[The sale of electric utilities to corporate investors has brought
more power outages and rate hikes. Local ownership has the potential
for lower rates, better service and a quicker transition to renewable
energy.]
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HOW ‘ENERGY DEMOCRACY’ COULD BUILD THE GRID OF THE FUTURE  
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Susan B. Inches
November 27, 2023
Governing
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_ The sale of electric utilities to corporate investors has brought
more power outages and rate hikes. Local ownership has the potential
for lower rates, better service and a quicker transition to renewable
energy. _

, Shutterstock

 

On Nov. 7, Maine voters considered a referendum that would shift
ownership of the state’s electric grid from foreign investors to
local consumers. The proposal was soundly defeated
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but it wasn’t a fair fight.

The grass-roots group that put the referendum forward was vastly
outspent by Maine’s two investor-owned utilities. The grass-roots
campaign had a budget of just $300,000 to educate the public on the
benefits of a locally owned grid; the utilities spent close to $40
million to defeat the measure.

What the Maine campaign sought to achieve was a measure of “energy
democracy,” a term emerging over the last several years. Its
advocates want more say in how our electric grids are managed, what
investments are a priority and how customers are treated. But given
the deep pockets and political power of investor-owned utilities, this
transition will be difficult.

It hasn’t always been this way. When most of the grid was built
between the 1930s and the 1960s, it was owned by either municipalities
or local private companies. In both cases, executives and managers
were trusted members of the local community. They were accountable.
And they were seen as heroes for bringing electric power to the rest
of us.

Corporate takeovers during the 1980s and ’90s changed that. The
thinking at the time was that corporate investors would bring more
capital to invest in the grid. Based on this, public utility
commissions didn’t hesitate to permit the sale of much of the grid
to national and international corporations.

But in selling off the grid, they were making a big trade-off: Distant
executives would no longer be accessible or accountable to local
communities. Instead, they are accountable primarily to their
corporate shareholders.

As a result, we’ve seen more power outages and rate hikes. We’ve
seen major investments in profitable transmission lines, but little
investment in updating and strengthening the grid to accommodate
renewable energy. We’ve seen a decline in customer service. This is
where we are today in most U.S. communities.

Energy democracy changes the status quo by embracing several
principles:
 

* Public or collective ownership of energy infrastructure.
* Decentralization and strengthening of the grid to accommodate
renewable energy.
* More public participation in policy and management decisions.
* Equitable governance of energy systems, taking into account race,
geography and socioeconomic status.

Democratically run electric grids do exist today. This is because a
number of electric grids across the country were never sold to
corporate investors.

More than 2,000 U.S. communities [[link removed]]
get their power from a locally owned and managed utility. These
utilities serve large cities including Austin, Nashville, Sacramento
and Seattle. All of the state of Nebraska and many smaller towns and
regions across the country also get their power from locally owned
utilities. All told, 1 in 7 Americans receive their electricity from a
locally owned grid.

The track record of locally owned grids is positive. They have
consistently lower rates than investor-owned utilities. They are more
reliable. And they have adopted renewable energy at a faster rate than
the investor-owned utilities.

Today, climate action plans in towns, cities and states across the
country call for clean energy fueled by wind, solar and hydro. Many of
these plans also call for decarbonization and “beneficial
electrification” — reducing the use of fossil fuels and
electrifying transportation, businesses, and heating and cooling.

If all these things are electrified, the demand for electricity will
greatly increase. To achieve local and state climate action goals,
electric grids will need a significant upgrade. Increasing renewable
energy means building new local transmission lines and upgrading
circuits, switches and substations.

Locally and regionally owned utilities are in the best position to
make the needed investments. Because their mission is to serve
ratepayers, they can build what communities most want and need. And
most can borrow through low-interest municipal bonds, making grid
improvements affordable.

In contrast, investor-owned utilities operate in a regulatory system
that incentivizes building large assets like centralized transmission
lines. Meeting state and local climate action goals is not their
priority; in many cases, meeting those goals is an added expense,
reducing their bottom line.

The cost of capital is much higher for investor-owned utilities than
for locally owned utilities. The difference in cost between municipal
bonds at 3-5 percent interest
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and the combined debt and return on equity for investor-owned
utilities of 8-12 percent
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amounts to billions of dollars in potential savings for ratepayers.

Several jurisdictions and regions have succeeded in taking back their
electric grid from investor-owned utilities, notably Winter Park, Fla.
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and Long Island, N.Y [[link removed]]. These
efforts were long and costly. But the end results have been positive:
Electric rates and power outages have been reduced.

Should our electric utilities be owned by distant shareholders? Should
foreign entities make a profit on local electricity? Or should the
electric grid be considered a part of the common good, owned by the
people?

Policymakers and ratepayers have begun asking these questions. With
climate change upon us, with the need to upgrade and build out our
grid and with ever-rising rates, these times call for change. We know
the road to get there will be hard. But we have a model for success in
the locally owned utilities across the country.

_Susan B. Inches is an author, educator and environmental advocate who
has worked extensively on energy issues. Her recent book is
_Advocating for the Environment: How to Gather Your Power and Take
Action
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Her website is sueinches.com [[link removed]]._
 

Governing_’s opinion columns reflect the views of their authors and
not necessarily those of_ Governing_’s editors or management._

* Energy Democracy; Locally Owned Electric Utilities; Public Power;
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