Category Archives: Utilities

California electric bill shock: Private firms charge way more than public utilities

Source: Jeff McDonald, Los Angeles Times, June 14, 2015

In Sacramento, a family using 500 kilowatt hours of electricity last October was charged $58. Customers in Los Angeles, also served by a public utility district, paid $79. Pacific Gas & Electric charged $93 for the same amount of power. Southern California Edison billed customers $97. And San Diego Gas & Electric topped the Southern California Public Power Authority survey at $116 for 500 kilowatt hours. The comparison of rates charged by public and private electricity providers in California shows a notable discrepancy in the amounts customers pay for power, depending on where they live and which provider serves them. ….

electric bills differ

Puerto Rico governor supports privatizing power production

Source: Associated Press, June 4, 2015

Puerto Rico’s governor said Wednesday that he supports privatizing electricity production in the U.S. territory as officials seek to restructure the island’s troubled public power company.

Related:
Puerto Rico Leaders Battle on Potential PREPA Privatization
Source: Robert Slavin, Bond Buyer, March 24, 2014
(subscription required)

Puerto Rico’s leaders are at odds over a potential privatization of the Puerto Rico Electric Power Authority. On March 20 Puerto Rico’s Senate passed a series of bills for reforming the commonwealth’s electrical system. …. . One of the bills opened the path for a possible quick privatization of the provision of electricity on the island. This is one of the key things García Padilla opposes about the bills, the governor’s chief of staff, Ingrid Vila Biaggi, told The Bond Buyer.

Obama Proposes P3 Tool to Help States Finance Infrastructure

Source: Liz Farmer, Governing, January 21, 2015

In his State of the Union, the president proposed expanding a program that encourages state and local governments to pay for infrastructure projects with public-private partnerships. …. A proposal included in President Obama’s State of the Union that is intended to encourage more private involvement in public infrastructure projects appears promising — but whether it would actually result in more development remains in doubt. The so-called Qualified Public Infrastructure Bonds, or QPIBs, would expand an existing financing tool that allows state and local governments to issue tax-exempt bonds to pay for public infrastructure projects managed primarily by private companies. That program, Private Activity Bonds (PABs), has already been used to support financing for more than $10 billion of roads, tunnels and bridges. For example, tax exempt PABs were used to help finance 29 miles of managed express lanes on Interstate 95 in northern Virginia. Gov. Terry McAuliffe has said the $950 million project, which opened in December, would not have been possible without the partnership of Fluor Enterprises and Transurban, which invested $280 million in the project and will collect tolls and maintain the lanes until 2087. If approved by Congress, the QPIB bond program would expand these kinds of tax advantages to include financing for airports, ports, mass transit, solid waste disposal, sewer, and water, as well as for other types of surface transportation projects beyond what’s allowed in the PAB program. The main appeal of offering tax exempt bonds is that it’s a cheaper way to finance projects: it allows the government issuer to pay back investors at a lower interest rate (compared with taxable bonds) because the investor is saves money by not paying taxes on the interest earned. In addition to being available to fund more types of infrastructure projects, the new bonds would also have no expiration date and no limit to how many a government can issue each year. The QPIB program eliminates a loophole in the PAB program that requires some investors to pay a minimum tax on their interest earned…..

States Explore Energy Banks as a Financing Tool

Source: Jocelyn Durkay, National Conference of State Legislatures, LegisBrief, Vol. 23 no. 2, January 2015
(subscription required)

As state policymakers continue to look for ways to boost efficient and renewable energy, some are turning to energy banks. Such banks combine public-sector funds with private-sector financing to lower the cost of investing in renewable or energy-efficient technology.

Philadelphia’s plan to sell gas utility is dead

Source: AP, Oct 27, 2014

City Council members are effectively killing the proposed sale of Philadelphia’s gas utility to a Connecticut company, saying the risks of the deal outweighed the benefits to utility customers and the city. Council president Darrell Clarke said there was “no appetite” for the proposed $1.86 billion sale of Philadelphia Gas Works to UIL Holdings Corp., which required approval from both the council and the state Public Utility Commission.

