Powering Strong Communities
Community Engagement

How Communities Lose Out With Privatization

While not a common occurrence, utilities do change ownership. Since 1980, 88 public power utilities have been bought out by private counterparts, including both to cooperative (private not-for-profit) and investor-owned (private for-profit) utilities.

For the people in these communities, the sale is not simply a change of the logo on their monthly bill. It can have wide-ranging effects on everything from local employment opportunities, local tax and general services revenue, quality and reliability of electric service, safety of employees, and more.

What Has Sold

The utilities sold since 1980 have ranged dramatically in size, although many had a small number of customers at the time of the sale, with a median of fewer than 600 customers. Less than 30% of utilities sold had more than 1,000 customers at the time of sale. Only five public power utilities with 10,000 or more customers have sold, and four of those five sales occurred or were approved since 2015. The largest such sale was from the electric department of the city of Murfreesboro, Tennessee, which had about 68,000 customers when it sold to the Middle Tennessee Electric Membership Cooperative in 2020. Other utilities of substantial size sold include those serving the cities of Vero Beach and Sebring in Florida; Anchorage, Alaska; and Eagle Mountain City, Utah. Altogether, the sales have meant more than 800,000 citizens today now get their electricity from a private utility rather than public power.

Sales have occurred in 26 states, with Kansas seeing the most, at 15. Almost all the Kansas sales occurred in the 1980s.

Most of the buyout activities since 1980 have transferred the utility ownership to IOUs, although more recent activity has involved co-ops, with eight out of 12 buyouts in the past decade and 18 out of 27 buyouts since 2000 transferring public power utilities to cooperative owners.

In some cases, the utility’s sale was effectively a formal recognition of longstanding operations, such as with the 2021 transfer of Galt Municipal Electric in Missouri to Grundy Electric Cooperative, which had been running the utility operations for years prior to the sale.

How Population Has Changed

Voters in Eagle Mountain, Utah, elected to sell the city’s community-owned utility in 2015 due to anticipated rapid growth. The city-owned utility began operating in 1996, when the town, located south of the Salt Lake City metropolitan area, had about 250 residents. By 2014, when the voter referendum was held, the city had expanded to more than 25,000 people, and was projected to surpass 100,000 people by 2050. In the 2020 census, the city’s population had surpassed 43,000, and the U.S. Census Bureau ranked it as the tenth fastest-growing city or town in the U.S.

Eagle Mountain’s story is not the norm. The majority of the towns where a utility has sold have seen population declines or flat population levels since the sale. Among the smallest towns, or those with fewer than 1,500 customers at the time of sale, nearly half — 49% — have since seen population declines. A third have had stable populations since the sale. Compare the 80% of communities seeing flat or declining populations to an analysis of census data from 1980-2010, which saw 40% of towns with fewer than 2,500 residents adjacent to metropolitan counties, and 22% of towns in nonadjacent counties, gain population. The analysis found that towns of fewer than 2,500 people saw an average 11% population gain if they were “metro-adjacent,” while those not adjacent to a metropolitan area lost an average of 8% of their population.

In Kansas, 11 out of the 15 towns whose electric utility was sold have seen their populations decline since the sale (73%), two have had population remain flat, and two – DeSoto and Wilson – have seen population increases. By comparison, of 42 small towns in Kansas that retained community ownership of their electric utilities, less than half (47%) have seen population declines since 1990, 11 have had population remain steady, and another 11 have seen population increases (26%).

Outside of Eagle Mountain, the towns with some of the most notable increases in population since the utility sale include Hercules, California, and Lebanon, Tennessee – also both adjacent to major cities. Of the areas with available data on population changes, the same number of towns that sold their utility to a co-op saw population growth as did the number of towns selling to an IOU, at 10, although a higher portion of towns where the utility sold to a co-op saw population declines (54%) than those sold to IOUs (45%).

Murky Prices

Despite public power’s track record of offering lower rates, a key promise in many buyouts is that customers will save money under new operations. An analysis of the average bundled rate for utilities sold since 2010 shows that in the year sold, customers would have seen a smaller average rate under the buyer than they were getting as customers of the public power utility. However, this difference was often very small – with a median difference of less than one cent per kilowatt-hour. All but one of the utilities sold – Murfreesboro – had an average residential rate at the time of the sale that was higher than the average public power rate in the state, with a median of nearly $0.02/kwh higher than the state public power average. Anchorage's average was $0.04/kWh higher than the average bundled public power rate in Alaska the year of the sale, but $0.01/kWh less than the state average for all Alaska utilities.

In the five years leading up to the sale, many customers would have seen significant increases in their bills. The analysis shows that the average rates increased an average of 30.52% in the five years leading up to the sale, although this ranges significantly. Two cities, Owensville, Missouri, and Vero Beach, Florida, had been decreasing their rates prior to the sale. Other cities, notably Seward, Kansas, and Campbell, Missouri, had significant rate increases in the five years leading to the sale, of 74% and 90%, respectively.

