Category Archives: Utilities

Chipping Away at the Ideology of Privatization / The Logic of Public Services

Source: Pete Dolack, Counterpunch, February 21-23, 2014

… Shareholders expect maximum profits from investments, and utilities that provide basics like electricity and water are not excepted. Many a local government has learned the hard way that even water is a commodity from which to squeeze a profit once privatized, with human need an afterthought. Decades of ideology have attempted to instill the idea that the private sector is always superior to government; that government can only mismanage what is in its hands. Although attempting to flip this discredited, self-serving phantasmagoria by arguing the complete opposite would not stand up to scrutiny, either, the realm of facts and data firmly contradict the standard corporate ideology. Government after government has found that privatization was a mistake in what has become a wave of “re-municipalization” — the return of public services to public management. …

Plug and Played: 6 Shady Power Providers / The retail electric market attracts operators with little experience—but lots of history running afoul of regulators

Source: Stephanie Mencimer, Mother Jones, January 27, 2014

The retail electric market has drawn scores of operators with little experience in the energy business—but lots of history running afoul of regulators. A sampling:

Ambit Energy
Dallas-based electricity and natural gas provider operating as a multilevel-marketing company, in which salespeople make money from signing up other salespeople….

Just Energy Group
Publicly traded company whose affiliates include Hudson Energy, Commerce Energy, Momentis, Amigo Energy, and Tara Energy….

ACN
North Carolina-based MLM company that sells everything from phone service to home security….

IDT Energy
New Jersey-based shop originally part of a telecom company….

Great American Power
Georgia-based company founded as part of a telemarketing outfit….

Energy Plus Holdings
Philadelphia-based company founded by former credit card executives, including Richard Vague, chairman of the Philly Fringe Festival. …

State Senator proposes selling or privatizing MUD

Source: Katie Schubert, KOIS, January 9, 2014

A state Senator from Omaha says he’ll introduce a bill to sell or privatize the Metropolitan Utilities District. Enlarge image Nebraska lawmakers return to session Wednesday. State Senator Scott Lautenbaugh says the bill he’ll introduce could bring in up to $3 billion. That money would go toward Omaha’s combined sewer overflow project and unfunded pension liabilities. …. Lautenbaugh says he’ll also introduce a measure authorizing charter schools in Nebraska, something he says has “long been a priority.”

When Public is Better: The Efficiency Case for the Visible Hand

Source: Robert Kuttner, Dēmos, November 2013

From the introduction:
The premise of the libertarian view of economics that has dominated public policy and public discourse at least since the era of Ronald Reagan and Margaret Thatcher is that markets work more efficiently than governments. This is asserted both as true by definition and also by example. Government is said to be cumbersome, bureaucratic, subject to pressure group influence and political corruption, averse to innovation, and so on. Markets, by contrast, are lean, subject to competitive pressures, and have other natural mechanisms that maximize efficiencies.

And yet the most costly economic failures of recent years have been those of the market. The financial collapse, a pure product of market mispricing of risk, cost the economy tens of trillions of dollars in just a year. Imagine the outcry if government squandered money on that scale! Global climate change, which Lord Nicholas Stern famously termed “history’s greatest case of market failure,” is the result of systematic underpricing of carbon pollutants by markets. It will cost the economy in the tens or hundreds of trillions of dollars.

In addition, the process of deregulating and privatizing is often afflicted with the same kind of wasteful corruption that conservatives attribute to government. When public services are contracted out, the corruption and inefficiency is typically the result of contractors seeking to game the system. Markets, especially in realms where there are public goods or externalities, are famous for loading up transactions with extra middleman costs. Our health system, for example, spends more than any other, and beneficiaries get a lower share of those expenditures than in any other wealthy country because of the costs extracted by middlemen….

….Often, private providers require government guarantees and/or subsidies, which both create moral hazard and necessitate costly supervisory systems that vendors then seek to frustrate, producing an infinite regress of move and counter-move, cost and counter-cost. Medicare, for instance, uses one set of vendors to provide health services, then retains another set of vendors to pay claims, and a third set of vendors to prevent the first two sets from gaming the system, and it then needs more public officials to supervise all the vendors. The health-industrial complex, meanwhile, spends a fortune trying to game the system, requiring even more complex counter-moves by government. As Medicare costs rise, its budget is pared back, leaving it less well equipped to monitor a Rube Goldberg system. But shifting to a market-like system—vouchers—would only leave more opportunity for profiteering, charging more money to the sick, and leaving non-affluent people without adequate coverage. As every other advanced nation proves, it’s simpler and more efficient to have a coherent and non-commercial health system. The normal price discipline of supply and demand does not apply to health care to control cost, since consumers and their physicians do not have equal knowledge and patients seldom bargain with doctors and hospitals over price. Health is better understood as a public good….

Hamburg citizens vote to buy back energy grid

Source: Anna Leidreiter, World Future Council, September 25, 2013

On September 22nd, citizens in Hamburg, Germany’s second biggest city, not only re-elected Angela Merkel as chancellor but also gave their electoral mandate to the city authority to buy back the energy grid in their Hanseatic city. Why? Because they concluded that the private sector cannot be trusted with public services – and that community ownership and participatory governance is the way to go.

The Hamburg-based civil society-led alliance “Our Hamburg – Our Grid” reminded citizens of a German federal law stipulating that municipal authorities invite bids from new companies, including communities, who wish to run the local grid once the contract term of 20 years ends. This alliance not only reminded citizens but actually called for action and campaigned for years for the buyback of the energy grid in the city.

And success: 50.9% of the population voted to re-communalize electricity, gas and district heating networks which are currently in the hands of multinational energy companies Vattenfall and Eon.

