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Cities can cost effectively start their own utilities

kevin.burke.dev

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Re: Cities can cost effectively start their own utilities

#241

Post by kevinburke »

calvinmorrison wrote: post #231

Philadelphia has repeatedly killed people due to aging infrastructure. They have wooden pipes 100 years old. Half my block caved in due to a sewer collapse. They estimate all the current backlog of pipes will be done in 100 years. Yes you can start it, but should we bow to political pressure to put off maintaining infrastructure? No. There's a real cost to maintain this stuff. But a political force doesn't want to ra…

This has not been the case with the three operators in the Bay Area - Santa Clara, Palo Alto, and Alameda.

Re: Cities can cost effectively start their own utilities

#242

Post by dgoldstein0 »

forgetfreeman wrote: post #194
animal_spirits wrote: post #147

Earlier quoted context omitted.

I think one problem is that most people confuse private ownership with "the market". Just because a utility company is owned and operated by a private entity does not mean it is influenced by market forces. Utilities fall under a natural or technological monopoly. Due to space constraints it is not desirable or efficient to have multiple companies run pipes, cables, or other infrastructure alongside each other to com…

I think a related thing that many people get confused by is the idea that market forces even exist. It's very rare these days to find industry segments where participants actively compete on quality or price. The whole idea is a holdover from how business was done 40 years ago.

market forces do exist. But it varies highly from industry to industry and product category to category.

Food: - restaurants definitely compete with each other, mostly in each local area - and within that, different slices of the restaurant business more directly compete, e.g. fast food is more competing with each other than fine dining. - BUT: we have a huge problem with a lack of competition in the supply chain driving prices up for everyone, at least in the US. - Groceries are similarly impacted by supply chain monopolies

Smartphones: high end smartphones are a oligopoly: - Apple vs Samsung vs HTC and several other tech companies producing phones; Apple definitely commands quite a bit of a premium, as do some of the nicer Android phones. But on the whole, the companies really are fighting to one-up each other with better features, battery life, etc. - quality is improving, even if the price is over-charging vs the ideal competitive market. Low end phones are even more fiercely competitive

Other electronic categories seem to show decent market dynamics; headphones, earbuds, usb peripherals, keyboards, etc. all seem very commoditized; there certainly are brands that try to command a bit of a premium based on reputation / marketing, but the cheap options are often good enough and definitely have a very competitive market. Big electronics like GPUs and gaming consoles though I think it's easier to start considering market distortions due to more monopoly power.

Of course there are no shortage of monopolistic practices out there, e.g. for utilities, collusion on rent, online retail (Amazon), textbook prices, medical care & pharmaceuticals, and even more mundane things like frozen potatoes and chicken.

---

The thing that bothers me most with the simplistic view that "the market will do it better" is that the whole premise of market forces giving the most efficient price assumes that (a) a commodity is being traded by (b) a large number of buyers and sellers, none of whom have any significant share of the market. Many markets either (a) aren't trading a commodity (e.g. iPhones and Android phones aren't interchangeable so Apple can command a premium price) or (b) have consolidated buying or selling to the point that they don't have the large number of independent buyers or sellers necessary to have the price be set by market dynamics rather than the monopolist or monopsonist. And the people promoting "let the market fix it" either are too dumb to realize that, or more likely are letting their rich friends make a quick buck or want to score political points by promoting smaller government.

Re: Cities can cost effectively start their own utilities

#243

Post by pfdietz »

eldaisfish wrote: post #229
pfdietz wrote: post #164

Earlier quoted context omitted.

This is where distributed renewable sources can apply. Supplying a remote home with solar and storage is probably cheaper than running a distribution line to it.

if your needs are fairly basic, sure. As soon as you add modernity, solar and storage for every house/region is cost-prohibitive.

The average residential electricity rate in CA is $0.34/kWh. In these problematic locations, I'd expect the cost to be even more than this. Ground mount PV would be suitable here, so there would not be great problems with scaling. I think a PV + battery system should be competitive regardless of "modernity", whatever it was you meant by that.

To put numbers on it: for a 12 kW system in Chico, CA (a location at ~40 degrees N I chose arbitrarily) the NREL calculator at https://pvwatts.nrel.gov/pvwatts.php gives annual generation of 18500 kWh (40 degree inclination). For a lifespan of 20 years at $0.34/kWh this is $125800 worth of electricity. A 12 kW + 16 kWh LFP battery system costs something like $36K (+ installation and financing).

Re: Cities can cost effectively start their own utilities

#244

Post by kevinburke »

bunabhucan wrote: post #216
kevinburke wrote: post #177

Earlier quoted context omitted.

I'm the author here. The cost savings come from not having people who live in cities pay for undergrounding lines and maintaining power lines in rural areas. Maintaining the city networks is much cheaper. This is why Santa Clara, Palo Alto and Alameda's power companies can deliver power for half of what PG&E can. You can just copy their cost structure.

You said in the article "PG&E rejected this offer for being too low" but then proceed to use that as the baseline cost that drives the rest of the estimates, that doesn't make sense. If I offer someone minimum wage to do my job and they refuse, I don't start a spreadsheet to calculate my savings. Boulder CO tried municipalization with Xcel and the gap between the city offer and Xcel position was very large. How do yo…

This is why I adjusted SF’s offer for population and then multiplied it by 50%, then used 400 million as the base for financing.

Financing at 4% interest is not the expensive part though. Even if the price was $1 billion it would be 6 cents per kWh.

