APPA News

By John Godfrey
APPA
Posted March 29, 2018

Our communities deserve the quality of life and stronger economy that better infrastructure provides. That is why, in the last decade, public power utilities have invested nearly $100 billion in distribution, transmission and generation equipment needed to reliably deliver affordable electric power to 22 million homes and businesses in more than 2,000 communities.

These investments are made by state and local officials who are directly accountable to the people they represent. The investments they choose to make on their customers’ behalf provide the electric power that keeps the lights on at home, computers running at work, machines operating at our factories and communications systems working for our police and fire departments.

State and local officials operating public power utilities focus on getting what their customers pay for — on time and on budget.

Public power utilities’ first responsibility is to the community’s residents and businesses — they have no shareholders looking at profits or rates of return. On average, the work and daily lives of public power utility customers are interrupted less often by power outages than that of customers served by investor-owned utilities. And when outages do occur, customers are without electricity for less time. That’s less time worrying about how long food in the refrigerator will keep or, for businesses, waiting to serve customers.

As identified by the Trump administration and echoed in our communities, our national infrastructure is a top concern. Crumbling roads and bridges, struggling water systems and the like have residents worried. States and localities invested more than $2 trillion in these assets in the last decade and are on track to invest another $2 trillion over the next decade. However, federal policymakers have been reluctant to raise the taxes necessary to finance additional investments in federal assets, such as interstate highways. Likewise, there is increasing pressure to reduce direct aid to state and local governments.

In the absence of direct assistance, some federal policymakers see privatization as a fix. For example, if the federal government won’t help repair a bridge, and the state can’t or won’t raise the taxes needed to do so, then a private company could take over the bridge and pay for the repairs by adding a toll. Such privatizations — if carefully negotiated — can shift economic risks from the state to the private operator. However, compensation for taking on these risks, plus the need to return a profit to investors means privatization tend to increase project costs.

Advocates generally avoid the term “privatization,” instead preferring to use “public-private partnership.” The latter is vague, but in this context generally means a long-term contract to maintain, operate, or make available a public facility. The distinction being that rather than receiving a one-time fee or short-term contract, the private operator gets a steady stream of revenue over the long run – generally over the useful life of the project.

We at the American Public Power Association strongly believe that the best investments are made when residents, not profits, are driving the decisions. We also believe that every community has the right to choose how it receives its public services. As a result, we adamantly oppose any effort to use the power of the federal government to try to tip those scales in favor of privatization.

As Congress develops a plan to update our infrastructure, we will oppose any effort that would create artificial incentives to privatize electric utility infrastructure – including the power marketing administrations that provide wholesale hydropower at cost to public power utilities and rural electric cooperatives. Likewise, any incentives for additional infrastructure investments should be available to governmental entities — including public power utilities — just as private-sector entities do.

We have nothing against public-private partnerships – in all their permutations. When public power infrastructure investments are financed with municipal bonds, they are literally financed by the private sector, although funded by the customers repaying those bonds. Likewise, when a utility buys power from a merchant generator or hires outside crews to help with construction or repair, it’s a public-private partnership. Likewise, some public power utilities already have long-term arrangements with private providers to help in operation or management of their electric systems.

However, should policymakers choose to incentivize privatization of infrastructure, hoping to put profit ahead of the people, it is 100 percent certain that our residents, our businesses, our customers will pay the price.