Advantages of Public Power

The central advantage of Public Power means homes and businesses run on electricity provided by a not-for-profit, locally owned utility. That means the community has more control, so all the benefits produced by public power—including affordable energy costs, better service, better environmental outcomes, and improvements to the local community is accrued by all the local rate payers. With investor owned utilities, the majority of the benefit is accrued by the stockowner. 

Public power utilities are community-owned, locally controlled and operated on a not-for-profit basis. Each utility is a little different, depending on population, geography, structure, and the community’s values and goals. This ability to tailor operations and services to the local community is the foundation of public power’s success.

The Beneficial Characteristics of Public Power

A public power utility provides long-term value to its community and citizens. The benefits are manifold, including (to name a few) rate stability, support for jobs, policies that are in line with community priorities, and financial support for local government functions. 

Public power is distinctly different from the investor-owned utility sector and even rural electric cooperatives because it is fully accountable to its customers.  Five Distinct Advantages Include:

Accountability and Transparency

Public power is about serving the local community. Local control affords public power communities five distinct advantages: accountability and transparency in governance; financial support for the local government; more efficient municipal operations; the ability to tailor utility policies, programs and practices to serve the priorities of the local community; and the value of ownership.

Public power utilities are governed and regulated by the city council or county commissioners, or an independent utility board whose members may be elected or appointed by local officials. This means customers have more say in the policies and practices of the electric utility.

 Citizens have access to planning alternatives, cost estimates, performance and other reports. Customers know how and why decisions are made.

Public power utilities also face a special kind of accountability, unparalleled in almost any other business: their friends and neighbors. In an era of globalization, public power utilities stand out in that every employee is a member of the community.

Supporting Local Government

Public power utilities provide a direct benefit to their communities in the form of payments and contributions to state and local government.

In addition to payments that resemble property taxes, payments in lieu of taxes, and transfers to the general fund, many utilities make in-kind contributions in the form of free or reduced-cost services provided to states and cities.

The level of support and how these benefits are returned to the community is a local decision–another advantage of local control.

For example, some public power utilities make transfers to the city’s general fund in an amount equal to the property taxes that would have been paid by an investor-owned utility. Others set the amount as a percentage of electric revenue or as a charge per kilowatt-hour of electricity sold.

Public power utilities make greater financial contributions to state and local governments than investor-owned utilities.

In the most recent year for which data are available, the median amount contributed by public power utilities was 5.6 percent of electric operating revenues. Over the same period, investor-owned utilities paid a median of 4.2 percent of electric operating revenues in taxes and fees to state and local governments. 

When all taxes, tax equivalents and other contributions to state and local government are considered, public power’s contributions, as a percent of electric operating revenues, were 33 percent higher than those of investor-owned utilities.3

Beyond direct financial contributions, public power utilities may support their local government and community with In-Kind Contributions.  These include:

  • Free or discounted electricity or other services to the local government, including streetlights, municipal buildings, water or sewer treatment facilities, and traffic signals
  • Installing temporary lighting for special events
  • Maintaining streetlights, traffic signals, or stadium lights
  • Electric repair or maintenance for other city departments
  • Rewiring municipal buildings
  • Tree trimming for other departments
  • Reading water meters
  • Putting up city signs or banners
  • Providing technical expertise (e.g., engineering studies)
  • Providing free building space
  • Hanging banners and holiday lights
  • Sharing electric department vehicles and equipment with other municipal departments

Efficient Operations

Public power utilities keep costs down through local scrutiny of operations. They use strategic partnerships and joint action with other public power agencies to obtain the advantages of size in wholesale supply matters without taking on the disadvantages of merging into larger, more bureaucratic institutions.

Electricity distribution, as opposed to large-scale generation and high-voltage transmission, is local, and public power utilities find that their smaller size can be an advantage in electricity distribution.

Municipal utilities can also create new efficiencies in local government.  These include:

  • Integration of municipal operations (e.g., shared office space for multiple city services)
  • Shared personnel (e.g., human resources department that serves the city and utility)
  • Lower per-person administrative costs for municipal employee benefits
  • Town may avoid short-term borrowing costs due to cash flow from electric revenues

Local Priorities

When the community owns the utility, the community controls the utility’s priorities. Decisions about pricing electricity, building power plants, purchasing wholesale power and service policies are made locally and reflect the values and choices of the community.  Citizens exercise their voice on big questions the utility may face, including:

  • investments in local infrastructure–system maintenance and upgrades
  • energy conservation and energy efficiency
  • energy resources–renewable energy, coal, natural gas, or other sources
  • environmental stewardship–pollution prevention, investing in cleaner technologies
  • customer service policies–assistance to low-income customers, service extension policies
  • system aesthetics and design–choosing whether to underground electric lines for community beautification or enhanced reliability

Customer Satisfaction

Public power utilities are highly responsive to customers’ needs and concerns, typically getting high marks for customer satisfaction because their first and only purpose is to provide efficient, reliable service to the customers in their communities.

