Community Engagement

Public power = local control

Communities across the country continue to explore the concept of forming a new public power utility. Between 2004 and 2014, 12 new public power utilities were formed — ten from the service areas of investor-owned utilities (see table below).

Publicly Owned Electric Utilities

Established 2004-2014

New Utility Formed

State

Year Est.

Previous Supplier

Jefferson County (18,000 customers)

Washington

2013

Puget Sound Energy

Toledo Public Power (1 customer)

Ohio

2012

First Energy

City of Egegik

(77 customers)

Alaska

2011

Egegik Light & Power Company

City of Atka (42 customers)

Alaska

2008

Andreanof Electric Corporation

Island Power, Pittsburg (400 customers)

California

2006

Former Military Base

Winter Park

(13,750 customers)

Florida

2005

Progress Energy

Berea

(4,700 customers)

Kentucky

2005

Berea College Electric Utility

Cerritos (60 customers)

California

2005

SCE

Moreno Valley Utilities (4,300 customers)

California

2004

SCE

Huron (2 customers)

Ohio

2004

Ohio Edison

Elk City (8 customers)

Oklahoma

2004

AEP

Rancho Cucamonga Municipal Electric Utility (400 customers/commercial and industrial)

California

2004

SCE

"Customers" refers to the number of customer meters served. The population served would be some multiple of this number.

Source: American Public Power Association (2015)

The reasons communities explore the public power or the municipalization option vary from year to year and from community to community. Ultimately, it's about having local control over a community's energy future.

Communities pursue public power to reduce rates, increase reliability, or provide better customer service.

In recent years, many communities have pursued public power to have more environmentally friendly options — such as an increase in renewable energy or greater access to energy efficiency programs. Environmental initiatives have spurred Boulder, Colorado; Santa Fe, New Mexico; and other cities to explore the public power option.

One of the nation's most recent municipalizations was in Jefferson County Public Utility District No. 1 in Washington, in 2013, serving 18,000 customers. After just two years of serving the community, the public power utility feels it has accomplished a lot.

Jefferson County PUD provides 100 percent carbon-free electricity. Puget Sound Energy, which provided electricity earlier, used about 30 percent coal and 30 percent natural gas. Despite switching to more expensive carbon-free sources, the PUD still charges the same rate that PSE used to.

The PUD has a citizen advisory board, whose meetings are open to the public. The citizens also have representatives at the public elected PUD commissioner board meetings.

Jefferson County PUD has hired more than 25 new employees — many local — and enhanced customer services. The PUD uses local contractors and materials where feasible and returns funds to the county through a privilege tax. It has been responsive during severe storms as well as routine outages.

The South San Joaquin Irrigation District in California, has been trying to form a public power utility for at least a decade, primarily in an effort to reduce electricity rates, but also to improve reliability and customer service. The district recently received approval from the California Local Agency Formation Commission to move forward with the effort.

The City of Winter Park, Florida formed its own utility in 2005 to improve reliability, and did so, in part, by undergrounding many of its power lines.

The City of Hermiston, Oregon, formed Hermiston Energy Services in 2001 following a four-year effort that began because the local investor-owned utility closed its local customer service office, and citizens determined that the company's service levels were declining. Customers can now pay bills and address service concerns in person at the local office.

Read about more municipalization case studies and benefits in my earlier blog post, Going Local: How Municipalization EmPOWERs Communities.

The process of municipalization isn't easy (learn more about forming a new public power utility). The process requires significant commitment, time, and money but the communities that pursue the public power option know the benefits outweigh the costs. The key benefits are listed below.

Local Control

  • The city sets its own priorities to achieve the most reliable, responsive electric service at the lowest reasonable price.
  • Success is measured by how many dollars are invested in the local community, not by how many dollars go to shareholders in the form of dividends.
  • Public power utilities are owned by, and accountable to, the people they serve. They are governed by elected officials on city councils or by elected or appointed board members — so citizens have a say in how the utility is run.
  • Citizens have input on the priorities of the utility, whether that be investing in upgrades to the system, keeping rates low, or adding more renewable energy to its portfolio. They also have a say on system aesthetics and design, such as undergrounding lines.

Lower Rates

  • Not-for-profit public power utilities often offer lower electric prices than IOUs that pay dividends to shareholders. In 2013, residential customers of IOUs paid average rates that were 14 percent higher than what public power customers paid. Lower rates encourage economic development and a better quality of life for citizens in the community.
  • Revenues from the utility are invested back into the utility, or the community.
  • Public power utilities typically make financial contributions to the local government in the form of payments in lieu of taxes, transfers to the general fund, and/or free or reduced-cost services to the city. The financial contributions of public power utilities, as a percent of electric operating revenue, were 31 percent higher than those made by IOUs, according to an American Public Power Association survey.

High Reliability

  • Public power utilities perform strongly in terms of power reliability, safety, and efficiency because they focus on these core operations and take care of their own assets.
  • As public power utilities are owned, operated, and staffed locally, when an outage occurs, they are able to respond quickly to service disruptions because service is provided by crews and equipment located in the community.
  • The community is the one and only priority for the utility. Electricity workers live in the community and are accountable to local officials, as well as to their friends, neighbors, and families. Crews are intimately familiar with the local electric distribution system and can identify and correct problems quickly.
  • In the event of a major outage, public power utilities coordinate with other public power utilities for assistance, making use of a broad mutual aid network.

Read more about the benefits of public power on APPA President and CEO Sue Kelly's blog post, Public Power: Locally Grown, Citizen Owned.

Municipalization is not for everyone. For various reasons, between 2004-2014, 13 public power utilities were sold — three to IOUs and ten to rural electric cooperatives.

All municipalization efforts may not result in the formation of a public power utility. However, simply evaluating the possibility ensures that community leaders have a better understanding of their options and the potential value. Even if the leaders decide not to form a public power utility, they can use what they have learned to help the community get better service, lower rates, or new programs from the incumbent utility.

To learn more about the public power business model, join us for Sustaining Public Power's Value through Effective Governance, a preconference seminar at the 2015 APPA National Conference, June 5-10, Minneapolis, Minnesota and participate in APPA's webinar series on public utility governance."