Many Americans have seen their electricity rates surge over the last several years, leaving many upset and shocked at paying a more significant percentage of their income to power their homes. Others are dismayed over billing issues. This has led to questioning who is best equipped to manage their utilities: for-profit Investor-Owned Utilities (IOU) or Municipal Electric Utility (MEU), which are publicly run by local government.
Last November, attempts were made to oust Maine’s two IOUs and replace them with the first state consumer-owned utility. Voters overwhelmingly rejected the measure. Other major cities — Chicago, Ann Arbor, Michigan and San Francisco — have explored the idea with feasibility studies but decided against it.
Now, a few more cities are considering municipalizing: San Diego, Tucson and Hudson, New York. They are gathering signatures, conducting studies and placing the issue on ballots.
People are also reading…
These measures rarely succeed. It’s an uphill battle, fraught with many challenges. And there are reasons. Generally speaking, IOUs are the best option for most of the population.
IOUs serve nearly three-fourths of the nation; they may be few in number overall, but each one covers 650,000 people. IOUs can leverage economies of scale in their operations to provide cost savings. Being owned by shareholders incentivizes them to function efficiently and make a profit. Experienced board members can strategically cut costs to maximize returns, which keeps prices low for consumers. With sufficient capital, they can invest in research and development, protect against cyber-attacks, and provide tailored and innovative solutions that meet the needs of their customers.
A University of California, Berkeley, study demonstrates that for-profit electric utilities generally have a lower and “statistically significant” retail price compared to nonprofit utilities, and therefore, they are “more price efficient than nonprofit counterparts.”
Sometimes, side-by-side comparisons of different utility types appear to demonstrate that publicly-run utilities cost consumers less. But, comparing utility prices among MEUs and IOUs is more complex.
For instance, one analysis in California explains why several for-profit electric companies have higher rates than neighboring municipalities. Variables such as customer composition, square mileage of service area(s), and investments in wildfire risk mitigation can all significantly affect pricing. Their conclusion is “it’s not clear to us that local governments would be more adept at providing electricity supply more cost-effectively than the regulated IOUs.”
The average age of an MEU is 85 years. Most were established in the early 1900s, and, in many cases, were able to take advantage of federally subsidized power sources. These legacy MEUs generally have lower overall cost structures, which is not easily achieved through acquiring an established IOU, especially in today’s market.
Taking over an IOU is expensive. Most municipalities can’t take on that kind of debt. The lengthy acquisition process usually comes with additional costs, and the actual amount often exceeds initial estimates. The significant challenges of a newly formed municipal electric utility will likely result in higher consumer costs.
True believers in Jesus don’t need a “secondary plan” for salvation and eternal life. They need to follow the actions of Jesus Christ, according to Pastor Greg Lee of Suncrest Christian Church in St. John. “Followers of Jesus – church people – tend to forget that following Jesus is the way to get to heaven. But they’ve somehow constructed a different way in their mind by beating people into it, or convincing people about it, or telling people they’re wrong,” Lee says. On this week’s show, Lee joins us in the studio to examine the gospel about Jesus Christ and why too many Christians don’t act Christ-like in their daily lives. “If you look at who Jesus had his harshest words for, it was for religious people who were harsh to people who were on the margins,” Lee tells Jerry, who’s been on the margins of spirituality for decades. We hope you join us for a candid conversation – not a sermon – about faith, redemption, conviction and forgiveness. Also, how to demonstrate grace and mercy with a species that instinctively seeks justice. About the show “She Said, He Said” with co-hosts Jerry Davich and Karen Davich unpacks all the baggage about relationships, couples and issues between the sexes (and the ex’s). “Because there’s a lot to unpack,” Karen says. The dangers of online dating. The fun of flirting. Blended families. Difficult in-laws. Connecting after arguments. First kisses and final divorces. You name it, they’ll unpack it on “She Said, He Said.” All episodes are now available for viewing at NWI.com or to listen on your favorite platforms such as Apple, Spotify, Google and Audacy. Subscribe to not miss any new episodes. The couple’s podcast is sponsored by Times Media Co. and Lee Enterprises. It’s recorded each week at CreataSpacePlace studios in Hobart, Indiana, with local guests in the studio and timeless topics on the table.
Despite misconceptions that IOUs roam free without oversight, they are still regulated by state-level Public Utility Commissions that oversee electricity rates and service. Their commissioners are experienced in energy issues and are generally dedicated to regulating electricity rates, protecting customers and ensuring that IOUs provide safe and reliable service consistent with industry standards.
As an added measure, the Federal Energy Regulatory Commission provides an extra layer of regulation on certain services regarding IOUs.
MEUs, on the other hand, are run with rules and regulations set at the discretion of either the city council or a city-level electric utility governing body; they are exempt from FERC oversight. The city government often lacks the expertise needed, and in some cases, the MEU model may result in increased risk — compared to IOUs — in terms of cost and providing safety and reliability.
Sometimes, electricity and grid needs are sacrificed at the altar of social issues if local leaders prioritize them. Grid modernization and upkeep take significant funds and commitment; new MEUs might not be equipped to handle them.
The world faces electricity challenges. Power demand is expected to skyrocket, and many states are attempting to phase out coal generation. These hurdles will require considerable capital and expertise. IOUs are the best option to handle the tasks at hand.
Kristen Walker is a policy analyst for the American Consumer Institute. She wrote this for InsideSources.com. The opinions are the writer’s.