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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

#321

Post by crazygringo »

Affric wrote: post #278
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…

> “the tax payers are being ripped off as asset owners because once the debt incurred to pay for the energy system is cleared they just give out cheap electricity and don’t seek profit. It is more efficient to sell, reinvest, and then let some massive rent seeker over charge you for something you once owned” The economists who argue for this, only slightly paraphrased.

I have never heard a serious argument that it is more efficient to sell and reinvest from a finance perspective.

The argument is generally that private companies are more productive than public services due to productivity improvements that are forced via competition. There's no such forcing function for a government-provided service, enabling (potential) waste and bloat, depending on governmental competence and oversight.

The correct counter-argument is that there needs to be competition for that to happen. If you have only one electric utility for customers to choose from, the argument is totally invalidated.

Re: Cities can cost effectively start their own utilities

#323

Post by kelseyfrog »

xerox13ster wrote: post #276
kelseyfrog wrote: post #84

Of course it's cost effective for cities to start their own utilities, the economies of scale work in favor of urban and suburban electrification and maintenance. What isn't effective is electrification and maintenance of low density regions although power monopolies like PG&E are required to provide service. The urban and suburban customers are effectively subsidizing the cost of transmission and maintenance for rur…

Suburbia is subsidizing nothing. They are a drain on the urban core of every single city. There is not enough density in a suburban land area to even reclaim the taxes required to build the infrastructure to get there. And we stupidly continue to build new suburban development for new tax bases that don’t even reclaim the cost of building them. Then there’s no money to maintain them. Urban development subsidizes ever…

I hate suburbs as much as the next person, but let's be realistic. Just because I hate them doesn't mean they aren't subsidizing rural power transmission - that would be letting emotions get in the way of rationalism.

Re: Cities can cost effectively start their own utilities

#324

Post by pclmulqdq »

sidewndr46 wrote: post #165
pclmulqdq wrote: post #162

Earlier quoted context omitted.

It sounds like your city was overprovisioned in terms of how much electricity they could supply, and you had the benefit of the cheapest power around (hydroelectric power is very cheap), so when you got plugged into the wider network that the power company was servicing, you got screwed. There's a good chance that power for neighboring towns got cheaper and/or more reliable after the deal given what happened with you…

its extremely unlikely that a town in Michigan was not connected to the Eastern grid

Whether they were connected and whether they were selling the power are two different questions.

Re: Cities can cost effectively start their own utilities

#325

Post by theGnuMe »

zmgsabst wrote: post #234
krallja wrote: post #210

Earlier quoted context omitted.

Californians blame it all on Enron, but that can't be the only reason, right?

The Enron scandal was 24 years ago, which is a generation ago — almost two. I’d guess the problem is more endemic to their political system.

The deep Texas freeze was the same thing.

Re: Cities can cost effectively start their own utilities

#326

Post by Empact »

animal_spirits wrote: post #147
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.

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…

Services subject to natural monopolies are good candidates for being run cooperatively, by / on behalf of the market participants, so that there is not the incentive to extract rents via market power. Government-run may be practical from e.g. a fundraising perspective, but these services could be run wholly privately as co-ops.

Re: Cities can cost effectively start their own utilities

#327

Post by fooqux »

maxerickson wrote: post #297
pclmulqdq wrote: post #162

Earlier quoted context omitted.

It sounds like your city was overprovisioned in terms of how much electricity they could supply, and you had the benefit of the cheapest power around (hydroelectric power is very cheap), so when you got plugged into the wider network that the power company was servicing, you got screwed. There's a good chance that power for neighboring towns got cheaper and/or more reliable after the deal given what happened with you…

One potential reason I can come up with is the dam aging and becoming a liability. The town may also have been putting other revenues towards the electric utility (so losing money on the service and billing). It was probably just a mistake though. My town charges about $0.11 per kwh, with a fixed monthly service fee making the effective rate for a small user closer to $0.20.

I think you're spot on. Damn failures are on the rise, and usually it's due to the simple fact that maintenance is expensive and everything has a shelf life. A lot of these dams were built during the same time period and the cost to replace / maintain the aging infrastructure is tough for small communities to swallow. And they're all coming due at roughly the same time.

Selling to a larger company who hopefully has the capital to fix them seems like a bargain when compared to the cost of replacing a hydro dam (or even replacing it with a non-electric generating dam).

Of course, that does come at a cost, and it's probably spread across all rate payers.

Re: Cities can cost effectively start their own utilities

#328

Post by gottorf »

tokioyoyo wrote: post #98
chasd00 wrote: post #83

Earlier quoted context omitted.

City municipalities aren’t exactly staffed with the sharpest knives in the drawer. Few have the ability to manage the basics of street maintenance let alone stand something up like a utility. A fool and their money are soon separated, color me skeptical.

That just sounds like a mismanaged city? Like obviously it might go wrong as well, just like how a private company might not have the sharpest knives.

Usually, for a private company, there is a forcing function (profit and loss) that incentivizes the management to ensure the knives are at least functional. Public employment doesn't have the same forcing function, and runs the risk of turning into a jobs program for the otherwise unemployable or a patronage network.

Of course, none of this is exclusive to one or the other.

Re: Cities can cost effectively start their own utilities

#329

Post by Der_Einzige »

andy_ppp wrote: post #271
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…

You can extrapolate this to why governments all over the world are effectively bankrupt, if you have no assets and instead rent them back from the rich it's extremely difficult to balance your books and the tax burden will go up forever. No amount of cost cutting will restore all public assets being owned by someone else and rented back at ever increasing costs. https://www.youtube.com/watch?v=II1GOhoNpms

The only governments which are not "bankrupt" are shitholes like Russia (and they only did it to prevent sanctions from harming their economy).

A healthy debt to GDP ratio (like what the USA has) is integral for a growing economy. Choke on it Austrians.

Re: Cities can cost effectively start their own utilities

#330

Post by massysett »

mattmaroon wrote: post #286
ericmay wrote: post #142

Earlier quoted context omitted.

How does it work in relation to the person you replied to? Genuinely asking.

Power companies in almost all cases don't supply power directly to homes. They supply it to the grid, and the grid supplies to homes. In states that are de-regulated, you pick your power company, you don't pick the servicer, and both charge you a fee. You pay one fee to the generator, one to the grid operator. (It may be rolled into one bill, but it could be going two separate places). The generator must sell to the…

Excellent explanation of all this:

https://youtu.be/sH1PVVJuBtE?si=EK4-rmq4CUxw0ttU

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