It’s easy to understand why the buzz continues about municipalizing utilities. With environmental concerns, reliability issues, rate increases and the desire to infuse more renewable resources into the power grid, it’s no surprise municipalities are looking to reclaim their electricity from private companies. It was a trend that was on the rise in 2013; but three years later, has the pendulum swung back? What motivates a community to make such a costly change? What are the advantages of this power play, and are there drawbacks to the conversion?
A lengthy process
According to Ursula Schryver, director of education and customer programs at the American Power Association, the municipal takeover of electric utilities continues; but the trend is largely dependent on the community itself and why it is seeking local control.
“It really varies over the years as to why communities do it,” she said. “A lot of it is driven by a community wanting more environmentally friendly options, but others may be looking for better reliability or to create something that costs less than a private company. It just depends.”
One thing is certain: It’s a lengthy process that does not happen overnight. When Winter Park, Fla., took over it’s electric utility in 2005, it was months before everything was in place and reliability improved for its 14,000 customers.
Schryver said it all begins when a community leader, or the community itself, takes the initiative to make a change. From there, a feasibility study is conducted and a referendum is held to determine the logistics of a municipalowned utility and address other concerns. If both come out favorably, then the process moves forward — including establishing the necessary infrastructure and negotiating with the incumbent utility to get out from under them. That negotiation can take years.
“Sometimes a utility is not a willing seller,” she pointed out. “It’s very unusual for them to come to an agreement on price right away, and it’s very important to have the support of the whole community (because of the time involved). There are a lot of benefits to making this switch, but you have to know what your goals are and be in it for the long haul.”
Eye on the prize
Most communities that create their own utility are small, like Winter Park; but on occasion a larger city does it as well. Boulder, Colo., is an example of a metropolis that decided to take control over its electrical service in order to meet environmental goals set by its residents.
In 2014 the city council unanimously decided to create a new public utility that will cost millions of dollars to implement, but one that is more in line with 21st century needs. After the decision was read, Councilman Macon Cowels said the residents who called for the change are envisioning a new world.
“If we want to wreck the natural systems, all we have to do is stick with the status quo. Most of the people in our town are saying we cannot keep doing this … This is a high calling that we are doing,” he said.
Other communities that have looking into the possibility are in the process of doing so or have already done it include Santa Fe, N.M.; the South San Joaquin Irrigation District in California; Hemiston, Ore.; and Jefferson County, Wash.
Despite the expense and delay, these communities say it’s worth it. When Jefferson County leaders decided to consider a municipal electric utility in 2008, they believed it would have a favorable impact on the local economy, be better for the environment and would create more jobs.
In a blog post written by Schryver, the Jefferson County Public Utility District began serving its 18,000 customers in 2013. In the two years since it has accomplished quite a bit. In addition to providing 100 percent carbon-free electricity, compared to the electricity provided by Puget Sound Energy prior to the change, it has hired 25 new employees; enhanced customer service; been responsive during storms; and has yet to raise rates.
Jim Parker, manager for Public Utility District No. 1 in Port Hadlock, Wash., confirmed that the change has gone well, but said it has not been a seamless operation.
“We only have 38 employees while other utilities have 100; but we are still working on personnel and trying to get the right people in the right places. It’s been a lot of work for me, and I wish we didn’t have to incur so much debt; but it’s good for the community, and that’s what it’s all about.”
Benefits of electric utility municipalization
- The city sets its own priorities in order to achieve the most reliable service at a reasonable cost.
- Success is measured by the amount of money that is invested into the local community.
- Public power utilities are owned by the people they serve and are accountable to the same.
- Citizens have input on the way in which the utilities are operated.
- Not-for-profit power companies typically have lower rates than their private counterparts.
- Revenues go back into the local community.
- They make contributions to the local government in lieu of taxes, transfers to the general fund, and/or free or reduced-cost services to the city.
- Because they answer to those whom they serve, public power utilities tend to be more reliable than privately owned utilities.
- When outages occur, there tends to be a lower response time.
- When a major outage occurs, publicly owned utilities tend to coordinate with other publicly owned utilities to create a broad network of mutual aid.