Public Power: An American Tradition that Works
More than 2,000 communities across the country have chosen to provide for their own electricity services. They have created public power systems — not-for-profit electric utilities that are owned by the communities and governed democratically. Public power provides for the electric power needs of about 40 million Americans or almost 15 percent of electricity consumers.
Every public power system is different due to its community's population, geography and climate, natural resources, economic and social resources and challenges, and local government structure and goals. However, all public power systems have in common their purpose: to provide adequate, reliable, not-for-profit electricity at a reasonable price with proper protection of the environment.
Public Power is Hometown Power
Public power systems are operated primarily by municipalities, as well as by counties, public utility districts, or other public bodies. A number of states also operate public power systems.
Public power systems are rooted in the American tradition of local people providing for their basic community needs. Public power systems provide a public service — electricity — at a reasonable price. Most public power systems — especially the smaller ones — are governed by a city council, while others are governed by an independently elected or appointed board. Community ownership and governance provide wide latitude to make local decisions that best suit local needs and values, as well as changing market conditions.
Citizens have a direct voice in utility decisions and policies about electric rates and services, generating fuels, clean air and water, and other issues that affect them through public meetings, the ballot box, and open policy board meetings.
"Customers First" is Public Power's Mission
Public power's first and only purpose is to provide excellent, efficient service to its citizens. Unlike private power companies, public power utilities do not have to serve stockholders as well as customers. Public power systems' measure of success is how much money they can keep within their communities through low rates and contributions to the city budget, not how much can be taken out to send to distant stockholders who are not part of the community.
Hometown Connections Hold Down Costs
Electricity prices drive local economies. Lower prices help residential customers better manage household budgets. They also allow commercial and industrial customers to grow and thrive, contributing to the overall prosperity of communities and the nation.
Public power has a proven track record of providing customers with lower-cost electric rates than private power companies on a national average. According to information reported to the U.S. Department of Energy:
Private power company residential customers pay average electricity rates that are about 18 percent more than those paid by public power customers; Private power company commercial customers pay average electricity rates that are about 9 percent more than those paid by public power customers; There are only small differences in average rates paid by industrial customers of public and private power companies.
The rate differential is due primarily to public power's not-for-profit status, and efficient management and operations.
Public Power Means Partnership
Public power systems work in partnership with their citizens and communities. Through the public decision-making process, they create policies and services that are responsive to and can anticipate citizen needs.
Hometown electric utilities are an integral part of their communities, with skilled managerial and engineering staffs. They are often called upon to find innovative solutions to community needs, working with other city and community institutions. They have become leaders in supplying an array of infrastructure services that are related to the provision of electricity and other essential public needs, such as telecommunications services.
Public power systems also work in partnership with each other through more than 60 joint action agencies. These organizations are consortia of public power systems that own or purchase power supplies, or take part in other activities in which they can obtain economies of scale through their partnership.
Public Power Boosts Local Economies
Public power's low electric rates are a magnet for community economic development. So is its ability as a local government arm to provide streamlined "one-stop shop" customer services that encourage existing business customers to maintain and expand their operations, and attract new businesses. Strong, stable employers mean strong, stable jobs for local citizens. Low electric rates also hold down consumer costs, stimulating the local economy.
While public power utilities are "not-for-profit" organizations, they make major economic contributions to their communities. Public power systems, on average, return to state and local governments in-lieu-of tax payments and other contributions that are equivalent to state and local taxes paid by private power companies.
Municipal Bonds Keep the Lights On
As not-for-profit state and local government entities, public power systems have a right to issue tax-exempt bonds for various infrastructure needs. These bonds carry a lower interest rate than taxable bonds, which helps hold down the cost of developing and maintaining a wide range of essential public services.
Public Power Thrives in the New Marketplace
Public power's hometown advantages — low rates, commitment to local communities, not-for-profit operations, public accountability, local decision making, and a customer service ethic — have become readily apparent as the electric utility industry restructures. Public power has remained true to its fundamental obligation to its citizen-customers — the obligation to serve.
Restructuring failures in some parts of the country have enhanced the benefits of hometown power and made it an even more attractive option, both for those consumers it currently serves as well as for many whose private power companies have not kept promises made about competition, service, and rates.
Many communities across the country are now exploring the possibility of taking control of their energy futures by creating municipal utilities.
Public power is an American tradition that works for local communities and consumers across the country. It will continue to work well throughout this new century.
For more information on public power, visit the website of the American Public Power Association at www.appanet.org.
Public Power Facts:
Public power systems provide electricity to about 40 million consumers — about one in seven Americans.
There are more than 2,000 public power systems in the U.S. They are in every state except Hawaii.
About two-thirds of public power systems do not generate their own electricity. Instead, they buy it on the wholesale market for distribution to their customers.
Public power utilities, on average, return to state and local governments in-lieu-of-tax payments and other contributions that are equivalent to state and local taxes paid by private power companies.
On a national average, private power company residential customers pay about 18% more for electricity than public power customers.
On a national average, private power company commercial customers pay about 9% more for electricity than public power customers, while public and private power industrial rates are about the same.
The first municipal electric utility was established in 1882. By 1885, four of today's largest public power utilities — in Anaheim, Jacksonville, Tacoma, and Austin — were up and running. By the end of the year 2005, about 500 public power systems will have celebrated their centennials.
Public power is a pro-competitive and pro-consumer institution that helps to protect all consumers — in public and private power communities — from private company price and efficiency abuses.
Public power is a big city and a small town phenomenon, although more than 1,200 public power systems serve 3,000 or fewer customers. Some of the larger cities that operate their own electric utilities are Los Angeles, San Antonio, Seattle, Phoenix, Austin, Memphis, Orlando, Omaha, Jacksonville, and Sacramento.
Public power systems are governed democratically through the local government structure. Most — especially the smaller ones — are governed by a city council, while others are governed by an independently elected board.