Customers hoping for sustained lower rates following a sale were likely disappointed. All but one of the utilities that acquired public power customers from 2010-2015 increased their rates in the five years following the sale, with an average increase of 7.2%. The one utility that didn’t raise rates, Rocky Mountain Power (a subsidiary of PacifiCorp), which bought the electric system in Eagle Mountain, Utah, saw its average rates decline 7.6% from 2016 to 2020.

In Vermont, customers in Readsboro might have seen a brief decrease in rates, as the Central Vermont Public Service Corp reported average residential rates that were slightly lower than the public power utility’s average in 2011. However, Green Mountain Power bought Central Vermont in 2012, raising the average residential rate above what Readsboro customers had been paying. The average rate has gone up about 16% since.

The electric utility for the City of Vero Beach, Florida, was purchased by Florida Power & Light in 2018. As reported in Utility Dive, the buy out was expected to provide customers a 21.2% drop in rates and “long-term savings of more than $100 million.” The utility also promised to make infrastructure upgrades to better serve the city.

The information coming out from FPL paints the picture of such promises. Utility materials mention at least three major solar facilities within the area, including the 74-megwatt Indian River Solar Energy Center, which opened in 2018, as providing emissions-free power for residents of Vero Beach and the surrounding county, and that the utility provided “nearly $6 million” in tax revenue to the county in 2021. At the time of the sale, city council officials noted that they expected FPL to provide about $145,000 in annual taxes to the city.

The story from Vero Beach residents isn’t the same.

The year of the sale, Vero Beach’s residential rates were about 15% higher than the average public power residential rate in the state, whereas FPL’s average rate that year was 6% lower than the state average. Energy Information Administration data show that FPL’s residential rates have changed each year since – including a drop in 2020, but have increased an average of four-tenths of a cent from 2018 to 2021. The average residential rate is now about 4% lower than the statewide average bundled rate.

What this data does not show are the other fees that utilities can tack onto customers’ bills.

For Lynne Larkin, an attorney in Vero Beach who was part of a contingent of residents who protested the sale, it is more difficult to discern the monthly bill and where that money is going.

“I’ve actually lost track of how many times they’ve raised the rates,” she said.

“When you had a bill from Vero Beach, it told you exactly what each thing was for, and if there was a surcharge for something,” said Larkin. By contrast, she finds that FPL’s bills are “very poorly described,” and that it’s difficult for customers to get information about what various fees and surcharges are for.

“Our power bills prior to the sale were relatively low, and the sale did not impact us much. Our bills may be a bit lower, but not by much,” said Peggy Lyon, a former attorney for the city of Vero Beach, now retired, who still lives just outside of the city limits in Indian River County.

“Everyone expected huge discounts,” recalled Tom White, who served as Vero Beach’s mayor from 1998 to 2010. His experience is that “we’ve gotten a little bit cheaper.”

White said that he recently received a notice from FPL that it plans to lower rates, but without much detail. White believes one major reason that residents might have been more easily misled about the savings potential was because the monthly bills combined water, sewer, and garbage costs along with the electric bill.

White also pointed to differences in what gets sold to customers.

“Every time I turn around, I get a letter from them and they want money,” he said. He mentioned getting a recent solicitation for insurance for the distribution wire connected to his house. When the city owned the electric utility, he said “we guaranteed to fix anything from the power pole to the meter.”

No Longer Next Door

Specific reliability data is difficult to compare comprehensively from before and after sales. A breakout of metrics such as average outage times per customer, or SAIDI, from the EIA only goes back to 2013, and the most recent data available is from 2021. Compounding the issue, most small systems aren’t required to report this data, and utilities can report using different methods. Still, there are various indications that customers moved into less reliable ownership following the loss of their community-owned utility.

In California, Pacific Gas and Electric has reported increasingly worse SAIDI figures, without major events, starting with 2015, when the Hercules Municipal Utility sold. PG&E’s reported SAIDI increased from 96 minutes in 2015 to 218 minutes in 2021 – an increase of more than two hours. Four other utilities that have sold since 2010 are now managed by utilities that have reported SAIDIs that average two hours or more over the past decade.

Anchorage Light and Power in Alaska had some of the lowest average outage times in the state prior to its sale, with six of the eight years prior to the utility’s sale reporting a SAIDI under 50 minutes, including each of the four years preceding the sale with a SAIDI under 30 minutes. The EIA does not show reported SAIDI for the Chugach Electric Association, which purchased Anchorage’s system.

Similarly, in Tennessee, Murfreesboro Electric Department was a recipient of the American Public Power Association’s Reliable Public Power Provider, or RP3, designation, due to its high reliability. In the seven years prior to the utility’s sale, its SAIDI ranged from 26 minutes to 45 minutes. In the year following its sale, the Middle Tennessee Electric Membership Cooperative, which bought Murfreesboro’s system, reported a SAIDI of nearly 55 minutes.

In Florida, the data is less clear. Vero Beach’s reported SAIDI ranged from 30 minutes to more than 160 minutes in the years prior to its sale, although the utility appeared to report the same SAIDI figure for with and without major event days for some of those years. Since the sale, FPL’s SAIDI has shown consistent improvement, with the 2021 report showing less than 45 minutes.

