Meet the communities trying to take over their local electric utility

By Stacker

Published March 6, 2024 7:44 pm

Metro Justice via Grist

Meet the communities trying to take over their local electric utility

a grassroots organization advocating for public power in Rochester, New York

Climate activists have set their sights on a new target in the fight to slow global warming: utilities.

Around a dozen communities across the country have launched campaigns to get rid of their investor-owned electric utilities — the for-profit companies that distribute electricity to three-quarters of U.S. households — and replace them with publicly owned ones. Calling their goal “public power,” advocates argue that existing utilities have saddled customers with high rates and frequent outages, while lobbying to delay rooftop solar and other climate policies. Advocates say local ownership of the power grid would lead to lower electric bills, a quicker transition to renewables, and greater accountability to customers.

In November, the movement for public power faced its biggest test yet in Maine. Residents voted on a referendum that would have replaced Maine’s two investor-owned utilities with a statewide public power company. Faced with an existential threat, the legacy utilities launched a $39 million advertising campaign to counter the initiative. The measure ultimately failed, with roughly 70 percent of voters opposed.

Yet despite the defeat in Maine, public power supporters in California, New York, and Michigan told Grist that they’re just getting started. Their campaigns are at different stages — some of them are working to get a measure like Maine’s on the ballot, while others are just trying to convince local officials to study the feasibility of public power. Most of them face opposition from legacy power utilities. But all of them are optimistic about the long-term prospects of publicly owned utilities.

“Public power is a necessarily ambitious and visionary effort,” said Mohini Sharma, organizing director of Metro Justice, a grassroots organization advocating for public power in Rochester, New York. “And when you’re going up against multibillion-dollar corporations, there are going to be some losses along the way.”

Some advocates see a silver lining in the election outcome in Maine. In the state’s largest city, Portland, the vote won by a margin of 163 votes.

Campaigners in San Diego say the results give them hope for what they can accomplish in a smaller, denser population as opposed to an entire state. “It pointed to the fact that if you can organize in a concentrated geographic area like a city, and pour effort and resources into it, even in Maine the result there was favorable,” said Bill Powers, chair of the advocacy group Power San Diego.

This year’s push for public power could find its next major foothold in San Diego. In early December, Power San Diego launched a signature-gathering campaign to get a vote for a new, locally owned electricity distribution utility on this year’s ballot. If the group successfully certifies 80,000 signatures by July, equal to about 10 percent of registered voters in San Diego, residents of California’s second-largest city could decide in November whether to oust their current investor-owned utility, San Diego Gas & Electric, for a municipal alternative.

A recent report by the California Public Advocate’s Office found that SDG&E’s rates have more than doubled over the last 10 years, and San Diego experiences some of the highest electricity prices per kilowatt-hour in the country. Last May, the San Diego Union-Tribune reported that more than a quarter of all SDG&E customers were behind on their bills.

Power San Diego argues that a new municipal utility would lower electricity rates by as much as 20 percent in the short term by operating as a nonprofit and taking advantage of lower-interest financing. A recent study commissioned by the city found that if San Diego is able to purchase SDG&E’s grid for $2 billion, on the low end of price estimates, ratepayers could save up to 14 percent each year with a municipal utility within the first decade. If the price ends up on the higher end at $6 billion, residents could see higher costs in the short term but long-term savings after 20 years, the report said.

The campaign says a municipal utility would greatly expand local battery storage and rooftop solar, prioritizing local energy generation over expensive investments in transmission lines, which move electricity from far-away solar, wind, and hydropower facilities.

But Anthony Wagner, communications manager for San Diego Gas & Electric, told Grist that the “Power San Diego initiative is a costly gamble that puts taxpayers on the hook for billions of dollars with no plan and no guarantee of benefits.” If residents vote to form a public utility, the city of San Diego would then need to purchase SDG&E’s grid infrastructure using municipal revenue bonds — a cost that would be paid off gradually through electric rates. Wagner added that operating and maintaining the city’s utility system, which serves more than 1 million residents, requires expertise, and that “burdening the city with this essential service in addition to its existing responsibilities is risky and could compromise grid reliability.”

Commissioning a feasibility study — which evaluates the costs, benefits, and risks of public power — is one of the first steps in forming a municipal utility. But in Rochester, New York, efforts to fund such a study have reached a standstill. Advocates with Metro Justice, the local grassroots advocacy organization, are asking city and county officials to fund a study to evaluate the cost of creating a public power company to replace the city’s investor-owned utility, Rochester Gas and Electric. Residents have criticized the utility for its high rates, billing errors, and poor customer service, with some reporting monthly bills totaling thousands of dollars and hours-long call wait times.

