Many Americans have seen their electricity rates surge over the last several years, leaving many upset and shocked at paying a more significant percentage of their income to power their homes. Others are dismayed over billing issues. This has led to questioning who is best equipped to manage their utilities: for-profit Investor-Owned Utilities (IOU) or Municipal Electric Utility (MEU), which are publicly run by local government.
Last November, attempts were made to oust Maine’s two IOUs and replace them with the first state consumer-owned utility. Voters overwhelmingly rejected the measure. Other major cities — Chicago, Ann Arbor, Mich., and San Francisco — have explored the idea with feasibility studies but decided against it.
Now, a few more cities are considering municipalizing: San Diego, Tucson, and Hudson, N.Y. They are gathering signatures, conducting studies and placing the issue on ballots.
These measures rarely succeed. It’s an uphill battle, fraught with many challenges. And there are reasons. Generally speaking, IOUs are the best option for most of the population.
IOUs serve nearly three-fourths of the nation; they may be few in number overall, but each one covers 650,000 people. IOUs can leverage economies of scale in their operations to provide cost savings. Being owned by shareholders incentivizes them to function efficiently and make a profit. Experienced board members can strategically cut costs to maximize returns, which keeps prices low for consumers. With sufficient capital, they can invest in research and development, protect against cyber-attacks, and provide tailored and innovative solutions that meet the needs of their customers.
Read the full DC Journal article here.
Kristen Walker is a policy analyst for the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit www.theamericanconsumer.org or follow us on Twitter @ConsumerPal