The motivation for Hamburg citizens? That energy supply is a basic public service that should not serve profit motives. They concluded that Vattenfall and Eon – the current grid operators – don’t act in the best interest of the people and are delaying Germany’s shift to renewable energy….

…The citizens of Hamburg were also driven by the motivation to spur local development. As the current energy grid operators are multinational companies, profits were leaking out of the northern Germany. Under democratic control, citizens will have greater powers to keep the socio-economic value in the region….

The grip of privatisation on our vital services has to be broken

Source: Seumas Milne, Guardian, 29 October 2013

From Ineos to energy, powerful interests are driving a 30-year failed experiment. Utilities belong in public hands… In the past week, a Swiss-based tax exile announced the closure of the Grangemouth petrochemicals plant, a crucial slice of industrial Scotland, after provoking a dispute with his workforce. Threatened with the loss of 800 jobs, they signed up for cuts in real pay and pensions.

Naturally, the employer claimed to be losing money (despite having made £1.7bn last year), while the media blamed the union. In fact it was a textbook lockout and display of corporate power by Britain’s largest private company – a strategic and once publicly owned complex supplying 85% of Scotland’s petrol, left to be run on the whim of a billionaire. …

….As if all that wasn’t grotesque enough, most of profitable Royal Mail has now been privatised by the supposedly dissident Vince Cable. The current loss to the “taxpayer” from selling shares below their market value is upwards of £1.3bn – more than the government’s entire planned savings from benefit cuts in 2013-14. And its biggest shareholder is now the hedge fund TCI.

Within days, the Co-operative Bank had also fallen prey to US hedge funds, as Conservative ministers put out to tender the country’s most successful rail service, the publicly owned east coast mainline. Never mind its reliability, value-for-money, popularity and the £208m dividend payment to the public purse….

…But then privatised water companies are planning to increase prices by 40% by 2020; Simon Stevens, an executive for the US private health firm UnitedHealth, now bidding for NHS contracts, has been put in charge of the NHS in England; and the security firms, G4S and Serco, are allowed to bid for a share of the probation service despite fraud investigations into existing deals….

Microgrids and Municipalization: Do they threaten the traditional utility business model?

Source: Jon Creyts and Eric Maurer, Rocky Mountain Institute, July 23, 2013

….The municipalization of parts of the electricity system is a theme that has often been met with opposition by centralized utilities for a number of reasons, not least of which is the loss of valuable customers. Between 1980 and 1997, at least 40 proposals for the municipalization of electricity assets were made in 17 states. While these have slowed in more recent years, Boulder, Colorado’s ongoing high-profile municipalization effort continues to progress and is a reminder of the challenges associated with breaking off assets in a highly interconnected operational and financial system….

….So with all this talk about “micro-municipalization,” we have to ask ourselves if microgrids pose a similar challenge to publicly-owned power as well. Our view is that any publicly-funded infrastructure program requires a careful re-think in the face of a powerful dislocative force such as what microgrids embody. However, we see a clear opportunity for municipal electric providers and cooperatives to lead in showing how to practically integrate and promote these projects.

This is, in fact, what is happening in Fort Collins, Colorado. In this city of 150,000 people, the municipal utility is part of a multi-stakeholder effort to develop a 2.5 square mile net-zero energy district. The district, called FortZED, will produce or procure as much electricity from renewable sources as it consumes. One of the first projects in FortZED demonstrated the coordination of distributed energy resources like solar PV and demand response to reduce peak load by 20 percent. Up next for the team is to build on this effort and test the use of these assets as an islanded microgrid. And as the team pushes forward with microgrids, the municipal utility is also working with RMI and its Electricity Innovation Laboratory (e-Lab) on new approaches to scale investment in distributed renewable resources throughout the city. Rather than run from or ignore the challenges that microgrids create for the utility, Fort Collins is tackling them head on, looking for the opportunities they create for the utility and its customers…..

Army seeks to expand public-private partnerships

Source: Andy Medici, Federal Times, October 28, 2013

The Army is looking to expand privatization efforts to nearly all commercial-like services, according to Army officials. Lt. Gen. Michael Ferriter, the Army’s top installations official, told a conference of the Association of the United States Army that the privatization of housing and utilities has been a success and the Army is looking to expand privatization efforts further. … He noted that the Army’s privatization of housing and utilities has been a success and said a likely next step is in-home child care within local communities. He said the Army will test various business models to make sure they work financially before rolling out something across all installations. Another candidate: dining halls. The Army is looking at issuing dining cards that could be used at its installations and at local restaurants, according to Army officials. …

Army Posts Look to Local Governments for Savings

Source: Amy Bushatz, Military.com, October 23, 2013

Army installation command officials think they may be on the cusp of finding millions of dollars in savings through a new initiative that allows garrisons to partner with local governments to provide support services for soldiers and families. … The public-public partnership push, which was made law in the 2013 National Defense Authorization Act, allows local Army leaders to seek out agreements with state and local governments to provide services like Morale Welfare and Recreation (MWR) support or public utilities. Garrison commanders must then submit a proposal to the Army’s Office of the Assistant Chief of Staff for Installation Management (OACSIM) for approval. If a cost benefits analysis shows that the partnership will save the Army money, officials said they will give it a green light. … Prior to the 2013 legislation, three garrisons had been given permission through individual legislation to form partnerships with local governments. For example, Fort Huachuca, Ariz., in 2006 found $2.2 million in savings by allowing the local city government to take over its library system. And the Presidio in Monterey, Calif., uses utilities provided by the City of Monterey at a savings of $1.5 million a year. …