Don’t be tempted to sell off public utilities, Steve Dupee is warning local officials.
Private companies have been buying up electric utilities from smaller towns, the Wellington village manager recently told council members.
The trend was the source of discussion in June during an American Public Power Association national conference in New Orleans, which Dupee attended.
No company has expressed interest to date in privatizing Wellington’s electric department. But the village manager stressed the importance of maintaining a public, not-for-profit model.
“One of the things that tends to happen is smaller municipalities don’t have the manpower to maintain the system, ensure reliability, and all of the things that are important hallmarks of public power,” he said. “Those kinds of utilities can become ripe for buyout from investors or the local rural co-op. A main message at the conference was investing in your system and keeping it reliable. When people think about electricity, they often don’t think about where it comes from, just whether the lights turn on and the air conditioner is running.”
Sixty percent of America’s electric utilities remain in public hands while 26 percent are run by rural electric cooperatives and six percent are privately-owned.
Privately-owned power costs an average of 13.2 cents per kilowatt hour while rural co-ops and public utilities charge averages of 11.6 and 11.5 cents per hour respectively, according to American Public Power.
“We need to continue to communicate the message that we’re local and we’re customer-owned,” said Dupee. “People who operate our utility often live in our community, so the quality of service, response time to outages, and the level of investment continues to typically be high in public power. We’re not beholden to any investors or shareholders.”
In Texas, prices for electricity rose four times faster than the national average during a period of mass deregulation and privatization between 2002 and 2011, according to Electric Light & Power.
A 2017 report by the Washington Post looked at the town of Lake Station, Ind., where officials voted to turn over control of municipal water systems to American Water, a private firm based in New Jersey. The sale erased an $11 million utility debt and left a $9 surplus.
However, more than $4 million in overdue system repairs were not covered in the sale and were passed along to customers in the form of rate hikes.
The city of Mooresville, Ind., won a lawsuit in 2014 to regain control of its water system from American Water. However, the $20.3 million court-approved price tag proved to be too expensive for the community and the utility has remained in private hands, the same Washington Post report cited.
“Once you give up that local control, you’re handing over the entire system,” Dupee said. “Maybe you get a one-time payout that looks like the right thing to do, but in the long-term, someone still has to maintain the system. Is this private entity going to that to the level of the local public utility? A local system belongs to the residents of that community. Maybe service is OK in the beginning, but as the need grows for that private utility to earn greater and greater profit margins, you see service begin to suffer.”
Jonathan Delozier can be reached at 440-775-1611 or @DelozierNews on Twitter.