Still, the statewide figure for nearly 6 million customers isn’t the same as the experience for residents in Vero Beach.

“I see response times as quite a bit longer,” said Larkin. She recalled an outage last year where she said the crews took hours to get onsite, and then crew members “had to sit there until they got the right directions. Then they had to send for more equipment. I don’t even know where it came from, [and] they had no idea, either. The communication is distant. That kind of response time and customer service time has been a really huge disappointment.”

Larkin attributed the delay to not having any local staging or crews. Before, she recalled, “the trucks came from right next door.”

“The city is now at the mercy of statewide outages, not just those limited to our small area of the state,” said Lyon. “The City of Vero Beach had a proven track record with our family for excellent proactive service following hurricanes, and the undergrounding of the utilities that the city did in our area was quite helpful for our little lane that dead ends at the Atlantic Ocean."

Lyon hasn’t personally noticed any differences in her electric service since the sale, with the caveat that the area hasn’t experienced a major hurricane in the five years since, and that is when she feels the “tire meets the road with utility service” in the area. Lyon does find FPL’s mobile app, which she has used to check on her electric usage and to report outages, to be useful.

Larkin recalled that when a hurricane affected the city back in 2004, when the city still operated the utility, “we had response times within days,” she said. “Out in the county [which was already served by the IOU], they were weeks in getting any sort of response. That was a bellwether to what was [going to happen] here.”

White recalled getting swift mutual aid for two back-to-back hurricanes in 2004, and expressed concern that Vero Beach is now “at the bottom of the food chain” when it comes to restoration. “During major storms, we’re one of the last ones to get turned on.”

That said, his house is also served by the underground system that the city installed, and he has not reported any reliability issues since the sale. “I’d rather be able to know that if I have a problem, I can call one of my local people at the electric company and talk to them. Now, I have no idea who to talk to at FPL. That’s what I miss.”

Cities Changed

Other effects on cities aren’t so easily traced in data but reside in the experience of residents.

In Utah, Eagle Mountain has, since its sale to Rocky Mountain Power, attracted several large companies. Facebook (now Meta) data center in 2018, and the city now has a Tyson Foods plant and a Google data center. The Facebook deal involved the city offering the company substantial tax breaks, up to $750 million, and the company paid about $120 million in infrastructure improvements, such as extending utility services to the facility. An analysis from Area Development magazine in 2015 suggested significant payoff from such facilities, despite the limited employment opportunities they bring. However, as Meta looks to bounce back from a significant dip in its value in 2022, it has paused construction on some data centers and has indicated possibly canceling more.

“We in Vero Beach pride ourselves on being a Tree City USA, and the FPL crews’ severe tree trimming methods have been painful to watch,” said Lyon. “Infrastructure upgrades have also been numerous, disruptive, and ongoing, with numerous new wooden poles going in along [a major thruway].”

Larkin also lamented FPL’s tree trimming practices. “What they have been doing all along our roadways is pretty much destroying trees that are anywhere near our power lines,” she noted. “I am shocked that even any of them have survived.”

She commented how when the city owned the utility, it had been undergrounding to protect the trees. “FPL is doing none of that,” she added.

Lyon noted that she sees undergrounding as an important component for the reliability of the system, and “I have not seen any evidence that undergrounding is a goal of FPL in our area.”

Also gone are the electric utility employees and other city staff supported by the budget transfer.

“We lost a lot of employees because we had to close the power plant down,” recalled White. “But this was part of the city business, and everyone thought we shouldn’t be in the power business. A lot of cities were, and their tax base was low and have been able to keep the quality of life that people were used to.”

Looking back at the time of the sale, Lyon recalled that the push for the sale included a “No taxation without representation” sentiment.

“As a county resident living just outside the city limits, I was in a unique position to see the benefits of a municipal utility that allowed local utility payments to remain local, funding roadways, parks, beaches and infrastructure within the 13 square miles of the city, all used by me and my family in our hometown, despite our status as county residents,” she said.

Larkin now sees friends and neighbors post on social media complaining about the reduced upkeep in parks and recreational facilities.

“There’s a lot of responsibility, when you are a public official, to be there for the people. And the electric company was a big help,” said White. He shared his efforts during his terms as mayor to keep the city “public friendly” – including creating dog parks, building a fountain and bathrooms in a downtown park, and expanding the city marina.

“It’s not the same city. People have noticed the services drop, people have complained regularly that the parks aren’t being kept up,” Larkin said. “It is night and day what we can and can’t do because they would have had to raise our taxes to fill that void. But now so much isn’t being done,” said Larkin. “You are taking revenue that is what people would spend anyway on their electricity… and giving it to a company rather than pouring it into your city.”

She shared that city staff now seem “overworked and understaffed,” making it difficult for all departments to provide the level of service desired.

“The people on the city council who pushed this… most of them are gone now, and they don’t have to deal with a budget that is a third less, or even more,” added Larkin.

“We had a beautiful city … now, everybody wants to move,” added White.