  • Reliability 
  • Public power utilities have a strong record of focusing on core electric operations and delivering a reliable power supply. Because of their connection to customers, public power utilities are motivated to maintain the community’s assets to keep their local electric system operating continuously and efficiently.
  • One of the most common is the System Average Interruptible Duration Index (SAIDI), which measures the average length of time, in minutes, that each customer of a utility was without power during a year. Recent data show that public power utilities demonstrate higher reliability than the national average.
Outage DurationPublic PowerNational average
Average58.49 minutes143.1 minutes
Median40.40 minutes125.6 minutes
Maximum552.84 minutes1,015.1 minutes
  • Public power utilities make business decisions every day that result in reliable electric service. The elected officials who oversee public power utilities are accountable to voters, who are also the utilities’ ratepayers.
  • Outage Restoration
  • Many public power utilities have outage prevention programs
  • public power utilities restore power quickly because they are located in the community. Repair crews live in the community and have a vested interest in getting service restored quickly.  Living in the community also means they can get to the site of the outage faste
  • As an entity of the local government, public power utilities also benefit by coordinating responses with In the event of a major outage, public power utilities coordinate with each other for assistance through a broad network of mutual aid programs. other local emergency services. 
  • The mutual aid network among public power utilities is strong. Public power’s commitment to serving communities extends beyond its own community, and utilities take pride in helping one another. 
  • Customer Service
  • Since a public power utility’s customers are its owners, there is no conflict between the needs of customers and the needs of shareholders.
  • Public power utilities receive high scores in residential and business customer satisfaction in the J.D. Power and Associates annual surveys for electric utilities.  Clark Public Utilities in Vancouver, Washington, ranked the highest in the midsize utility segment in its region for an eighth consecutive year.
  • In a public power community, customers drive customer service; the utility can tailor its programs and services to the needs and desires of its customers, instead of looking only to make a profit.
  • Lower Rates And Other Economic Advantages
  • On a national basis, average electricity rates for all investor-owned utility customers in all customer classes are 6.9 percent higher than average rates paid by public power customers.
  • Average electricity rates for all cooperative utility customers are 3 percent higher than those paid by public power customers.
  • Public power utilities can offer lower rates because:
  • The utility does not pay dividends to often-distant shareholders.
  • They are accountable to the customer-owners they serve. 
  • Local cost-consciousness and public scrutiny over expenditures keep the utility’s budget in check.
  • Administrative costs are lower, due to improved efficiencies through sharing personnel, equipment and supplies with the local government. 
  • Rates are set locally by citizen-controlled boards or city councils that operate publicly. 
  • There is no economic bias toward high-cost, capital-intensive technologies. 
  • They are eligible to borrow money for capital expenses using tax-exempt bonds, holding borrowing costs down. 
  • They consistently earn higher credit ratings from the three major credit rating companies. 
  • In certain parts of the country, they may have access to lower cost hydroelectric power marketed at wholesale by federal and state agencies,
  • Joint action agencies give smaller utilities access to economies of scale in generating and purchasing power and other services.
  • Also the use of Municipal Bonds gives Municipalities unique advantages
  • Nearly three-quarters of all core infrastructure built in the United States is financed with municipal bonds. Interest paid on these bonds has been exempt from federal tax since the inception of the federal income tax in 1913, just as federal bonds, bills, and notes are exempt from state and local taxes.
  • Nearly three-quarters of all core infrastructure built in the United States is financed with municipal bonds. Interest paid on these bonds has been exempt from federal tax since the inception of the federal income tax in 1913, just as federal bonds, bills, and notes are exempt from state and local taxes
  • The federal tax exclusion of bond interest means municipal issuers can finance their investments affordably. Over the past 20 years, the average yield of Standard & Poor’s Corporate Bond (Aaa) Index has been 130 basis points higher than that of Moody’s High-Grade Municipal Bond Index. Adjusting for the cost of call provisions common in municipal bonds (but rare in corporate taxable bonds), the spread is closer to 180 basis points. The difference can save municipal bond issuers 25 percent over the 30-year life of a project.
  • The federal tax exclusion of bond interest means municipal issuers can finance their investments affordably. Over the past 20 years, the average yield of Standard & Poor’s Corporate Bond (Aaa) Index has been 130 basis points higher than that of Moody’s High-Grade Municipal Bond Index. Adjusting for the cost of call provisions common in municipal bonds (but rare in corporate taxable bonds), the spread is closer to 180 basis points. The difference can save municipal bond issuers 25 percent over the 30-year life of a project.
  • Local Economic Development
  • Public power utilities are an integral part of the economic development of their communities, working closely with new and existing businesses to provide the highest levels of reliability, customer service and development assistance. Public power utilities are local and are invested in the success of the customers and communities they serve.
  • Public power utilities benefit their communities by providing employment opportunities for local residents.
  • Public power utilities are good for the local economy. Lower electricity prices allow consumers to spend more money on other goods and services, in addition to attracting business and industry to the community. Local dollars stay at home in public power communities. They are not sent to companies and shareholders out of the city, state, or in some cases, country.
  • Many public power utilities have taken a leadership role in preparing their communities for the future by pursuing new technologies as an integral part of community growth.
  • A 2015 survey indicated that the most important thing an electric utility can do to attract business to the community is offer high reliability and competitive prices
  • Tools that may be offered by public power utilities with their communities include:
  • special economic development rates for the first few years of operation
  • special connection fees or line extension rates to make extending electric service to a new business site more affordable for new businesses 
  • key accounts programs for large commercial, industrial and institutional customers 
  • additional service redundancy to enhance electric reliability 
  • backup generation 
  • rebates
  • discounts and fee waivers
  • tax credits/abatements
  • zoning assistance
  • grants
  •  low- or no-interest loans