‘NO’ to privatization in Philadelphia
Source: Joseph Piette, Worker’s World, June 26, 2014

A large crowd of Philadelphia Gas Works workers and their supporters rallied outside City Hall on June 19 to stop the privatization of the city-owned utility. Utility Workers Local 686 organized the demonstration, which included a number of politicians and labor leaders, including Pat Eiding, president of the Philadelphia Council AFL-CIO. Speakers emphasized that the sale of the utility would ultimately raise heating prices for residents, decrease safety for communities, and lower wages, benefits and rights of workers…
Related:
Group Says 1,000+ Signed Petition Against Privatization of PGW
Source: Mike Dunn, CBS Philly, May 27, 2014

About a dozen local activists delivered petitions today to members of City Council, urging the lawmakers to oppose Mayor Nutter’s plan to sell the Philadelphia Gas Works….Nutter wants to sell the city-owned utility to a Connecticut firm called UIL for nearly $2 billion (see related story). The group of protesters believes that natural gas rates would escalate if PGW is sold and that relief for low-income families and senior citizens would end.

Related:
Selling PGW: A bad deal
Source: Ellen Dannin and Jim Walsh, Philadelphia Inquirer, May 25, 2014

Not all utilities are the same. Compare, for example, Philadelphia Gas Works with Connecticut-based UIL Holdings, which is seeking to buy PGW and privatize it for profit. Both sell gas to their customers. But other than that, the differences are stark and plentiful. The city-owned PGW does far more than simply provide gas to 500,000 Philadelphia customers. As a not-for-profit, PGW has no obligation to make money for shareholders and executives. Instead, it can – and does – act primarily for the benefit of all Philadelphians…The proceeds from the sale of PGW may sound nice for the city, but that money is not free. Instead, it is an expensive loan, with UIL recouping interest on its investment by increasing gas rates for families and local businesses. The three-year rate freeze that Nutter has touted is riddled with exceptions and exclusions. It doesn’t apply to more than a dozen different surcharges and riders, or to the cost of any state-mandated improvements….

Rejected bidder for PGW offers alternative roles
Source: Andrew Maykuth, Philadelphia Inquirer, May 25, 2014

A politically connected unsuccessful bidder for Philadelphia Gas Works is positioning itself to move into the breach if Mayor Nutter’s embattled plan to sell the utility collapses. Liberty Energy Trust, a year-old firm started by Russia-born, Harvard-trained former Enron executive Boris Brevnov, last month hired a lobbying firm, S.R. Wojdak & Associates, to “coordinate discussions” about energy-development opportunities. City officials say Liberty is quietly promoting alternatives to Nutter’s plan to sell PGW to UIL Holdings Corp. of New Haven, Conn., for $1.86 billion….

Nutter Announces Agreement To Sell Phila. Gas Works to a Conn. Company
Source: Mike Dunn, CBS Philly, March 3, 2014

Mayor Nutter today announced that he has reached a deal for a Connecticut company to buy the Philadelphia Gas Works for more than $1½ billion. … And with that, Nutter confirmed that New Haven-based UIL Holdings Corp. intends to purchase PGW for a whopping $1.86 billion. Nutter said that was at the high end of the range of possible sale prices that financial experts had projected. … Under terms of the deal, UIL has committed to holding its base rate — the portion of the bill unaffected by natural gas prices — to current levels for three years. It will continue assistance programs for low-income customers. All current PGW employees will be guaranteed a job and their pension fund will be preserved….

A year later, what cities can learn from Detroit’s bankruptcy

Source: Bruce Katz, Jennifer Bradley, Fortune, July 22, 2014

Detroit’s recovery shows that cities are networks, not just governments….The city government, for example, gave up control of the neglected (but promising) urban park, Belle Isle, turning it over to state management under a 30-year lease. Through a $185 million bond package, the Detroit Public Lighting Authority is tackling one of the most iconic symbols of the city’s troubles, replacing 55,000 broken streetlights with state-of-the-art LED bulbs. … As Detroit’s government was struggling with fiscal challenges (and the struggles started long before the bankruptcy filing), civic, business and philanthropic actors were committing billions of dollars into downtown and midtown and supporting a smart plan for the city’s physical and economic future. The M1 rail line, which is expected to begin construction later this month, is emblematic of Detroit’s physical and economic transformation. The bulk of the funding is coming not from the federal, state or local governments, but rather a consortium of companies, philanthropies and other anchor institutions. … When it looked like the DIA’s collection would be dismantled to pay the city’s bills, the DIA itself, philanthropies, businesses, and the state of Michigan created what’s termed the “grand bargain” to shore up the city’s pension fund and thereby save the art. …

