encourages public ownership of utilities to promote energy efficient
policies, conservation, renewable energy projects and lower costs to
From the resolution ‘Protect
adopted by the 65th UE Convention
show that publicly owned utilities in the United States have prices 2.5
percent lower than investor-owned utilities; residential customers on
average enjoy 15 percent lower costs.
study of electricity prices in Western Europe shows that electricity is
relatively cheap where under public ownership, higher than average where
privatized or deregulated.
From a report by the International Labor Organization
As the UE NEWS was readied for press, rolling
blackouts again disrupted Californians’ lives. Lights go out,
elevators stop, traffic lights freeze, refrigerators don’t. In the
first few months of the year, California had already experienced a
series of stage 3 alerts. Rolling blackouts as a result of power
shortages plagued Californians at work and at home throughout the
fall and winter.
Except in Los Angeles.
Members in California Cope with Deregulation Fiasco
the heat of summer approaching, UE members in southern
California are expecting a bad situation to get worse: rolling
blackouts with no notice and lasting two-to-four hours,
impacting both commercial and residential customers.
power blackouts are not bad yet, only had two in the last few weeks
for about 20 to 50 minutes, but I’m expecting them to get much
worse in the months ahead," says District 10 Fin. Sec. Francine
As Intl. Rep. Leanna
Noble points out, "we haven’t seen the employer panic
yet" — and fights over layoffs and a host of contract
violations that could ensue.
employers have had contracts with the electric utilities which
offered "a dirt cheap rate" but gave the utilities the
right to demand shutoff of power during emergencies. "This
never happened," says District 10 Pres. Marianne Hart
— until last year, when the effects of California’s
electric-power deregulation shocked the state.
Alloys in Pomona, close to a third of the shop has worked less than
30 hours because of Southern California Edison’s voluntary power
interrupt scheme. Interruptions have been as much as six hours per
incident. The shutdown has to be immediate — even if wire is going
through the oven. As a result, Hart says, "everything is
not only did not get their 40 hours, but have been denied report-in
pay. Workers are fighting this violation of the contract.
Packaging in Santa Ana this past winter, "if we made it to 5 we
were pretty much home free," says Hart, a Graham worker. When
the buzzer went off and the emergency light flashed, the power had
to be shut down within 30 minutes. A few lights and computers were
left on. "We’d all converge in the breakroom," Hart
says. Those needed to start up a line were kept in the plant,
everyone else was sent home by seniority. "It was taking longer
and longer each time to turn the lights back on," Hart reports.
has opted to eat substantial penalties and pull out of the scheme.
The power-interrupts have played havoc with production. "It
takes four hours to get heat back up to melt the plastic," Hart
explains. (Graham produces plastic containers.)
At Henry Mayo
Newhall Memorial Hospital in Santa Clarita, emergency electrical
generation protects the delivery of medical care, but blackouts
still have their effect. "Almost all of our equipment is
supported by computers for processing or even the generation of a
study such as CAT scan and MRI and our angiogram room," says Terry
Bucknall, a radiation specialist and Local 1004 member. "We
have been so lucky lately that no studies were interrupted that I
know of, but the power surge, even with protection, shuts down
everything and the reboot takes time and sometimes isn’t
With the ongoing
crisis hospital staff is more conscious of power usage and time of
day for certain tasks, Bucknall observes.
seen big increases in her home heating bill and in gas prices at the
pump (from $1.05 to $2.13 a gallon in one month); "electricity
can increase anywhere from 31 percent to 61 percent a month,
depending on how well you conserve. Some of us have always conserved
and can’t conserve any more than we do now — so I will get a
very high increase in my bill starting next month," she says.
question," Mitchell says, "is, why won’t Bush help us
Sizing up the
impact on UE members in District 10, Noble recommends public
takeover of power plants, transmission lines and natural gas lines
and supplies — quickly, before the crisis worsens.
