What I am about to write is logical, but maybe not always evident to those outside of the electric sector. Electricity is an essential, significant input into every industrial and commercial business endeavor, as well as to college campuses, military bases, and schools. Of course, it is also essential to residences, but for now, I want to focus on the relationship to commercial, industrial, and governmental, or quasi-governmental, functions.
The industrial sector consumes about a third of all energy in the U.S. and about 25% of electricity. Combined with commercial businesses, these customer segments account for more than 60% of all electricity consumed, making energy a key consideration in both their day-to-day operations and their growth strategies. The cost and, sometimes more importantly, the reliability of their electricity are often major factors in where they locate, relocate, or expand. These considerations also apply to military needs. As any decent historian will admit, U.S. industrial might was a major reason we were able to provide pivotal support to our allies and ultimately win World War II.
Based on my 20 years working on behalf of public power, visiting public power utilities across the country and researching our members to provide examples to policymakers in the legislative arena, my sense is that we have a disproportionate amount of key businesses and defense facilities in our service territories. This is only a sense, however. The American Public Power Association has surveyed our members in the past about “key accounts” (i.e., major commercial and industrial, or C&I, customers), but has not, on a national level at least, evaluated how such accounts compare, proportionally, to those in other parts of the electric sector.
But what I do know is that public power utilities excel at reliability, and they serve more than 3 million C&I customers. Public power communities have been able to attract and maintain many industrial and commercial heavyweights, from more traditional sectors of the economy to emerging sectors, because of a desire to maintain those businesses by providing competitive rates and high levels of reliability. Data from the Energy Information Administration show that in 2020, public power utility customers, on average, experienced less than half the total outage minutes per year as customers of other utility types — about 116 minutes less than cooperative customers and 87 minutes less than customers of investor-owned utilities.
That extra time with the lights on is worth a lot to C&I customers. Using the Lawrence Berkeley National Laboratory’s Interruption Cost Estimate Calculator, which estimates the economic loss that customers incur during an outage (and which is integrated with our eReliability Tracker), a public power utility with about 16,000 customers (and 2,800 C&I customers) that had a three-hour all-system outage would cost its customers more than $9 million. The overwhelming majority of that cost would be shouldered by C&I customers –— from potentially lost revenue, decreased productivity, equipment damages, spoiled supplies, and security concerns.
Anecdotally, we know that public power’s reliability edge has been a deciding factor for many large C&I customers. In places like California’s Silicon Valley, where production of computer chips and microprocessors cannot be interrupted for even a millisecond, many high-tech industrial facilities are served by Silicon Valley Power, a public power utility. Toyota decided to build its manufacturing headquarters in Jackson, Tennessee, where Jackson Energy Authority is the local — public power — utility. Many data centers, food processors, chemical manufacturers and others are sited in public power communities. One of my favorite stories is that of the classic American company, Smucker’s, which was formed in the small public power town of Orrville, Ohio — its corporate headquarters remains there to this day. Not to mention the many defense facilities served by public power.
Public power utilities often also work with their key accounts to provide enhanced redundancy in the electric infrastructure if desired. While this typically entails additional fees, public power utilities can often respond quickly to these requests. They can do so because of local governance and decision-making regarding rates and approval of projects. Of course, the not-for-profit public business model makes public power utilities’ basic rates extremely competitive and transparent to their customers.
As many communities look to revive their economies, these qualities combine to provide powerful incentives for businesses to make their homes — and remain — in our communities, supporting economic development at all levels.