Shelby Cohen, senior manager of communications at Avangrid, RG&E’s parent company, told Grist that in response to complaints, RG&E “has made significant improvements to customer service, drastically lessening customer wait times, improving the accuracy of billing, and hiring hundreds of new staff.” Cohen also noted that “small rate increases are vital and needed to invest in maintaining, repairing, and replacing New York’s several decades-old aging infrastructure while meeting New York’s clean energy goals,” and that a municipal utility would compromise service and reliability “while putting taxpayers on the hook for billions of dollars.”

Sharma, the organizing director of Metro Justice, said the study will be crucial for clarifying if and by how much electricity rates would fall under a public utility, and enumerating other benefits — like job creation, improvements in reliability, and a transition to renewable power — that a municipal power company could achieve.

In June, the Rochester City Council agreed to allocate $500,000 for a feasibility study, but the funding was contingent on additional financial support from the Monroe County Legislature, whose jurisdiction includes Rochester. In November, county legislators voted against funding another $1 million, citing concerns over the costs and length of time required to form a public utility. Despite the setback, advocates aren’t dissuaded: Sharma said as new county legislators take office this month, Metro Justice will continue to organize for another vote to fund a study.

Meanwhile, in Ann Arbor, Michigan, a recent study commissioned by the city to evaluate public power produced mixed results. The report did not reach a firm conclusion on whether rates under a municipal utility would be lower than under the city’s current investor-owned utility, DTE Energy, due to potential litigation over the costs of buying the grid and future investments needed to improve grid reliability. The study also modeled scenarios for Ann Arbor to achieve 100 percent renewable power by 2030 but excluded a municipal utility as one of those options, arguing that forming the utility would likely take too long.

Public power advocates in Ann Arbor strongly disagreed with that assumption. Don Lee, executive director of the advocacy group Ann Arbor for Public Power, said that the city council has the authority to vote for and launch a municipal utility well within the timeframe to reach 2030 decarbonization goals. Lee also noted that until recently, investor-owned utilities in Michigan were allowed to cap distributed energy generation like rooftop solar to just 1 percent of a utility’s annual average peak load. (A suite of statewide clean energy laws passed in November raised that cap to 10 percent.) In contrast, a municipal utility could rapidly expand rooftop solar, he said, as well as community solar systems, which are currently not allowed under DTE policies.

If Ann Arbor formed a municipal utility, the campaign argues, the city could not only build out local clean energy sources, but also invest in a more reliable grid. Ann Arbor residents have experienced high rates and prolonged outages with DTE Energy, Lee said. Pete Ternes, a communications specialist with DTE Energy, did not respond directly to Grist’s questions about affordability and reliability, but pointed out that the city’s study concluded that working with DTE Energy would be the lowest cost option for Ann Arbor to reach its 2030 climate goals. He noted that 30 percent of Ann Arbor’s energy comes from wind and solar, and that the utility “will continue to submit carbon reduction goals to the Michigan Public Service Commission.”

Ternes added that buying DTE Energy’s distribution system would come at a significant cost, and “does not include the cost of buying or generating electricity for customers or the ongoing costs of running the system once purchased.” Ann Arbor for Public Power has called for another study to further evaluate the costs and benefits of public power.

Gus Teschke // Ann Arbor for Public Power via Grist

Publicly owned utilities are far from new

Volunteers for Ann Arbor for Public Power at a tabling event in Ann Arbor, Michigan

(Volunteers for Ann Arbor for Public Power at a tabling event in Ann Arbor, Michigan, in July 2023)

Across the country, around 2,000 consumer-owned utilities serve more than 50 million customers, in places like Sacramento, Long Island, and the entire state of Nebraska. Unlike investor-owned utilities, public utilities don’t pay dividends to shareholders and have access to tax-exempt, low-interest municipal bonds.

Supporters say the benefits of public power are wide-ranging. Customers served by publicly owned utilities often have smaller electric bills — on average about $15 lower per month than with an investor-owned utility, according to the American Public Power Association, an industry group representing consumer-owned utilities. They also tend to experience more reliable service than investor-owned utility customers, with on average about half the annual duration of interrupted power.