Consumers in Los Angeles haven’t experienced a rolling
blackout yet and probably won’t. In fact, Los Angeles has excess power
it sells to other parts of the state.
While the California Public Utilities Commission approved
two electric rate increases so far this year for the two largest utilities
in the state, Los Angeles consumers have not seen a rate increase in nine
years. None are anticipated.
Why? Los Angeles electrical needs are provided by the city’s
Department of Water and Power, a municipal agency. The DWP chose not to
open its doors to deregulation. As a result, Los Angeles residents and
business owners have not been impacted by energy alerts or rolling
The Los Angeles Department of Water and Power, which
provides electricity and water to the city’s 3.8 million residents, is
the largest of the nation’s more than 2,000 publicly owned electric
utilities. Public power serves about one in every seven Americans.
Unlike investor-owned utilities, which exist to make money
for investors, publicly owned utilities exist to provide electricity efficiently
and inexpensively to consumers. In effect, public power generates
dividends, too, but in the form of lower rates. Los Angeles ratepayers,
for example, pay 19 percent less than Southern California Edison and 16
percent less than Pacific Gas & Electric.
The nation’s publicly owned electric utilities range
from large city systems (Seattle, San Antonio, Memphis and Cleveland) and
a few state public power agencies (New York, Nebraska, South Carolina,
Wisconsin) to small communities. Most public power systems are located in
small and medium-sized cities.
This is not a new idea. The first public power system was
created in 1882; more than 300 public power systems have been in existence
for more than 100 years. Many date to the early years of the 20th
century (known as the Progressive era), when the abuses, corruption and
inefficiency of electric companies led reformers to view municipal
takeovers as the best solution.
"Public utilities can meet the unique needs of local
communities," says Jerry Jordan, executive director of the California
Municipal Utilities Association. "The only way all the resources stay
within the community is with a publicly owned system."
Locally regulated, public utilities are not regulated by
states, so they can set priorities based on community needs, Jordan says.
"Public utilities are allowed to remain integrated utilities,
providing electric generation, transmission and distribution. And they can
continue setting rates based on the cost of their services on a non-profit
"The consumers served by public power systems
historically have enjoyed the benefits of lower rates," says Alan
Richardson, executive director of the American Public Power Association.
"Federal rate comparison records collected since the late 1940s
document this fact. It is absolutely clear that public power has
traditionally enjoyed a significant rate advantage over its competitors
for more than half a century."
This is due in part because publicly owned electric
utilities are exempt from taxes and can obtain new financing at lower
rates than investor-owned electric utilities.
Almost all investor-owned electric utilities own and
operate generating capacity; that’s not true of publicly owned
utilities. Some (like Los Angeles) have plants that supply their customers’
needs. Others (more than half of the total number of major publicly owned
electric utilities) purchase power which they transmit and distribute.
These utilities are still able to offer consumers lower prices because
there are no dividends to pay to investors.
In addition to bringing local control and lower rates,
publicly owned utilities are better placed to promote conservation. In Los
Angeles, fully 10 percent of the city government’s electricity purchases
will go for new clean, renewable energy sources, effective in July. The
DPW’s Green Power for a Green LA is designed as an opportunity to bring
cleaner energy resources to Los Angeles.
Under California’s deregulation law, all public power
systems in the state exercised their option of continuing local control.
"Their customers and their communities were not asking for customer
choice," says Richardson of the American Public Power Association.
"They didn’t sell their generation. They didn’t abandon or
divorce their communities and their customers."
California’s deregulation fiasco has meant problems for
some of the state’s publicly owned utilities but has also made the
public option seem more appealing.
Deregulation of electric power was supposed to lower
prices — California’s electric rates were 50 percent higher than the
national average in 1996 — and boost supplies. That’s why the state
legislature voted unanimously for deregulation that year. But, as everyone
now realizes, that’s not what happened (see the box at right for the
impact on UE members).
