Municipal Utilities Cheaper Than Private

May 9, 2015

Across the country, cities are showing a renewed interest in taking over the electricity business from private utilities, reflecting intensifying concerns about climate change, responses to power disruptions and a desire to pump more renewable energy into the grid. Over the years, many localities have examined creating municipal utilities, usually around the time their franchise agreements with private electric companies are to expire. But officials and advocates are now examining municipal utilities as concerns rise over carbon emissions from fossil fuels, especially coal, and as the ability to use renewable energy sources like solar and wind increases. Roughly 70 percent of the nation’s homes are powered through private, investor-owned utilities, which are allowed to earn a set profit on their investments, normally through the rates they charge customers. But government-owned utilities, most of them formed 50 to 100 years ago, are nonprofit entities that do not answer to shareholders. They have access to tax-exempt financing for their projects, they do not pay federal income tax and they tend to pay their executives salaries that are on par with government levels, rather than higher corporate rates. That financial structure can help municipal utilities supply cheaper electricity. According to data from the federal Energy Information Administration, municipal utilities over all offer cheaper residential electricity than private ones — not including electric cooperatives, federal utilities or power marketers — a difference that holds true in 32 of the 48 states where both exist. In addition, they can plow more of their revenue back into maintenance and prevention, which can result in more reliable service and faster restorations after power failures.

 

NOTE: this last paragraph has been fact-checked. It is correct and is available here: http://www.eia.gov/cneaf/electricity/chg_stru_update/chapter3_2.html in the second paragraph of the section titled "Other Publicly-Owned Utilities"

 

Source: Diane Cardwell, "Cities Weigh Taking Over From Private Utilities," The New York Times, March 13, 2013. http://www.nytimes.com/2013/03/14/business/energy-environment/cities-wei... [verified 4/17/14]

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