[BETA] Fortnightly

Last Spring I heard superintendent William "Billy" Ray tell how the folks down home at his Glasgow, KY, municipal utility took a flier on the information superhighway. They gambled and won by constructing a new utility-owned cable television system to offer competitive TV service to their municipal electric customers. It's a good story.

Ray, who has testified before Congress from soup to nuts on telecommunications policy, loves to tell his audience how the Glasgow utility management got permission from the town council, conducted extensive planning sessions, and only then picked a target subscription price they thought was high enough to make money but low enough to compete with the entrenched cable company. So guess how much the local cable company cut its rates when faced with Glasgow's competing service? As Ray tells it, Glasgow had to learn the hard way how to make its new business go when the competitive conditions changed drastically overnight.

But Ray discovered some other things too, like what customers want. (Glasgow's most popular cable shows and info services almost all have to do with local community activities.) Moreover, Glasgow doesn't have to fear retail wheeling. Faced with a competitive threat from another electric utility, Ray just winks (but he's deadly serious): "I'll just tell my electric customers, if they stick with us we'll throw in free HBO. No charge."

And you still think electric distribution is a natural monopoly?

Meters R Us

"The current 'municipalization' phenomenon is more a manifestation of competition than a contest between public and private power."

That view comes from Coopers & Lybrand, which a couple of months ago released its 1995 Electric Municipalization Review (em a compendium of facts, figures, law, and analysis on forming municipal electric distribution systems to take advantage of the open-access transmission opportunities in the Energy Policy Act of 1992. The C&L study runs down a number of case studies: Albuquerque and Las Cruces, NM; Brook Park and Toledo, OH; Broken Bow, OK; Bennington, VT; Westbrook and Jay, ME; Romero, MI; and Culver City, CA. But the most interesting discussion centers on the City of Falls Church, VA (two miles west of my childhood home), and how, according to C&L, that fight has become a test case on attempts by the Federal Energy Regulatory Commission (FERC) in various contexts to delineate the exact boundary (if it even exists) that separates electric transmission from distribution.

Several months ago I quoted John Anderson, executive director of the Electricity Consumers Resource Council (ELCON), talking about a strategy known as "municipalization lite" (em about how a city might install some meters on some local homes and businesses, claim to operate a city-owned "distribution system," and then seek out alternative wholesale power supplies as a "municipal utility." That's happening now in Falls Church.

According to C&L, which conducted telephone conversations with Anderson and Donald Allen (legal counsel for Falls Church), the city is testing to see just how much investment the FERC will require before it is willing to accept the city's claim that it operates a bona fide electric utility. C&L quotes