Red state, red power: Nebraska’s publicly-owned electricity system

 

wind_0Following from recent discussions on Bella about public ownership of energy companies, this by Thoma M Hanna. Nebraska’s energy is all publicly owned, yet it blows away the myth that public ownership is inherently inefficient, bureaucratic or unresponsive.

Around the world, people often assume that in the United States, home to a no-holds-barred version of “free market” capitalism, private ownership operates more or less across the board. There is, however, a rich and robust history and experience of public ownership throughout the country – often found in the least expected of places. For instance, there is one state where every single resident and business receives electricity from a public or community-owned institution rather than a for-profit corporation. It is not a famously liberal state like Vermont or Massachusetts. Rather, it is conservative Nebraska, with its two Republican Senators and two (out of three) Republican members of Congress, that has embraced the complete socialization of energy distribution. The ‘red states’—named after the color now given to states that vote Republican in elections—are often ‘red’ in more ways than one.

In Nebraska, 121 publicly-owned utilities, 10 cooperatives, and 30 public power districts provide electricity to a population of around 1.8 million people. Public and cooperative ownership keeps costs low for the state’s consumers. Nebraskans pay one of the lowest rates for electricity in the nation and revenues are reinvested in infrastructure to ensure reliable and cheap service for years to come. “There are no stockholders, and thus no profit motive,” the Nebraska Power Association proudly proclaims. “Our electric prices do not include a profit. That means Nebraska’s utilities can focus exclusively on keeping electric rates low and customer service high. Our customers, not big investors in New York and Chicago, own Nebraska’s utilities.” Payments (in lieu of taxes) from the state’s publicly-owned utilities exceed $30 million a year and support a variety of social services throughout the state—including the public education system.

Nebraska has a long history of publicly-owned power systems dating back to the beginnings of electrification in the late 1800s. Initially, these co-existed with small private utilities. However, in the post-World War One era, large corporate electric holding companies backed by Wall Street banks entered the market and began taking over smaller private and municipal systems. Using their financial and political power, these corporations dramatically consolidated the power industry in Nebraska and attempted to stop new cooperatives and publicly-owned utilities from forming. During this time more than one-third of the state’s municipal utilities were sold to private corporations.

Tired of abusive corporate practices, in 1930 residents and advocates of publicly-owned utilities took a revenue bond financing proposal straight to the voters, bypassing the corporate influenced legislature which had previously failed to pass similar legislation. It was approved overwhelmingly – signaling both popular support for publicly-owned utilities in the state and also the beginnings of their resurgence. Led by powerful Nebraska Senator George W. Norris—the driving force behind the publicly-owned Tennessee Valley Authority—a series of state and federal laws were passed including: the state’s Enabling Act (1933) which allowed 15 percent of eligible voters in an area to petition for a decision on a publicly-owned utility; the Public Utility Holding Company Act (1935) which forced the breakup and restructuring of corporate electricity monopolies; and the Rural Electrification Act (1936) which provided financing for rural electricity projects. By 1949, Nebraska had solidified its status as the first and only all-public power state.

Local control and the possibility for democratic participation are defining features of Nebraska’s publicly-owned electricity system. At the ground level, public utilities and cooperatives are run by publicly elected power district boards, cooperative boards, or elected city councils (often through appointed boards). These bodies establish budgets, establish service standards and policies, and set prices. Regularly scheduled meetings of power boards and councils are open to public involvement and comment. Should they so wish, every Nebraskan has the opportunity to become involved in the decision making of their local electricity provider. One such example relates to the increasing use and proliferation of renewable energy facilities. While the state remains heavily reliant on coal and nuclear sources to provide low-cost energy to consumers, interest in renewable energy—primarily wind—has taken off in recent years. In 2003, electricity consumers, many of whom drove more than 100 miles for the event, participated in an eight-hour deliberative polling survey for the Nebraska Public Power District (NPDD) – a public corporation owned by the state of Nebraska that supplies energy to 600,000 people via local publicly-owned utilities and cooperatives. The topic at hand was the potential addition of more than 200 MW of wind energy by 2010. 96 percent of the participants supported the wind project, with 50 percent agreeing it was the right size and 36 percent wanting it expanded (compared to just 3 percent who wanted it reduced).

In addition to its other wind power facilities, in 2005 NPDD began operating the Ainsworth Wind Energy Facility, the nation’s second largest publicly-owned wind farm consisting of 36 turbines generating up to 59.5 MW of energy. In 2011, the state’s energy plan acknowledged both that power generation from wind had doubled every two years since 2006 and that developing just 1 percent of the potential energy from wind in Nebraska would satisfy the state’s entire peak demand.

Moreover, public ownership of electricity generation and distribution in Nebraska is complemented by another seemingly socialist idea – planning. The Nebraska Power Review Board is a state agency that oversees the publicly-owned electricity system. In addition to its regulatory functions—such as monitoring rate increases and arbitrating conflicts—the five person Review Board (appointed by the Governor and confirmed by the legislature with party, occupational, and term limit restrictions) “oversees the preparation and filing of a coordinated long-range power supply plan,” as well as the location and construction of new electricity generation facilities.

As demonstrated by Nebraska’s nearly 100 years of experience with a completely public and community-owned electricity system, American experimentation offers an interesting alternative to how public ownership has often been implemented in other parts of the world. Describing the post-World War Two British public-ownership program, University of Glasgow professor Andrew Cumbers writes:

“The nationalization of the electricity, gas and other utilities resulted in the centralization of many activities that had formerly been locally or municipally owned and subject to a reasonable degree of local democratic control…Not only did this eviscerate important traditions of municipal socialism and more democratic forms of public ownership, but it also led to an increasing number of costly and unaccountable decisions (notably the decision to invest in nuclear power) by nationalized entities.”

