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

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.

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.

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.

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.

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.

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.

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.

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.

<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.

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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

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.

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.

…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.

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..

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.