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A Champion for Public Power

Fortnightly Magazine - July 1 1996

J. Hoecker and William L. Massey that such issues should be left to state public utility commissions. "They saw no reason to be so intrusive in state's rights and wanted to let the states handle those decisions first. And if states couldn't, maybe the Commission could be a backstop," Richardson says. Nevertheless, a trip to court might be needed to determine the limits. "When you have dissenting opinions, they seem to help you fashion arguments that could help you advance to the appellate level," the APPA official says.

All state and federal rulemakings reveal the unusual relationships public power utilities have with IOUs: They're competitors, but also customers.

The essence of public power, however, is very different from that of a corporate enterprise. Richardson says public power is locally owned, community directed, and not for profit. Public power also comes in many forms. It could exist to serve a large city, like Los Angeles, or as a consortium of small systems that both generate and transmit power. Then there are the several hundred public-power utilities that only offer distribution services.

IOUs have been acquiring public-power systems for years, but no major systems have changed hands recently. And although efforts to municipalize are on the rise, Standard & Poor's believes Order 888 will likely slow the momentum.

Ironically, one of the most recent takeovers in the news has been the proposed absorption of a private utility by a public agency. Long Island Lighting Co. (LILCO), whose rates are twice the national average, has been negotiating with a state agency created to take it over, the Long Island Power Authority. An outcome was expected by the end of June.

Richardson says a LILCO takeover doesn't exactly jive with his picture of public power.

"I don't like to think that public agencies, state governments, sit out there only to rescue private corporations," he says. "I don't think that's appropriate." It is appropriate, however, he argues, as a political choice New York officials have to make in the best interests of their state and its citizens.

While federal and state mandates may be redefining the utility industry, in many ways public power is ahead of the restructuring game, at least at the retail level.

Nearly every state is considering tests of retail competition, but municipalities have been experimenting for some time, according to Richardson.

For the past two years, the University of Missouri has wheeled electricity and natural gas through the City of Columbia Water & Light Department. Clark Public Utilities in Vancouver, WA, has a retail wheeling tariff for customers. Clark has also told commercial and industrial customers that it will "work" the market for them, or they can work the market.

There are even cases of house-to-house competition, Richardson says. Cleveland Public Power and Cleveland Electric Illuminating, an IOU, regularly switch meters in response to customer choice. In the City of Lubbock, TX, a cooperative, a muni, and an IOU do the same. The city council has ordered the municipal utility not to underprice the IOU; competition proceeds entirely on service.

State-level resolution is