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Municipalization: Is the Grass Really Greener?

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Nevelyn Black's picture
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Nevelyn Black is an independent writer with a background in broadcast and a keen interest in renewable energy.  In the last few years, she transitioned from celebrity interviews and film shoots...

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In Kentucky, the city of Louisville committed to a 2020 resolution that all city-government buildings receive 100% renewable electricity by 2030. Unfortunately, the city’s admirable goal surpasses the pace of the local utility company, Louisville Gas & Electric (LG&E).  While the city is exploring multiple avenues to reach its climate commitments, a breakup with LG&E is a possibility. Louisville Metro government has been working with National Renewable Energy Lab to consider how to best meet their sustainability goals.  “They kind of looked at the regulatory environment of Kentucky, they looked at our energy use and laid out a couple of possible routes,” said Allison Smith, assistant director at Louisville’s Office of Advanced Planning and Sustainability. The city has also asked researchers to conduct a study to see how the city could connect to the electric grid without LG&E.  Why would they want to take on the expense and complication of a city-owned utility?  Those supporting the breakup are convinced a city-owned utility would result in lower bills, fewer rate hikes and improved reliability...and then there is the issue of climate change.  More than 40 percent of the state’s total emissions came from just one company: Louisville Gas & Electric and Kentucky Utilities (LG&E and KU). The utility is planning to reduce emissions and reach a net zero carbon future but not by 2030.  The company has retired several coal plants and built a 10-megawatt solar array at the former E.W. Brown coal plant.  LG&E told Kentucky utility regulators, they will continue to replace coal-fired generating units with some combination of solar, wind, battery technologies and natural gas over the next 15 years.  LG&E’s latest Integrated Resource Plan puts the utility on a different path than the city of Louisville. 

Is the grass really greener on the other side?  Supporters in Ann Arbor, Michigan would say yes.  Despite DTE Energy’s promises to reduce greenhouse gas emissions, customers are concerned with the reliability of the utility.  Michigan is the fourth-worst state in the United States when it comes to average time to restore power to a customer after an outage.  On January 18, the Ann Arbor City Council voted to begin a study into the feasibility of a municipal electricity program.  Because the University of Michigan is the largest consumer of power in the city and has a considerable influence on the community, many feel with their backing the breakup is inevitable.  Can a city-owned utility provide renewables and reliability while they keep rates low and carry the expense of new transmission lines?  In Kentucky, Smith shared their plans, “We would look at building our own transmission lines and distribution networks on top of what LG&E has. So basically we would build on top of LG&E’s distribution network using our public right of way then we could connect to what’s called the MISO {Midcontinent Independent System Operator} network.”  

For various reasons, municipalization might reflect ‘the best laid plans…’ However, ‘An Analysis of Municipalization and Related Utility Practices,’ prepared for the District of Columbia Department of Energy and Environment, sited several case studies. One focused on Long Island, NY.  Long Island’s municipalization started in the mid 1980’s with the near bankruptcy of the investor‐owned Long Island Lighting Company (LILCO).  For years, Long Island Power Authority (LIPA) continued to own the electric system.  Rates remained comparatively lower and service was adequate until Hurricane Sandy hit the area in 2012.  The destruction lead to major power outages and severe scrutiny of LIPA’s performance.  As a result, the LIPA Reform Act was signed and placed LIPA’s day-to-day operations under The Public Service Enterprise Group (PSEG).

City-owned or not, interruptions will still occur and the transition to clean energy will take time. The public wants to know how much time?  Regarding net zero goals, are customers and city officials being unreasonable or overly optimistic?  Allison Smith, assistant director at Louisville’s Office of Advanced Planning and Sustainability said, “We made a very ambitious commitment to get to clean electricity by 2030.  I think as the renewable market changes, as federal regulations change, our ability to get there is going to change as well.”   How is your utility adapting to greater demands for clean energy?

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Michael Keller's picture
Michael Keller on Feb 7, 2022

The structure of municipal power is more responsive to customers because the management is generally subject to local public elections. Also, municipal power operates outside control of state bureaucrats, unlike private utilities. Further, the municipal power’s absence of profits inherently reduces costs. Boils down to economies-of-scale associated with private utilities versus the smaller size of municipals.

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