I agree it would be bad if they had to fight in court for a decade! But you have to start somewhere and as I mentioned you might get a good outcome just from threatening to do it. My hope is the CPUC would force them to accept some offer.

Re: Cities can cost effectively start their own utilities

#245

Post by szundi »

rmason wrote: post #86

I used to live in a small town in Michigan which had city provided power using a dam. It was inexpensive and highly reliable. But every couple of years the big power company in the state would try and get the city to sell them the utility. After I moved a city council for whatever reason ended up selling. As a result the cost of electricity immediately doubled and power outages occurred regularly due to reduced maint…

These politicians are smart enough and can see through the first layer of obvious. They wanted to win the next election and this had nothing to do with that, but the money they could spend on shiny bullshit. Or they just got consulting jobs after losing it, nah, who cares. Was it theirs or what.

Re: Cities can cost effectively start their own utilities

#246

Post by jncfhnb »

ty6853 wrote: post #187
sgarland wrote: post #161

Earlier quoted context omitted.

This has to be the most confidently incorrect take I’ve ever read here. The Rural Electrification Act not only brought power to rural areas, but also jobs to Americans when they were most needed, and countless follow-on benefits: increased farm productivity, longer lifespans and higher quality of life, etc. It’s also not that subsidized compared to many other industries; the entire point of co-ops is purchasing somet…

Its hilarious city folks think rural power is subsidized. I recently extended a line about 1000 feet. For this, I paid $13000 -- primary transmission, poles, anchors, electricians, transformers, all at full rates. And it was a required donation, as in the power coop owns everything and it goes on public easement on to the next guy when they extend from mine. When they finished, I worked myself silly digging secondary…

The cost of installing that stuff is way more than 13k

Re: Cities can cost effectively start their own utilities

#247

Post by locallost »

simoncion wrote: post #167
locallost wrote: post #45

Earlier quoted context omitted.

This can't be true. Every month?? How many kwh per month do you use, and on what?

I pay $200 per month in electricity costs. I live in a small San Francisco apartment. I have two laptops, two desktop machines (only one of which has a video card in it), two monitors, some ethernet switches and WiFi APs, a fridge, a microwave oven, and two ceiling fans. My heat (for both air and water) is provided by the building's boiler and is included in the rent, rather than the utility bill. My stove and oven b…

I can't see it, even with heating, as it's California. Even at something outrageous like $1 per kwh it's ~1000 kwh per month (I suppose PG&E takes some fixed costs like everyone else in the world). For comparison we're a family of four and just got our final bill for 2024, we were at 1500kwh for the whole year (more or less the same for years now).

Even yours is weird. I don't have a desktop computer running but we cook or bake with electricity every other day. I do realize we spend a lot less than other people, every time I check the prices and estimates if I want to switch the companies estimate 2500kwh for two people. So there's that.

Re: Cities can cost effectively start their own utilities

#248

Post by animal_spirits »

forgetfreeman wrote: post #194
animal_spirits wrote: post #147

Earlier quoted context omitted.

I think one problem is that most people confuse private ownership with "the market". Just because a utility company is owned and operated by a private entity does not mean it is influenced by market forces. Utilities fall under a natural or technological monopoly. Due to space constraints it is not desirable or efficient to have multiple companies run pipes, cables, or other infrastructure alongside each other to com…

I think a related thing that many people get confused by is the idea that market forces even exist. It's very rare these days to find industry segments where participants actively compete on quality or price. The whole idea is a holdover from how business was done 40 years ago.

Market forces do exist. I'm not sure why you think they do not. You are plain incorrect to claim that it is the exception for industries to compete on quality and price, at least in the U.S.

Re: Cities can cost effectively start their own utilities

#249

Post by hgomersall »

wisty wrote: post #160
treyd wrote: post #139

Earlier quoted context omitted.

It's the end state of neoliberal policies . That's the ideological tendency that actually has the obsession with markets and strangling government capacity to do anything other than be a spigot for tax dollars. Scandinavian social democracies aren't perfect but they don't suffer from these entirely predictable problems to nearly the same degree.

Neoliberalism fails because of what economists call "the theory of the second best". Neoliberalism fundamentally assumes that the best practical system is as close as possible to an ideal free market, but it's not, due to local minima (often ones we've already found!) often being better. The best system is a free market, if possible. But the second best system may not be close to the best system, it may be a local mi…

It fails fundamentally because the underlying economic theory is built on a sink hole and constructed from cheese. There's pretty much no relation between the models that espouse neoliberal policies and reality, except those bits that were too egregious to ignore so were patched in as afterthoughts.

Re: Cities can cost effectively start their own utilities

#250

Post by cscurmudgeon »

tmnvix wrote: post #105
rmason wrote: post #86

I used to live in a small town in Michigan which had city provided power using a dam. It was inexpensive and highly reliable. But every couple of years the big power company in the state would try and get the city to sell them the utility. After I moved a city council for whatever reason ended up selling. As a result the cost of electricity immediately doubled and power outages occurred regularly due to reduced maint…

Perhaps I'm too cynical, but somehow I doubt that those with decision making power that were in favour of selling at the time regret much. Our modern political economy is almost entirely focused on ensuring that everything that can be sold to private entities (read, the market) is. In this ideology the sale would be viewed as a success regardless of any practical downsides.

Don’t blame this on the market. A true market won’t have a heavy handed regulator in bed with a govt approved monopoly.
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