Excerpts from: PUBLIC POWER FOR YOUR COMMUNITY, American Public Power Association, 2015

Energy Democracy

Excerpts from: Johanna Bozuwa – Research Associate

Johanna Bozuwa is a research associate with The Next System Project at the Democracy Collaborative. Her work focuses on transitioning away from the extractive, fossil fuel economy and building towards resilient and equitable communities based on energy democracy. 

And

Energy democracy: Goals and policy instruments for sociotechnical transitions

Matthew J. Burke, Jennie C. Stephens

The concept of energy democracy is increasingly being used by grassroots activists in the United States, parts of Europe and elsewhere to call for and justify integrations of policies linking social justice and economic equity with renewable energy transitions.

A new idea from the ranks of community organizers, labor, and renewable energy advocates who see our current energy system as broken and destructive—seeks to take on the political and economic change needed to tackle the energy transition holistically. A democratic energy system powered by renewables (and free of fossil fuels) would distribute wealth, power, and decision-making equitably. 

Can we redesign our energy system with energy democracy at its core?  The following will offer a pathway:

  1. Realizing opportunities for this restructuring of sociotechnical regimes requires a re-imagining of energy politics, an effort that energy democracy advocates intend to inspire. The energy democracy movement seeks to create opportunities for destabilizing power relations, reversing histories of dispossession, marginalization and social and environmental injustices, and replacing monopolized fossil fuel energy systems with democratic and renewable structures. A first step is to stop exploiting fossil fuel reserves, as Quantitative Easing for the Planet proposes.
  2. The energy democracy movement represents an example of a de-alignment/re-alignment transition pathway, an ideal-type pathway for energy transition that develops in response to serious contextual pressures.  Shift ownership of the generation, transportation, and distribution of energy. Restructuring and democratizing our electric systems through public ownership.  Public ownership of utilities can accelerate the renewable energy transition at the scale needed to meet our closing climate deadline for action. Publicly-owned utilities don’t have the same motivations and incentives to continually expand energy production since they don’t have to generate a profit for shareholders. This freedom gives them more flexibility to respond to their customer-owners’ needs, as their charters require (either directly or through elected representatives).  Therefore, a publicly-owned utility is more likely to yield to public pressure to eliminate fossil fuels than investor-owned utilities.
  3. Recent scholarship on sociotechnical systems change acknowledges that the urgency for transitions to sustainability requires policy mixes that combine instruments that can destabilize existing regimes while creating space for innovative alternatives, described as processes of creative destruction or disruptive innovation.  Publicly-owned utilities could be major players in the rapid expansion of decentralized energy—from individual solar to community wind farms. What’s more, renewable-energy projects financed by local municipal utilities could be deployed on a larger scale since municipal bonds afford them cheaper access to capital than companies or individuals enjoy. Tax-exempt municipal bonds have financed $96 billion in new public utility investments over the past decade.
  4. To improve outcomes and to democratically legitimate consent, advocates and scholars argue that all of society need to participate in and engage with the processes of energy transition.  By involving the community in the process of renewable energy projects and sourcing related jobs locally, utility-financed projects could build community wealth.   In other words, economic development would localize investment and provide broad-based ownership.
  5. The energy democracy movement advances a vision that includes communities powered by 100% renewable energy, with the majority of energy coming from decentralized systems.  Regulators across the country also bend to the powerful influence of the wealthy industry they regulate.  This type of corporate capture has left people feeling unheard and unprotected. In contrast, community members served by a publicly-owned utility act as owners and decision makers. Instead of controlling large swaths of the country that may not even be contiguous, publicly-owned utilities are rooted to place—owned and operated by their community.  Reorienting utilities toward democratic governance for the 21st century would redistribute power by giving communities more energy decision-making opportunities.
  6. Participatory energy planning and deliberation. Participatory energy planning processes offer the opportunity for communities to become educated and engaged on key issues, creating precedents and capacities for long-term, meaningful public participation in energy system  decision-making. One such mechanism is the multi-stakeholder board where elected workers, community members, and local officials make decisions together.  Participation should go beyond representative systems of democracy. Opportunities for direct engagement should span such institutions as public forums, neighborhood assemblies, and online engagement
