One third of us own our electric companies, either directly as members of 900 cooperatives, or indirectly as citizens of the 2,100 municipalities that own their utilities. The vast majority of customer-owned utilities (COUs)- about 70 percent - are distribution-only utilities. They purchase power on the wholesale market and resell it to their customers. They traditionally have been allowed to issue tax-exempt bonds to finance the construction and upkeep of their systems. Few COUs have been started in recent years because the process is time-consuming, expensive, and typically fought tooth-and-nail by the incumbent private utility.

But public power is garnering increasing attention in a restructured electricity market. Many customers, cities and states see customer control as a way of maintaining reliability and peace of mind in a deregulated environment.

Because customer-owned utilities are democratic and locally controlled, and service rather than profit oriented, we should encourage their formation. In today's topsy-turvy electricity world, states should encourage the formation not only of customer-owned distribution utilities, but public transmission utilities and generation utilities as well.

Encourage Public Distribution Utilities

The California electricity crisis has been a boon for municipalization efforts. San Franciscans will vote on a ballot initiative in November 2001 to decide whether or not to form a public power district. The New Orleans City Council voted in January 2001 to purchase Entergy New Orleans' city-wide distribution system. Public power advocates in Portland, Oregon are working to place municipalization on the 2002 ballot.

While hundreds more communities have expressed interest in taking over their electricity systems in the past couple of years, most have not pursued it because of the time and costs involved. To help streamline the municipalization process in California, The Fair Citizen Access to Public Power Act has been introduced. For example, under current California law a two-thirds majority vote is needed to approve formation of a municipal utility district. This bill would reduce that requirement to a simple majority.

The largest incentive for customer ownership is the right that municipal and cooperative utilities have traditionally had to issue tax-exempt bonds. This benefit has come under attack recently by private utilities that have argued that COUs should not be given this benefit in a deregulated market because it gives them an unfair advantage. The American Public Power Association has endorsed a compromise solution that allows municipal utilities to issue tax-exempt bonds if they choose not to participate in a competitive environment. The bill was introduced in the last session of Congress, but has not yet been reintroduced.

More:

• Forming a New Public Power Utility - by the American Public Power Association