Financial advisor recommends against divesting TVA

Source: Robert Varela, Public Power Daily, June 9, 2014

An independent strategic review by an financial advisory firm, Lazard, Frères & Co. LLC, has recommended that the federal government not divest the Tennessee Valley Authority. TVA said it is pleased the report “supports TVA’s financial and operational plan.” The utility engaged Lazard to assist in analyzing financial data for the Obama administration’s strategic review of options for addressing TVA’s financial situation, including the possible divestiture of the utility. The Lazard report “concluded that the business model with TVA’s financial and operational plan is the best current option for the citizens of the [Tennessee] Valley and others,” TVA noted….The high level of complexity associated with a possible divestiture “would likely lead to a costly, multi-year process to execute any such strategy, during which time TVA would experience organizational disruption and which would result in an uncertain outcome,” the report said. The complex network of TVA stakeholders would add to the difficulty of divesting TVA “in a manner that creates value for all parties,” Lazard said. …TVA released the Lazard report on June 4 as part of a mandatory Form 8-K filing with the Securities and Exchange Commission. The 8-K document is available on the TVA website.
Related:
Study findings: TVA should not be sold; analysts reject Obama’s call to privatize utility
Source: Dave Flessner, Chattanooga Times Free Press, June 5, 2014

Selling TVA wouldn’t yield much for American taxpayers, but it could prove costly for Tennessee Valley residents and the region’s economy and environment, according to an outside financial review of America’s biggest government utility. In $1 million study prepared for White House budget planners, Lazard Freres & Co. said if TVA had to earn the financial returns of private utilities, electricity rates would jump by 13 percent. At the same time, dismantling its power and nonpower programs could hurt TVA’s recreation, economic development and environmental programs.

Unions fear a ‘New Deal’ sell-off
Source: Kevin Bogardus, The Hill, March 11, 2014

Labor unions are going on the attack against a proposal buried deep in President Obama’s budget that they charge is a move to privatize the Tennessee Valley Authority …. But while the utility is now self-financing, the government could pocket a hefty profit by selling its stake. Obama proposed studying that option in his last two budgets, angering a trio of major labor unions that have thousands of members at TVA facilities. …… In this year’s budget, the administration said it “continues to believe that reducing or eliminating the federal government’s role in programs such as the TVA, which have achieved their original objectives, can help mitigate risk to taxpayers.” That language was included over the strenuous objections of labor unions, which approved a resolution at the AFL-CIO convention in September urging Washington to reject all efforts to privatize the TVA.

TVA to meet with budget officials over privatization
Source: Eric Snyder, Nashville Business Journal, May 20, 2013

Executives with the Tennessee Valley Authority will meet with officials from President Obama’s administration this week to discuss privatization of the utility, WPLN 90.3 FM reports. It will be the first face-to-face meeting between the groups to discuss a possible sale of TVA since the idea was floated in Obama’s budget proposal earlier this year.

Shocker: Republicans Fight Obama Plan to Privatize the Hugely Popular, Cheap Energy Source of the TVA
Source:Gar Alperovitz, Thomas Hanna, AlterNet, May 19, 2013

US electricity giant rejects privatisation plan
Source: Ed Crooks and Stephanie Kirchgaessner, Financial Times, April 29, 2013
(subscription required)

The head of the Tennessee Valley Authority, the US government-owned electric company and a pillar of Franklin D. Roosevelt’s New Deal, has rejected an Obama administration plan to explore privatisation….But in an interview with the Financial Times, Bill Johnson, who took over as chief executive of the TVA in January, said the authority “isn’t broke” and could fund the investment it needed while staying in the public sector. His comments reflect an upsurge of support, led by typically pro-privatisation Republicans from Tennessee, for retaining government ownership of one of the largest electricity companies in the US…

Politics can obscure history’s reasons
Source: Edward Lotterman, Bismark Tribune, April 28, 2013

If you like irony, the kerfluffle about the Obama administration’s proposal to privatize the Tennessee Valley Authority provides plenty… Stalwart congressional Republicans like Richard Shelby of Alabama and Bob Corker and Lamar Alexander of Tennessee, who are all for small government, free enterprise, and lowering the national debt are decrying this move…

So why are GOP congressmen from the region now all opposed to its sale?

