US cities pushing to take over electricity generation
Boulder, Colorado, for instance, could take an important step towards creating its own municipal utility, among the nation's first in years, as soon as next month. A scheduled vote by the City Council comes after a study process that residents, impatient with the private electric company's pace in reaching the city's environmental goals, helped pay for by raising their own taxes.
While Boulder's level of activism may be unusual, the desire to take control of the electricity business is not. Officials in Minneapolis and Santa Fe are considering splitting from their private utilities, while lawmakers in Massachusetts are trying to make it easier for towns and counties to make the break.
Over the years, many localities have considered creating municipal utilities, usually about the time their franchise agreements with private electric companies are to expire. But they are now examining municipal utilities as concerns rise over carbon emissions and as the ability to use renewable energy sources increases.
"Right now, a lot of the communities are looking at it for climate reasons," said Ursula Schryver, director of education and customer programs at the American Public Power Association. "The biggest benefit about public power is the local control."
But private utilities often resist giving up control - and customers - to new, public competitors, arguing that it leaves them unable to recoup investments. In addition, the power industry cites its experience in keeping the lights on while meeting environmental goals.
"This is our business. It's what we do," said David Eves, chief executive of the Public Service Company of Colorado, the division of Xcel Energy operating in Boulder. And because its parent company operates in eight states, the utility can focus on being more efficient. "We don't run other parts of the city operation and deal with those kind of things. It's our specialty."
Roughly 70 per cent of the nation's homes are powered through private, investor-owned utilities, which are allowed to earn a set profit on their investments, usually through the rates they charge customers. But government-owned utilities are non-profit entities that do not answer to shareholders. They have access to tax-exempt financing for their projects, they do not pay federal income tax and they tend to pay their executives salaries that are on a par with government levels rather than higher corporate rates.
In addition, they can plough more of their revenue back into maintenance, which can result in more reliable service.
But supporters of investor-owned utilities say restoration speeds vary among government-owned and private utilities. The large electric companies, they say, are often in a better position to muster resources because they can call on extra staff from other companies and regions.
"Very few utilities can really maintain the full complement of crews and equipment that they may need - it's not economic," said James Fama, vice president of energy delivery at the Edison Electric Institute, which represents private utilities.
The road to a new utility is a long and expensive journey.
Frequently Asked Questions about this Article…
When a city considers taking over electricity generation — called municipalization — it plans to create a government-owned utility to deliver power instead of relying on a private, investor-owned company. Municipal utilities are nonprofit, locally controlled entities that can use tax-exempt financing, don’t pay federal income tax, and typically reinvest revenue into maintenance and local priorities.
Cities are motivated by concerns about climate change, frustrations with how quickly private utilities adopt renewables, and responses to power disruptions. Local officials and residents want more control to accelerate renewable energy use, meet environmental goals and improve reliability, which is driving renewed interest in municipal utilities in places like Boulder, Minneapolis and Santa Fe.
The article highlights Boulder, Colorado as a high-profile example moving toward forming its own municipal utility. Officials in Minneapolis and Santa Fe are also considering splitting from private utilities, and lawmakers in Massachusetts are exploring laws to make it easier for towns and counties to break away.
Investor-owned utilities serve roughly 70% of U.S. homes and earn regulated profits through customer rates. If cities municipalize, private utilities may lose customers and the ability to recover investments in those service areas. Private utilities and industry groups argue that such changes could make it harder to recoup investments and maintain efficient operations.
Public power advocates point to local control over energy decisions, access to tax-exempt financing, exemption from federal income tax, and the ability to steer more revenue into maintenance and reliability. That local control can make it easier for communities to prioritize climate goals and renewable energy deployment.
Private utilities and industry groups say they have experience balancing reliability and environmental goals and can mobilize extra crews and resources across regions during outages. They also argue that it’s costly and difficult for them to maintain large standby crews and equipment solely for emergencies, which can affect restoration speeds.
Forming a new municipal utility is described as a long and expensive journey. Many localities consider municipalization when franchise agreements with private utilities expire, and the process typically requires studies, votes, financing plans and sometimes changes in state law to enable the break.
Boulder’s push to create a municipal utility illustrates growing local impatience with the pace of private utilities — in this case the Public Service Company of Colorado, a division of Xcel Energy — on environmental targets. For investors, it signals that community-driven moves toward renewables and local control can present regulatory and competitive risks to utilities operating in politically active cities.
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