And while public ownership is no guarantee of climate leadership, advocates say the community-oriented structure can lead to a more rapid switch to renewables. In Kauaʻi, Hawai’i, residents bought their for-profit utility — a willing seller — in 2002 and created a locally owned electric cooperative. The Kauaʻi Island Utility Cooperative now sources 60 percent of its electricity from renewables, almost double the percentage generated by nearby investor-owned Hawaiian Electric. Meanwhile, many consumer-owned utilities, from Burlington, Vermont to Greensburg, Kansas, were among the first in the country to achieve 100 percent renewable power.

In recent decades, however, most municipal takeover attempts have failed, owing to the high costs of not only buying out existing utilities’ assets, but also funding legal efforts to defend against pushback. Since 2000, more than 60 cities have attempted to replace investor-owned utilities with a public alternative, but only nine have succeeded, according to a study commissioned by the Edison Electric Institute, a trade association representing investor-owned utilities. They include Jefferson County, Washington, and Winter Park, Florida, which took over their power systems within two and four years, respectively.

But elsewhere, the process can be “torturous,” said Richard Sedano, president and CEO of the Regulatory Assistance Project, an energy policy nonprofit. He cites Boulder, Colorado, as one notable example. Frustrated with the lack of clean energy progress from its investor-owned utility, Xcel Energy, the city embarked on what would become a decade-long struggle to form a municipal utility in 2010. A series of legal challenges initiated by Xcel and other delays ended up costing taxpayers close to $29 million. In 2020, residents voted to ditch the effort and instead enter into a 20-year agreement with Xcel that would hold the utility to certain climate commitments, including achieving 100 percent clean electricity.

Sedano credits Boulder for successfully applying pressure on Xcel to switch to more renewables but wonders if there are less costly solutions to communities’ concerns about investor-owned utilities. One option is for state regulators to set utility performance standards, which reward or penalize utilities based on certain defined criteria, such as the rate at which they connect solar projects to the grid. Sedano also points to community choice aggregation programs, or CCAs, as another way for local governments to provide cheaper and cleaner power. In states with CCA programs like California and Illinois, cities and counties can purchase or generate their own electricity, which is then delivered to customers through the investor-owned utility’s distribution grid.

Working closely with investor-owned utilities, however, can present its own challenges. San Francisco’s Public Utilities Commission, or SFPUC, already generates or purchases more than 70 percent of the city’s electricity supply through its CCA program, CleanPowerSF, and its publicly owned hydroelectric and solar power provider, Hetch Hetchy Power. The city coordinates with the local investor-owned utility, Pacific Gas and Electric, to deliver that supply through PG&E’s poles and wires. Over the years, city officials have accused the utility of requiring exorbitant infrastructure upgrades to connect municipal facilities using the SFPUC’s power supply to the grid, including public transit, affordable housing, and street lights. The city claims that the costs of the utility’s obstruction and delays have totaled more than $20 million. PG&E did not respond to multiple phone calls from Grist.

That’s why San Francisco city officials, including the SFPUC and Mayor London Breed, want to buy out the city’s portion of PG&E’s grid and create a fully public power system. In 2019, city officials offered PG&E $2.5 billion to purchase the city’s electrical grid, but the utility refused, saying the offer was too low. The city is petitioning for a formal evaluation of PG&E’s assets by the California Public Utilities Commission, and hopes to negotiate with the utility once their value is determined.

Barbara Hale, assistant general manager of power services at the San Francisco Public Utilities Commission, said that if San Francisco succeeded in taking over the local grid, customers would see lower rates, fewer barriers to connecting rooftop solar and battery storage, and local decisions “focused on what San Francisco needs, not what shareholders need.” She pointed out the SFPUC already has a strong track record of generating and distributing clean power, and continues to expand rooftop solar and battery storage.

Hale said that the city is currently focusing on communicating those benefits to San Francisco residents. “One of the lessons we take away from [Maine’s] experience is the importance of us continuing to talk about what value we bring,” she said.

That message is especially important when going up against powerful opposition from investor-owned utilities, said Sharma, from Rochester. “When fighting for something this big against an opponent that is going to outspend you in misinforming the public, it is very important that we’re able to counter that misinformation with real facts and a real concrete vision,” she said.

In San Diego, campaigners say residents are more than ready to hear their case.

“Until this initiative came forward, there was a general sense of resignation when it came to the electric utility,” said Powers. “Like, ‘We want rooftop solar but we can’t get it,’ or ‘These rates are out of control, but there’s nothing we can do.’ And now we have an initiative where people can act, and they can actually do something about it.”

This story was produced by Grist and reviewed and distributed by Stacker Media.