The simplest answer is that under private ownership, without an implicit federal guarantee of its debts and faced with the same requirements to pay state and federal taxes as any other private corporation, electricity rates would go up and TVA employment would go down. That would be politically unpopular. It is a case of “I’m against big government except when big government benefits me and my constituents.” Cynics may say that it also reflects the fact that the guiding principle for the GOP right now is “whatever Obama is for, we are against.”…

The Tennessee Valley Authority: Dammed if you don’t / Barack Obama mulls privatising America’s biggest public utility

Source: Economist, April 27th 2013

Eighty years ago Franklin Roosevelt signed a law creating America’s biggest public utility. The Tennessee Valley Authority (TVA) was charged with delivering cheap hydropower to the rural South, which it did by damming the Tennessee river (see map)…. Privatising the TVA would end the perception of an implicit federal debt guarantee. (A similar implicit guarantee for Fannie Mae and Freddie Mac, the federal mortgage-financiers, ended up costing taxpayers untold billions.) Divestiture would also free the TVA to raise more capital than the $30 billion debt cap allows—though, as the bond spike earlier this month hinted, it would probably pay steeper interest rates….

Role reversal: GOP attacks Obama plan to sell Tennessee Valley Authority, icon of New Deal
Source: Matthew Daly, Associated Press, April 16, 2013

6 things that should never be privatized / From prisons to fire departments, these essentials must be protected from corporate greed

Source: Alex Henderson, AlterNet, May 26, 2014

The idea behind operating gas, water or electric services as public utilities is that those things are important to people’s health and survival and therefore, must be protected from corporate greed. Some things belong in the private sector, others don’t. Here are six things in the United States that should remain in the public sector. 1. Running Water … 2. Prisons … 3. Fire Departments …. 4. Social Security …. 5. Medicare …. 6. Gas and Electric

Amid crisis, Detroit urged to outsource more

Source: Darren A, Nichols, Detroit News, April 14, 2014

Detroit has made progress in contracting with private firms for certain services, such as garbage collection and electricity, but outsourcing advocates say there are more opportunities yet unexplored. Emergency Manager Kevyn Orr’s office is considering outsourcing other services, including the water department, to cut costs and an estimated $18 billion in debt. Yet Detroit’s privatization efforts are “a bit underwhelming, when you look at the severity of the (financial) crunch,” said Leonard Gilroy, director of government reform for the libertarian Reason Foundation in Los Angeles…. LaFaive said Orr could go further and sell Belle Isle. The city also should explore privatizing services such as business licensing and permits, as well as ambulance service, LaFaive said. The city’s Emergency Medical Services unit has been notorious for slow response times, a problem Duggan is addressing through internal reforms. Royal Oak lawyer Tim Wittebort, who was a member of Pontiac’s financial review team when it went under state oversight, said outsourcing Detroit’s airport would make sense. The city is considering selling the airport or “outsourcing certain functions” to reduce costs, but also plans to spend $28.5 million over 10 years to upgrade bays and terminals, create a new passenger ramp, improve security and bolster maintenance, according to Orr’s amended bankruptcy disclosure statement….

Electricity privatisation in Australia: A record of failure

Source: John Quiggan, Report Commissioned by the Victorian Branch of the Electrical Trades Union, February 2014

The record of failure for electricity privatisation in Australia has its genesis in ‘market liberalism’ and ‘economic rationalism’ that drove reforms in the Thatcher and Reagan eras in the 1980s & 1990s. Whilst these theories conflicted with all the evidence showing that public ownership of essential services that are natural monopolies is optimal, the theories are nonetheless used to justify selling off public assets. Actual fiscal analysis does not support that there any long-term benefits to governments from the sale of assets to pay down debt. …