Electricity

This week the City of Crest Hill began considering purchasing their electricity from a co-op instead of from ComEd. This is a great way to save money now that ComEd's rate freeze has ended and the costs of electricity are on the way up due to the power auction scheme. It should be clarified that this is a proposal for the Crest Hill to buy the electricity for city facilities only. Those of us who live there will still have to keep buying from ComEd. I think the time has come to look to other options for all of us.

I spent two years managing a small municipal electric utility in Wisconsin. Our main role was as a distributor of electricity. We built and owned the power lines within the city. We contracted with a co-op to purchase wholesale power which we then sold to our customers. We did own and maintain generation facilities of our own, although we used them only in emergencies and during time of high demand when prices on the spot market soared. The utility was not in anyway subsidized by the city, had to comply with the same state and federal regulations as a private utility would, and paid a higher portion of its revenue in taxes than private utilities did.

The result was that our customers (residents of the city), paid less for electricity than those in surrounding cities that bought power from traditional power companies and far less than what I now pay to ComEd. In addition, the distribution system was locally controlled, so the decisions to replace lines, upgrade the system, and how to trim trees were local decisions that were publicly made and that anyone could speak to the board about. Due to our maintaining generation equipment, we not only could negotiate lower rates, but we could provide our own power when necessary. There were numerous times that ice storms would take out transmission lines outside the city cutting power to the whole region. The city would switch on our generators and have the lights back on within the hour, while surrounding areas were stuck waiting days for their power to return.

I know that it took a great amount of investment to build the system and know the obstacles that exist to creating a municipal utility where there is already an existing private utility. But, thanks to the legislation that ended the rate freeze here, we have an opportunity to create a different type of municipal utility with less capital cost. A utility no longer needs to own its distribution lines, it can exist solely to sell power over lines owned by others. A city could purchase wholesale power and then resell it. This would create an alternative to ComEd and would provide the competition that we need.

I believe that this would not be the ideal solution and would support a municipal utility acquiring some generation capacity of its own so as to be in a better negotiating position. And there would also be some non-financial benefits to acquiring the distribution system, but I think the cost of this would be too great. In addition, the distribution costs are much better regulated than power costs which are now market driven (by a rigged market).

I am split as to if it would be best for Crest Hill and other cities to each have their own municipal utility or if a combined utility would be better. I certainly think that individual cities are large enough to operate their own utilities and even to negotiate individual wholesale contracts. However, a combined utility could probably negotiate a better contract and be able to explore more options than an individual city could. A combined utility though would allow for less local control. My suggestion would be individual municipal utilities in each community, but a regional organization to combine forces in negotiating wholesale contracts.

While, I am often leery of additional government involvement in our lives and the expansion of government, I have seen how a municipal utility operates and am very impressed. I think that in this area, it could do even better than what I observed elsewhere and would provide actual competition to ComEd. I do believe though that any municipal utility should have to operate on a level position with private companies. This means no tax dollars for municipal utilities, separate finances from the city's finances, payment of all taxes and fees that a private company would pay, and open competition.