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There are efforts under way in some Iowa cities to encourage the takeover by local government of the private, rate-regulated electric and/or natural gas system now serving that community.
While, on the surface, establishing a new local government utility may seem an attractive option, it is neither realistic nor economically viable in today's new energy environment.
Proponents of such takeovers boldly declare that a newly formed, government-owned utility will provide lower utility rates and better service while "the money will stay home." They mislead others by drawing direct comparisons between Iowa's long-established, decades-old municipal utilities and those that would form sometime in the future.
All of Iowa's 137 government-run electric and natural gas utilities are at least 25 years old, and most of them have been around for 50-100 years. The conditions under which those entities were created in the early years of the 20th century no longer exist.
Today, nullifying the advantages that were once available to older city-owned utilities are: |
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federal limits on municipal bond financing, |
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the absence of low-cost federally subsidized power, |
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the fully built-out nature of today's energy distribution systems, and |
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the new deregulated wholesale power market. |
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The risks and complexity of a takeover increase dramatically when you add: |
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the expenses of lengthy feasibility studies, |
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legal and consultant fees, |
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the costs of purchasing the current system and acquiring new facilities and equipment, |
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the price tag for the generation and transmission capacity the private utility has built or is building to serve its customers, and |
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the 1998 law requiring a new municipal utility to replace the property taxes of the private utility it would displace. |
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