Business lobbyists pushed for deregulation; manufacturing
and agricultural companies figured they had the muscle to negotiate better
rates for themselves. The big electric utilities saw a chance for bigger
The utilities devised the deregulation plan, which split
the electricity business into two sectors: one consisting of companies
that generate power, the other companies that deliver power. The big
utilities controlled both sectors; the restructuring plan allowed a
handful of corporations to consolidate the generation business. "When
the generators charged too much, they were essentially overcharging
themselves," writes San Francisco-based journalist Rachel Brahinsky (The
Progressive, March 2001). "As a result, while one arm of each
corporation suffered, another posted record profits."
Both Southern California Edison and Pacific Gas and
Electric paid dividends to stockholders during the crisis months of the
The deregulation plan artificially froze consumer rates above
the price of energy for a fixed period so that the utility companies could
"recover" so-called "stranded costs" — mostly debt
from bad nuclear investments. What happened to the $22 billion bailout
handed over to the big utilities before the crisis has never been fully
explained, but it is likely that some of it flowed to Indonesia and
Australia, where both SoCal Edison and PG&E have investments.
(PG&E has filed for bankruptcy.)
Although deregulation was supposed to increase
competition, the big utilities clobbered potential competitors. This, of
course, did nothing to increase supply. As recently as the early 1990s,
SoCalEd fought successfully against construction of new power plants,
During the transition to deregulation, the big companies
failed to negotiate long-term supply contracts. "The utilities were
left dependent on a spot market where short-term prices could soar without
notice," writes Harvey Wasserman. "That, in turn, left the
public at the mercy of a handful of out-of-state energy speculators, most
notably Duke Power of North Carolina, and Dynergy, Reliant and Enron, all
of Texas." (The Texan firms have ties to George W. Bush.)
Sharp increases in natural-gas prices and low hydro power
because of low levels of rain last year combined to collapse the
structurally flawed system.
POWER STANDS OUT
Thirty-one publicly owned electric utilities in California
belong to the American Public Power Association. "Most of them are
doing quite well," says APPA Director Richardson. But all, he says,
have been affected. "Some of them had enough generation to meet their
own loads. Those that didn’t had a significant amount of generation
combined with long-term power supply arrangements. These generation
resources and contracts provided a bumper against the price volatility
that we’ve seen in California."
Due to the way the grid is constructed, some public power
systems in northern California have been affected by rolling blackouts —
even though they have adequate capacity to meet their needs. "It isn’t
really fair that the consumers in these public power communities have not
been part of the problem but are required to pay a price to be part of the
solution," Richardson says.
Overall, the publicly owned utilities in California look
good, certainly in comparison to the utility giants. "I can tell you
that the experience of the public power systems in California, the way
they’ve been able to weather the storm and the fact that they continue
to look after the communities that they serve has created quite an
interest in public power within that state," Richardson says.
James McClatchy, publisher of The Sacramento Bee,
is among those calling for public ownership as a solution to California’s
energy crisis. "Electricity, natural gas and water systems are
natural monopolies," he wrote in a Feb. 18 column. "They are so
essential to the very life and well-being of our citizens and economy that
they should not be subject to the vagaries of free-market speculation.
Deregulation of the electricity monopoly is a failure. The monopoly should
be returned to the tax-paying consumers who support it and depend on
In Massachusetts, another state that has restructured,
consumers are paying higher rates except in public power communities. The Boston
Globe observed how communities served by publicly owned utilities
largely can be sure of secure sources of power, stable prices and good
"We can look at a well-run municipal utility district
and see there are models staring us in the face," says Medea
Benjamin, who ran for the U.S. Senate in 2000. "These things aren’t
pie in the sky," says Benjamin, currently spokesperson for Public
Power Now. "These are real, and these are working."
for Electricity is Democracy" - thoughts and
recommendations on the California "energy crisis" by Richard
Grossman, co-director of the Program on Corporations, Law & Democracy
(POCLAD). (This link will take you to the POCLAD website.)
UE News - 05/01