Government Takeovers of Local Power Companies: Better Service for the Hotel Industry?
By Steve Kiesner Director of National Accounts, Edison Electric Institute | October 28, 2008
Iowa is one state where a number of local ballot initiatives are asking residents if their city should municipalize, or more accurately, takeover the role of electricity provider. California is another. And in recent years the question has come up in Florida, Nevada, and New York and elsewhere.
The bait is typically lower prices and greater reliability. But government takeovers can't guarantee either. To make improvements here, we must look beyond local control issues and address the national issues that are affecting the country's electricity system. And this can only be accomplished through comprehensive national energy legislation.
Government Takeovers Pose Risks, New Costs
What the government takeover proponents don't mention is that many factors affect the price of electricity. Government control-of and by itself-will have no bearing on the price of power. The local government can artificially lower the electricity rates, but that only means taxpayers will be making up for it in another way.
In the distant past, when the majority of government-owned utilities were established, cities typically had access to cheap, government-owned hydropower. This ensured a low cost kilowatt-hour.
But today, long-term contracts tie up federal power for decades into the future. A newly minted government-owned utility will either have to buy or build its own power plants-highly unlikely today, given the cost and lengthy process involved-or turn to the country's unpredictable wholesale electricity markets to buy its power-just like the local power company did.