Brett Litzler is a staff writer for Brief Policy Perspectives and a first-year MPP student.
America’s electrical grid is becoming increasingly run down and outdated. Weather-related power outages are becoming more common, coal-fired and nuclear power plants are closing, and aging infrastructure has led to higher prices for consumers. At the same time, however, state and federal governments are investing millions in loan programs for grid upgrades. Struggling utility companies see opportunity in this spending, too. Pacific Gas and Electric (PG&E) in California spent $2.1 million to lobby policymakers in 2019, the same year a bill was introduced in the state legislature to provide the company $20 billion in tax-exempt bonds. In Ohio, FirstEnergy and Speaker of the House Larry Householder became the subject of a bribery scheme in which the Speaker and others received $60 million from FirstEnergy in exchange for a $1.3 billion bailout for the company last year.
Considering Publicly Owned Utilities
To address these problems, policymakers could continue with the same slate of policies while adjusting their level of implementation. This would mean continued or increased subsidies and incentives for utility companies to improve their facilities and infrastructure. A large issue with this, however, is the nature of many utility companies as private entities. Naturally, companies like PG&E and FirstEnergy have the responsibility to increase profits for their shareholders, but in this market the profit motive has the tendency to disincentivize the improvement of transmission lines, as the return on investment is relatively small compared to maintaining the existing lines. According to an analysis by PG&E, burying a mile of overhead lines costs upwards of $3 million.
Another feature of this market is that many power companies are considered to be natural monopolies. Not only does this result in limited competition, it also results in limited accountability. Policymakers have only so much regulatory authority over private companies, and in light of the increasing urgency of climate change, a rapid transition to green power may prove difficult for private companies that don’t see economic opportunity in doing so. The monopolistic nature of the market is also arguably a factor in the recent discussion surrounding bailouts in California and Ohio. The indispensability of electricity means that regardless of corruption or a lack of profitability, these services must be provided.
The concept of publicly-owned utility companies is not foreign or unheard of in America. The most notable public power company in the United States is the Tennessee Valley Authority, which has become a model for low-cost, carbon-free power, while being entirely self-financing. Calls for public power have also increased in recent years. The Chicago City Council has begun exploring the possibility of municipalizing CommonwealthEdison facilities in the city, while California Governor Gavin Newsom proposed a state takeover of PG&E during the company’s bankruptcy last year. Senator Bernie Sanders went the furthest during his presidential bid with calls for a $2 trillion plan that would have included massive investment into public power generation, specifically to build new power plants operated by the Tennessee Valley Authority and the Department of Energy’s Power Marketing Administration, which operates a number of hydroelectric facilities in 33 states.
Benefits to Public Operation
Public operation of power generation comes with a number of significant benefits. As discussed previously, publicly owned corporations are more accountable to the needs of society than their private counterparts. The TVA, for instance, is required to report to Congress twice per year, and their Board of Directors is appointed by the President and confirmed by the Senate. As a vital part of our infrastructure, it is important that electricity generation is able to respond to the needs of consumers; for better or worse, private companies must respond to the needs of shareholders.
Public operation would also eliminate the need for generation to be profitable. Other publicly owned companies such as Amtrak and the USPS typically operate at a loss while still providing a vast number of necessary services to their consumers, and it is not unreasonable for electricity to be provided in such a way. Even with this in mind, publicly owned generation facilities have a high potential to generate profit while also providing reliable service and well-paying jobs. In 2019, the TVA generated $11.3 billion in revenue and $1.4 billion in profit, while retaining 66,000 jobs and maintaining “99.999% reliability for the 20th consecutive year,” bucking nationwide outage trends.
The political feasibility of a plan this extensive is unknown, and considering it has been compared to New Deal-era levels of investment, it would likely prove very difficult. Still, the benefits of eliminating private power monopolies while ensuring that energy generation is green and cost-effective through publicly owned and operated utilities is something that analysts and policymakers should take into close consideration, especially should the political opportunity arise for federal action on both infrastructure and climate change.