’s no statutory limit on the board taking a heavier hand, but it has been the long normative standard that the board issues guidance on what the goals are, and then staff decides how to get there. I don’t think there’s anything legally blocking them from being more aggressive, but that has been a cultural boundary that thus far they have not been willing to transgress

John Farrell:

Despite the limitations of public power, it still gives communities an opportunity to push back and influence their utility — an opportunity that customers of a private utility don’t always have. Liz explains how electing a new board of directors made a difference, although not as dramatic as she would have liked.

Liz Veazey:

Still with all of that, we’ve seen the approval of like 500 million of new fossil gas infrastructure, extension of coal burning at a plant in North Omaha, we’ve seen no new big demand side management. Where are distributed energy resources, energy efficiency programs, though they did also do 500 million or so in the works of solar – utility scale solar, and there’s a net zero 2050 commitment. And I think that there have been lots of little things changing. I think the board culture has changed. The board is asking a lot more questions, is pushing staff. I think the staff culture is changing.

John Farrell:

Back in Sacramento, even though Fatima Malik fell short of winning a seat on the utility board, the utility did make changes in response to the campaign. That’s something that current candidate for the SMUD board of directors Derek Cressman wouldn’t expect to see from a privately owned utility.

Derek Cressman:

One of the real benefits of municipal power is they are more responsive to public pressure. And we saw that again just a couple of years ago. I I think in part to Fatima’s campaign and organizing by local environmental groups and energy groups that were rightfully complaining about a horrible integrated resource plan that SMUD had put out that called for keeping a gas fired power plants open all the way through 2040 and the community was outraged by it and organized around it. And candidates ran based on this and SMUD responded and they said, okay, we’re gonna go zero carbon by 2030. And they’re still not doing it as fast as I think they can and should do, but it is an example of organizing and public pressure working. Whereas so often when we go up against PG&E or the investor owned utilities, they’re just immune to public pressure and you’re solely relying on regulation to move their behavior.

John Farrell:

Thank you so much for listening to this episode of Local Energy Rules, the 5th in our multi-part series, The Promise and Peril of Publicly-Owned Power. We hope you enjoyed this candid look at public ownership and how examples from a few communities illustrate how it’s not a panacea for democratic control, affordability, or clean energy.

If you liked this episode, don’t miss the earlier parts of the series. Episode 1 covers the inspiration behind public power campaigns, episode 2 discusses the benefits of public power, episode 3 explores the ingredients of successful public power campaigns, and episode 4 asks – what happens if we fail? We also have many resources for advancing equitable clean energy at the local level on the website of the Institute for Local Self-Reliance, including the interactive Community Power Toolkit, a list of municipal utilities on our Community Power Map, and numerous other interviews and articles about the community efforts to achieve thriving equitable economies through clean energy.

Our next episode in the public power series, in two weeks, asks what communities can do without owning their utilities to meet their economic development, equity, and climate goals. 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.