  7. Statutory  priority for  demand reduction  and distributed generation.  The energy democracy movement intends to shift toward an energy system in which the total demand for energy is reduced over time, and where distributed generation supplies a majority of the electricity supply within a 100% renewable energy system. To make such inequitable burdens things of the past, we need to de-consolidate power, make extraction unprofitable, and redistribute wealth and ownership in the energy economy while providing a just transition for workers in the current energy industry. To make such inequitable burdens things of the past, we need to de-consolidate power, make extraction unprofitable, and redistribute wealth and ownership in the energy economy while providing a just transition for workers in the current energy industry.
  8. A strategy based on energy democracy should deliver renewable energy locally to the extent possible and insist on broad ownership—both individual or community-owned decentralized renewable energy and larger, utility-scale projects run by and within the municipality. Publicly-owned utilities will need to identify ways to balance centralized energy with a more decentralized grid.  Statutory priority for demand reduction and distributed generation. The energy democracy movement intends to shift toward an energy system in which the total demand for energy is reduced over time, and where distributed generation supplies a majority of the electricity supply within a 100% renewable energy system.
  9. The tradition of stronger unionization within the public sector opens the possibility of working with unions to phase out current fossil fuel jobs and provide better, long term jobs in the reinvented energy sector. Adding participatory structures that give workers’ more say can ensure that workers shape the transition, not get left behind.
  10. A two-pronged strategy for public ownership could simultaneously harness the opportunity of public utilities to champion and accelerate energy democracy, while also taking for-profit utilities into community hands to reorient their focus towards the public good.
    – More agile and accountable, communities have more leverage to prompt wider shifts towards equitable renewables at these municipal utilities and rural electric cooperatives faster than what it possible with investor-owned utilities. To do so means transforming the institutions so they better deliver on the values of energy democracy—such as better democratic procedures and equitable access to services.
    – At the same time, through municipalization we need to take back those large swaths of our energy system captured by investor-owned utilities. These for-profits have employed many tactics to derail municipalization campaigns, particularly by discrediting publicly-owned power as inefficient or costly and spending millions of dollars to bankroll anti-municipalization efforts. Often, these scare tactics lack any factual basis. For instance, publicly-owned utilities consistently provide lower—not higher, as claimed—rates today than their for-profit counterparts. 
  11. A Renewable Energy Standard or Renewable Portfolio Standard (RES/RPS) requires that utilities supply a argeted proportion of electricity from renewable sources by a specified point in time, typically within decadesour energy system captured by investor-owned utilities. RPS programs help to ensure that renewables replace fossil fuel use rather than simply adding new capacity. RPS policies have also shown a redistributive effect, shifting benefits through shifts in employment from fossil fuel to renewable energy sectors.
  12. Community choice aggregation.  Community Choice (Energy) Aggregation (CCA) programs allow communities to choose the source of electricity supply. A CCA functions by designating a public agency such as a municipality, county or other jurisdictions as the aggregator, to procure electricity on behalf of ratepayers, for example, through targeted purchasing or through local renewable energy development, while the utility continues to deliver electricity and service.
  13. Community benefit agreements. Community benefit agreements(CBAs) are legal measures designed to distribute the benefits of projects or programs among a community. For renewable energy projects, CBAs are typically set up as contractual agreements between large developers and communities hosting a project that specify required tangible benefits to the communities. CBAs can be required for projects that receive some form of public support such as subsidies or tax reductions or through state or local programs that promote renewable energy.
  14. Green subsidies. Green energy subsidies include various grants and funding mechanisms implementable across levels of government that direct resources to targeted communities for specific needs. Energy efficiency and weatherization programs target what many consider the most cost-effective first steps for supporting a renewable energy system

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