Such experiences often reinforce the concern that public ownership of larger scale systems can lead to inefficiency, unaccountability, and bureaucracy. But Nebraska demonstrates that this does not necessarily have to be the case. The principles of subsidiarity and local control can, in fact, be preserved through a networked mix of publicly-owned institutions at various scales without sacrificing efficiency or service quality. Of course, public ownership alone is not a fix-all solution. It does, however, provide an opportunity for a community, a city, or even a whole region or nation to become actively involved in economic decision making on important matters affecting their lives, their environment, and their future.

 

 

This article was first published in Our Kingdom. Republished with thanks.



Categories: Energy

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17 replies

  1. So given this is a real-time functional power supply model, would anybody like to offer a comment as to why it is not being proposed in any political manifesto for the GE in less than 100 days time?

    • Because we are locked into an ideological mantra that says that private is good – public is bad – even though we have overwhelming public support for this and 40 years evidence of its failure.

      • Ok, let’s get it on the agenda – the SG should make it part of their 2016 commitment – where’s the ideological barriers to this – if we start to get it discussed the mantra that dominates will be skewered.

  2. no utility should be private. full stop.

  3. Also worth looking at – the Black Forest town of Schoenau which was able to use the direct-democratic rights of initiative and referendum to force the local distribution company to sell it the distribution rights. The new locally-owned company ran the system so efficiently – including installing the highest capacity of solar panels anywhere in Europe – that it became famous and was able to start a consultancy to tell other towns and cities with direct democracy how to do the same. Schoenau creates a surplus which it sells to the grid.
    The key is direct democracy!

  4. Globally, major essential infrastructure such as water, energy, ports and airports etc are considered ‘utilities’, as in France, Germany, Belgium and Netherlands, and hence they generally remain in public ownership. The UK is really an extreme form of experimental privatisation in which today almost all UK essential utilities’ assets are owned (and even self-regulated in some cases) by offshore ‘financial engineers’, friends of Lord ‘Deutsche Bank/SSE’ Smith, the result of dodgy leveraged debt transactions with zero transparency. These dodgy deals badly need to be sorted out, though even the SNP Government has yet to cotton on to the downsides of private utility ownership (i.e. a high cost, less competitive, and socially unjust economy) as yet. Land Value Rental (Tax?) could form part of the solution, as well as tackling the present loose/non-existent regulation.

  5. Reblogged this on Common Weal.

  6. Have advocated this until I,m “blue” in the face,bring into public ownership all the utilities,whereby we can offer business reduced costs with the aim to them employing more workers,you could then also reduce wages by giving those in work reduced travel community taxes etc freeing up finances for them.

  7. In Germany recently, many municipalities have opted to take public control of electricity. With no shareholder profit to consider, just a small profit for improvements/renewables only around 5% is taken.

    The large corporates are already being squeezed.

  8. I have always advocated that the utilities are essential to life and as such should be in public hands. We cannot be held to ransom by the vagaries of company performance, profits rake-off and general monopolistic nature of the large multinationals which now control this market.
    Water is essential to disease prevention, hygiene and sewerage. Electricity and gas are essential for light and heat. We don’t know how many, having been priced out of the energy market, die every year in this country. The worst thing is – the profits go abroad.

    • Essential utilities are far more than water and energy. This includes pretty much most major infrastructure that society needs to function. It especially relates to ‘lumpy’ long-term infrastructure that ‘markets’ are unable or unwilling to provide or, crucially, provide at the right time, place, price and to the right extent/capacity. The UK extreme laissez faire economic deregulatory ‘model’ wrongly assumes that ‘markets’ will provide essential infrastructure as and when required. They don’t. All we have in the UK are private equity scams buying and selling former public assets and monopolies from/to each other and fleecing the public, but creating very little new infras in the process. That is why much of UK infrastructure is crumbling and has been for decades. Scotland needs to wise up and plan and provide its essential future infrastructure properly. The ongoing financial free for all since the 1980’s is a consequence of highly negligent UK governance, with the latter in thrall to millionaire ‘financial engineers’, folk like Lord Smith of Deutsche Bank/SSE etc etc etc. Are even the SNP Government aware of such issues and do they know what to do about it? Probably not I fear. All beyond their radar at the minute.

  9. Until we get nationalised gas and electricity why don’t councils negotiate a price with energy suppliers and then users buy through the council. I’m sure the negotiated price could be much lower if done this way. I have heard this being done in the Netherlands.

    • This option has been available since the Utilities were first privatised. If enough households got together to form a Union similar to a Credit Union they could apply to distribute these utilities at a price they could set themselves with or without profit.. These could force the larger For profit Utility companies to start reducing their prices. After all the consumer is only paying for a middle man to read the meters.

    • This option has been available since the Utilities were first privatised.
      If large enough group of neighbours or even a Council got together and formed something similar to a Credit Union they could apply to become an energy supplier. This would allow them to supply the utilities at favourable rates.
      As with everything else it is motivation or a desire to buck the system that is missing.

  10. Nationalisation of the Utilities, although I believe popular with the masses, would be fought against tooth and nail by the vested interests. The industries were only “privatised” because they are a “cash cow” with “suppliers” only providing their services as a “middle-man” who reads the meters. The “Government” acts as “back-up” for any part which is difficult to run at a profit. Take the Railways as an example.
    Most of the “Nationalised” industries were seen as jobs for life and often attracted people looking for a “cushy number” which alongside salaries “needing” to be “at least open market levels” without “open market” penalties lead to the system being abused.
    “Privatisation” has instead led to higher Utility prices with lower costs through lower man-power requirement (job losses).
    The Utilities Services Industry could easily be “nationalised” by everyone signing up to a Government established Services Union.

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