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Price volatility is a never-ending issue. The city would have to develop expertise in hedging and buying electricity in volatile wholesale energy markets. |
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Long-term contracts sound nice, but they just aren't available at better rates without increasing the risks. For example, contracts with attractive long-term pricing often come with a trade-off such as interruptibility, which means power can be shut off at peak demand. |
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Any increase in prices would have to be approved by the Iowa Utilities Board. City residents would lose this regulation and price protection under a government takeover. |
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The city can't guarantee lower rates; in fact, electric prices could well be higher. |
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The facts are that some city utilities have higher rates. It's misleading to suggest that a city-run utility necessarily would have lower rates. Most of those with lower rates were established more than 25 years ago when things were very different. |
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Local distribution (wires and meters) and customer service make up only about one third of electric bills, so any opportunity to realize savings is very limited. |
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The opportunity for savings is even smaller when you add up the additional expenses: long-term debt, consultants, legal fees, regulatory proceedings, a new labor force, ongoing operating and maintenance costs, future capital expenditures and the legal mandate to replace property taxes. |
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Another potential expense is reimbursement for "stranded costs," including billions of dollars of investments in new power plants in Iowa. |
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Completing a government takeover is a long, expensive and complicated process.
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It is just not practical for the city to build its own power plant. They are too expensive today, partly because of environmental requirements. Cities with power plants built them and paid for them many years ago. |
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Not only would the city have to buy power efficiently, it would also have to find reliable suppliers who would keep electricity flowing during the summers. |
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The city would also have to hire and manage highly skilled line workers (who are hard to find and make more than $60,000 a year). |
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In an emergency like an ice storm, a city utility that gets outside help has to pay for it. |
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To ensure reliability, the city would also have to buy and maintain its own fleet of special trucks. One aerial bucket truck can cost more than $130,000.
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The city should focus on what it does best - things like streets and roads and police and fire and sanitation and parks. It has no experience in electric service. |
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Don't be fooled by those who say a government utility would be a cash cow. It is unlikely that money would be left over to fund swimming pools and community programs. Even if that were possible, it's questionable to pay for city services through a hidden tax in electric bills. |
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It's more than taking over poles and wires. The city also would have to provide:
- A round-the-clock customer call center, with high-volume answering technology during storms and backup equipment for emergencies.
- A 24-hour control center with high technology and expert supervisors.
- Meter reading, billing, line service and dispatch capabilities.
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The bottom line is that electric services are just too essential to put at risk. |
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