Hold on to your hats. The vaunted and vilified “standard market design”, once thought dead and buried, has been resuscitated, with all attendant chaos and rhetoric, but this time in the guise of a...
Public Power: An Inexpensive Insurance Policy Against Consolidation
An Editorial Response:
Some critics wants PMAs out of the electric business. But that could leave market power to a few, large monopolies.
Department of Energy Secretary Federico Peña observed in an address at the recent annual meeting of the Edison Electric Institute: "The [electric utility] industry is incredibly diverse, with investor-owned utilities, municipalities, cooperatives, the federal power system, independent power producers, marketers and others. And the challenge we face today is to respect those complexities - not to underestimate them."
Richard Munson should have heeded this advice in writing his piece on "Public Power in a Competitive Marketplace," (PUBLIC UTILITIES FORTNIGHTLY, July 1, p. 24). Unfortunately, rather than respecting these complexities, as counseled by Secretary Peña, Mr. Munson has ignored them.
The logical starting point for any examination of public power in a competitive market should be a careful definition of the term. A careful discussion of the specific characteristics of the diverse entities often lumped under this definition should follow. Instead, Mr. Munson's polemic against "public power" is based on a gross misunderstanding and many mis-statements about what public power is and what role it has played and will continue to play in a competitive market.
Getting it Right
Rep. Ralph Hall (D-Texas), ranking member of the House Energy and Power Subcommittee, clearly understands the importance of getting the definitions right. In his opening statement at the subcommittee's July 9 hearing on public power, the Tennessee Valley Authority and the Pacific Northwest, he had this to say:
I think it would be helpful to quickly outline what public power is and what it is not. Basically, public power is the electric utilities that are owned and operated by the "public." There are over 2,000, and they are not for profit. Their owners may be counties, public utility districts, and an occasional state, but in a great majority they are owned by individual local communities. These are public institutions, and they are managed by public servants, located throughout the country. Their salaries are not dependent on how much energy they sell, or how big they can grow their utility. Their loyalty is to their customer-owners and to providing their community with not only electricity, but a fruitful economy and quality infrastructure. ... In addition to public power companies, there are also the federal power marketing administrations (PMAs) and the Tennessee Valley Authority. These, however, should not be confused with public power. While many public power systems purchase power from the PMAs and many public power systems distribute TVA power, they are distinctly different because of the reasons outlined above. Finally rural electric cooperatives or co-ops are not true 'public power.' Instead, they are 'private' cooperative organizations. At the same time, coops and municipal public power share the same interest and not for profit status. I encourage my colleagues to keep these distinctions in mind as we consider ways to restructure the electric utility industry. (Author's emphasis)
Public power as correctly defined by Rep. Hall has had an outstanding record in promoting competition from the first days of the industry. It was