The public power business model — also known as municipal ownership — is an American tradition rooted in community. In place since the 1880s, the model is simple: distribute electricity to local customers on a not-for-profit basis. The focus is on customers. Rates are cost-based. Service is reliable. Dollars spent on electricity stay in the community and are re-invested there. Customers are the owners and — through elected or appointed governing boards or city councils — the decision makers for their utilities. Where economies of scale are helpful for meeting energy needs, public power utilities form joint action agencies serving a single state or region.
Today, public power — locally owned and controlled electricity service — is as relevant and valuable as it was over 100 years ago. Public power utilities have survived frequently unfavorable political and economic environments. Municipal utilities established in the 19th and 20th centuries still stand today as continuing testament to the value of public power.
Public power utilities are deeply rooted in the history of the United States. They are an expression of the American ideal of local people working together to meet local needs. Like schools, parks, libraries, police, and fire protection, public power utilities are part of local government. They are governed locally and operated to provide an essential public service at a reasonable price.
Several factors led to the establishment of public power utilities. In some communities it was simply a practical decision made by community leaders who wanted to improve the quality of their citizens’ lives. In the early days of the electricity industry, smaller communities were not attractive to private electricity companies. When the private sector failed to meet their needs, these communities took matters into their own hands.
The first public power utility was born on the evening of March 31, 1880, in the farm community of Wabash, Indiana. Shortly after 8 pm that evening, mechanics hitched a threshing machine engine to the west wall of the Wabash County Courthouse and sent motive power to a generator in the basement. Within minutes, lights atop the courthouse bathed downtown Wabash in brilliant light.
One eyewitness account described the scene in Wabash that night as follows:
People stood overwhelmed with awe, as if in the presence of the supernatural. The strange, weird, light, exceeded in power only by the sun, rendered the square as light as midday. Men fell on their knees, groans were uttered at the sight and many were dumb with amazement. We contemplated the new wonder in science as lightning brought down from the heavens.
(Museum of Electricity, Brush Arc Lamps, Wabash, Ind. 1880, citing an excerpt from a newspaper account in Men and Volts: The Story of General Electric).
The Wabash City Council’s decision to own its electric lighting system instead of franchising the new utility to a private company created America’s first municipal utility. Wabash later relinquished the title of America’s oldest public power community to Butler, Missouri, when it sold its electric utility to a private company. But Wabash created a model in 1880 that would be adopted by thousands of American communities since, a model that still thrives.
Butler prides itself on being known as “electric city” because it was the first city west of the Mississippi to have electric power. It is also the oldest continuously operated public power utility in the United States, running since 1881.
Early in the 20th century, public power utilities were being formed at a rapid pace. The golden days of public power came in the early 1920s when more than 3,000 municipal systems were in operation, according to David Schap in Municipal Ownership in the Electric Utility Industry: A Centennial View. Public power utilities were becoming a real threat to private electricity companies.
Then, the number of public power utilities shrank under the pressure of an aggressive private industry and rapidly changing technology. By 1930, the number of public power utilities fell to approximately 1,900, according to Schap.
In the early 1930s, this downward spiral was reversed, and by the end of the decade there were approximately 2,000 community-owned and operated electric utilities. Several factors contributed to this second, more modest, wave of municipal ownership. One was the development of diesel technology, which made small-scale municipal generation more efficient. Another factor was growing resentment against private utilities, with excessive rates and absentee owners who exported the profits at the expense of the utility systems.
Increasingly, active federal involvement also played a major role. The administration of Franklin D. Roosevelt created the Tennessee Valley Authority to develop hydroelectric power. In his famous “Portland Speech,” on September 21, 1932, Roosevelt said that inexpensive public power would serve as a “yardstick” against which to judge private utilities’ rates and service. “The very fact that a community can, by vote of the electorate, create a yardstick of its own, will, in most cases, guarantee good service and low rates to its population,” he said. “I might call the right of people to own and operate their own utility something like this: a ‘birch rod’ in the cupboard to be taken out and used only when the ‘child’ gets beyond the point where a mere scolding does no good.”
Public power utilities in the 21st century still are an integral part of the nation’s electric utility infrastructure. They have capitalized on new techniques and technologies to provide low-cost, superior service to their communities and citizens. Public power systems have consistently served as a benchmark, or yardstick, by which the performance of other utilities have been measured.
Notwithstanding public power’s many successes to date, “munis” must continue to adapt and change with the times. At the same time, they must not forsake traditional values. They must make the most of their unique characteristics to enhance their competitive position in an ever-changing market. Through the ongoing efforts of dedicated public power boards and city councils, employees, citizen owners, and advocates, public power utilities must continue to lead the industry by acting in the best interests of their customers and reflecting the needs of the communities they serve.
Public power has the potential to remain the strong competitive force that provides a “yardstick” for customers and regulators to measure the performance and rates of private electric companies for decades to come. This continued competition benefits all electric customers, not just those served by public power.