One third of us own our electric companies, either directly as members of 900 cooperatives, or indirectly as citizens of the 2,100 municipalities that own their utilities. The vast majority of customer-owned utilities (COUs)- about 70 percent – are distribution-only utilities. They purchase power on the wholesale market and resell it to their customers. They traditionally have been allowed to issue tax-exempt bonds to finance the construction and upkeep of their systems. Few COUs have been started in recent years because the process is time-consuming, expensive, and typically fought tooth-and-nail by the incumbent private utility.
Butpublic power is garnering increasing attention in a restructured electricity market. Many customers, cities and states see customer control as a way of maintaining reliability and peace of mind in a deregulated environment.
Because customer-owned utilities are democratic and locally controlled, and service rather than profit oriented, we should encourage their formation. In today’s topsy-turvy electricity world, states should encourage the formation not only of customer-owned distribution utilities, but public transmission utilities and generation utilities as well.
Encourage Public Distribution Utilities
TheCalifornia electricity crisis was been a boon for municipalization efforts. San Franciscans voted on a ballot initiative in November 2001 to decide whether or not to form a public power district. The New Orleans City Council voted in January 2001 to purchase Entergy New Orleans’ city-wide distribution system. Public power advocates in Portland, Oregon worked to place municipalization on the 2002 ballot. In 2006, after passing referendums, six small communities in Iowa filed regulatory petitions with the Iowa Utilities Board to drop their current electric supplier and form municipally-owned electric utilities.
The six cities are Everly, Kalona, Rolfe, Terril, Titonka and Wellman. They currently get their electricity services from Interstate Power and Light (Alliant Energy) but their residents voted to sever the ties with the incumbent utility (Iowa Utilities Board– there are six dockets set up to address each city’s initial “Petition Requesting Authority to Establish a Municipally-Owned Electric Utility to Furnish Electric Service” – SPU-06-5 (Everly); SPU-06-6 (Kalona); SPU-06-7 (Rolfe); SPU-06-8 (Terril); SPU-06-9 (Titonka); SPU-06-10(Wellman)).
The American Public Power Association reported that in Everly (pop. 650), summer electric rates are about 13.9 cents per kilowatt-hour and that nearby cities that own their electric utilities have rates around seven cents per kWh. Everly will use its prior experience in taking control of its natural gas utility service from an incumbent utility in the 1990s.
If successful in their bids to uncouple from their utility, the cities will have to purchase the distribution lines and equipment from Interstate Power and then find a supplier of electricity or develop their own power plants.
Interstate Power and Light spokespersons say that the efforts of the cities to municipalize their electric services are a mistake. The utility says that it appears to be a move by the cities to raise additional revenues to supplement ongoing state budget cuts to local governments. Interstate says that the economic assumptions that the cities are relying on are flawed and that a take over may create unforseen reliability issues on the grid.
While hundreds more communities have expressed interest in taking over their electricity systems in the past couple of years, most have not pursued it because of the time and costs involved. To help streamline the municipalization process in California, The Fair Citizen Access to Public Power Act has been introduced. For example, under current California law a two-thirds majority vote is needed to approve formation of a municipal utility district. This bill would reduce that requirement to a simple majority.
Thelargest incentive for customer ownership is the right that municipal and cooperative utilities have traditionally had to issue tax-exempt bonds. This benefit has come under attack recently by private utilities that have argued that COUs should not be given this benefit in a deregulated market because it gives them an unfair advantage. The American Public Power Association has endorsed a compromise solution that allows municipal utilities to issue tax-exempt bonds if they choose not to participate in a competitive environment. The bill was introduced in the last session of Congress, but has not yet been reintroduced.