Public power sparks debate near and far

Hermiston’s shift shows challenge, rewards of utility ownership

By Don Hamilton

The Portland Tribune, Jun 24, 2003, Updated Oct 30, 2009

Seven years ago, PacifiCorp shut down many customer service operations in Hermiston and replaced them with a toll-free telephone number.

That didn’t go over well, and within a few years, the town of 14,000 had acquired the company’s poles and power lines and opened a city-owned utility, Hermiston Energy Services.

Today, about 4,000 customers pay rates 2 percent or 3 percent lower than they were under PacifiCorp, even when counting debt payments on the $8 million purchase price.

“If you can pay less to buy your house than you would to rent it, why wouldn’t you buy it?” said Ed Brookshier, Hermiston’s city manager.

A combination of events, among them increasing electric rates and decreasing customer service, are creating fertile political conditions for local acquisition of the local power company. And not just in Hermiston or Portland Ñ where the city is trying to buy Portland General Electric in the wake of parent Enron Corp.’s bankruptcy Ñ but all over the country.

In the last year, similar efforts have taken place in California, Florida, Montana, Massachusetts, Nevada, Wyoming and South Dakota. Circumstances were different in each town, and, for their own reasons, not all efforts succeeded. But the acquisition attempts all began as part of a search for lower rates and better service.

During the last year, the American Public Power Association saw a jump in the number of queries it received from local governments trying to learn how to own a local utility, said Deborah Penn, the association’s vice president.

More than 100 such inquiries came to the group, which represents publicly owned power companies. It doesn’t know how many of them actually led to a transaction, but the number of queries went up after the collapse of Enron and the Western power crisis of 2001.

Nonpublic customers pay more

Here are some quick numbers about publicly owned and investor-owned utilities:

• There are 232 investor-owned power companies serving 73.5 percent of all U.S. electricity customers

• The 2,008 publicly owned utilities Ñ both municipally owned and public utility districts, or PUDs Ñ serve 14.4 percent of customers. The majority of them, about 1,200, are found in towns of 10,000 people or less.

• The 889 rural electrical cooperatives serve 11.9 percent of customers.

• Oregon is home to 19 electric cooperatives, 12 municipals, 11 PUDs and three investor-owned utilities: Portland General Electric, PacificCorp and Idaho Power.

• The three private companies operating in Oregon serve 73.1 percent of the state’s electricity customers.

Many cities own utilities, among them Seattle, Eugene and Tacoma, and Sacramento and Los Angeles in California, with some of the operations dating to the late 19th and early 20th centuries. McMinnville opened Oregon’s first city-owned utility in 1889, only 10 years after invention of the light bulb.

Many municipals and electrical cooperatives sprang up a century or more ago, most commonly in remote areas ignored by private companies. Public power operations took off in earnest in the 1930s when Congress gave them preferred rates from the Bonneville Power Administration to ensure that electricity reached rural areas and the general public.

These days, public power can be controversial.

Publicly owned power companies say they can usually offer lower rates, don’t pay federal income taxes, can issue tax-free bonds, operate locally and can put profits back in the operation and not toward big salaries or stock dividends.

Residential customers of investor-owned power companies paid an average of 16 percent more for electricity than customers of municipals or PUDs, according to the Public Power Council, based in Portland.

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