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Public Power in California
Public Power in California
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Overview of the book:
This book examines the structural and economic issues affecting the expansion of municipal electric power utilities in California. Although the discussion centers on the California case the implications of our analysis are relevant for the viability of future municipalization of utilities in the United States.
The key findings are:
1. With deregulation and restructuring of the electricity industry, as well as the maturation of alternative and dispersed electricity generation technologies, significant changes that will reshape the way both public and investor owned utilities (IOUâs) operate are emerging.
2. Although historically municipal (MUâs) have enjoyed significant tax and other advantages over investor owned utilities (IOUâs) in todayâs world they will have to compete for and pay about the same price for power as the IOUâs.
3. Many existing MUâs have access to low priced hydropower, but this advantage will not be available to new MUâs.
4. Focusing on the California case, the cost of that stateâs failed deregulation scheme will be borne by the existing IOUâs and for the most part not the existing MUâs. However, new MUâs will not be able to avoid paying their fair share of these costs. Overall, in the period after deregulation, MUâs have few advantages over IOUâs despite their ongoing tax advantages.
5. The capital costs of acquisition and establishment of a MU will be substantial. It is likely to exceed a typical cityâs annual revenue These high costs raise other issues including a cityâs bonding capacity and the need for voter approval for any new taxes required to finance municipal take over of IOUâs. These are real hurdles in light of Californiaâs (and other stateâs) current fiscal crisis.
6. The most recent data suggests that cities can expect to pay between one and two times the book value of an IOUâs facilities.
7. Thus, even in the emerging system, only municipalities with special advantages, such as access to inexpensive power, seem likely to be able to justify the cost and difficulties of forming municipal utilities.
8. Selective municipalization or âcherry pickingâ will result in problems of equity and fairness when the residual system becomes more expensive to serve.
9. It will be a challenge for new MUâs to foster, invest, and gain access to productivity improvements via R&D in the rapidly evolving electric power industry.
This book examines the structural and economic issues affecting the expansion of municipal electric power utilities in California. Although the discussion centers on the California case the implications of our analysis are relevant for the viability of future municipalization of utilities in the United States.
The key findings are:
1. With deregulation and restructuring of the electricity industry, as well as the maturation of alternative and dispersed electricity generation technologies, significant changes that will reshape the way both public and investor owned utilities (IOUâs) operate are emerging.
2. Although historically municipal (MUâs) have enjoyed significant tax and other advantages over investor owned utilities (IOUâs) in todayâs world they will have to compete for and pay about the same price for power as the IOUâs.
3. Many existing MUâs have access to low priced hydropower, but this advantage will not be available to new MUâs.
4. Focusing on the California case, the cost of that stateâs failed deregulation scheme will be borne by the existing IOUâs and for the most part not the existing MUâs. However, new MUâs will not be able to avoid paying their fair share of these costs. Overall, in the period after deregulation, MUâs have few advantages over IOUâs despite their ongoing tax advantages.
5. The capital costs of acquisition and establishment of a MU will be substantial. It is likely to exceed a typical cityâs annual revenue These high costs raise other issues including a cityâs bonding capacity and the need for voter approval for any new taxes required to finance municipal take over of IOUâs. These are real hurdles in light of Californiaâs (and other stateâs) current fiscal crisis.
6. The most recent data suggests that cities can expect to pay between one and two times the book value of an IOUâs facilities.
7. Thus, even in the emerging system, only municipalities with special advantages, such as access to inexpensive power, seem likely to be able to justify the cost and difficulties of forming municipal utilities.
8. Selective municipalization or âcherry pickingâ will result in problems of equity and fairness when the residual system becomes more expensive to serve.
9. It will be a challenge for new MUâs to foster, invest, and gain access to productivity improvements via R&D in the rapidly evolving electric power industry.
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