Municipal Electric Utilities Research Articles

Demunicipalization as political process: Strategic action and the sale of municipal electric utilities in the United States

Demunicipalization as political process: Strategic action and the sale of municipal electric utilities in the United States

The Power Grid/Wildfire Nexus: Using GIS and Satellite Remote Sensing to Identify Vulnerabilities

The effects of wildfire on the power grid are a recurring concern for utility companies who need reliable information about where to prioritize infrastructure hardening. Though there are existing data layers that provide measures of burn probability, these models predominately consider long-term climate variables, which are not helpful when analyzing current season trends. Utility companies need data that are temporally and locally relevant. To determine the primary drivers of burn probability relative to power grid vulnerability, this study assessed potential wildfire drivers that are both readily accessible and regularly updated. Two study areas in Idaho, USA with contrasting burn probabilities were compared. Wildfire drivers were obtained and differentiated between the study areas across the 2018–2021 growing seasons. This study determined that mean wind speed, cumulative growing season precipitation, and the mean Normalized Difference Vegetation Index (NDVI) for an area of interest may be reliable indicators of burn probability on a temporally relevant scale. This assessment demonstrates a method and variables that may be utilized by municipal electric utilities, electric cooperatives, and other power utilities to determine where to harden power grid infrastructure within wildfire-prone areas.

Interaction between energy incumbents and solar entrants: Relationship status complicated

This paper contributes to the conceptualization of niche-regime interaction through a retrospective study of the evolution of business relationships between new entrant solar firms and incumbent municipal electric utilities in Sweden. We analyse how activity links, resource ties and actor bonds evolve over time and discuss the resulting interactions. We find that the relationships initially created mutual benefits, combining utilities’ brands and sales channels with solar firms’ technology competences. Most collaborations later turned into conflict due to the solar firms’ strengthened network positions and the clash between their private sector logic and the utilities’ public sector logic. Conceptually, we emphasize (1) changes in the relative importance of different resources (technology-related interactions), (2) decreased alignment of goals, strategies, and values (institution-related interactions), and (3) shifts in the relative power of new entrants vis-à-vis incumbents (network-related interactions). This leads us to question the common association of niches with new entrants and regimes with incumbents.

Determining the efficacy of consolidating municipal electric utilities in Ontario, Canada

Purpose This paper aims to examine empirically if the encouragement by government policy of merger and acquisition activity involving municipal and provincially owned electricity distribution utilities (LDCs) in the Province of Ontario has had positive effects in terms of value creation, operating performance and economies of scale. Design/methodology/approach It was anticipated that with LDC consolidation, there will be increased operational efficiency and improvement in the cost-effectiveness of the merged electrical utility. Using matched pairs dependent t-testing and Wilcoxon signed-rank testing, the authors compared data for three years before and after the merger or acquisition of 16 municipal utilities (616 total observations) to determine if there were any statistically significant changes (positive or negative) in measures of financial, operational and service efficiency. Findings The findings indicate statistically significant increases in debt as a percentage of shareholder equity in post-merger/acquisition utilities and consequently leveraged higher returns on equity. However, there were no statistically significant changes in financial, operational or service efficiency measures (with the exception of decreased efficiency in telephone response). Research limitations/implications A total of 16 mergers or acquisitions were reviewed involving 32 of 79 LDCs, with the research implications pointing to a need for existing policy to be reviewed to determine whether a more detailed examination is required by the provincial energy regulator, including a closer examination of managerial motives, before approving mergers between municipal electricity distributors. This research involves only a quantitative approach and further research would examine these transactions using qualitative measures for a deeper examination as to managerial motives. Practical implications The results suggest that the mergers or acquisitions to date have served only to increase shareholder risk without improvement in other financial, operational or service efficiencies, a contradiction to the rationale behind the Province’s merger policy. Social implications The consolidation policy for Ontario LDCs has not resulted in any statistically significant improvement in electricity rates or service for consumers. Originality/value This paper is the first examination of the effects of Ontario’s LDC consolidation policy in terms of specific financial, operational and service efficiency measures.

A Massachusetts Municipal Light Plant Seizes Internet Access Business Opportunities

This report describes the development and recent expansion of HG&E Telecom, the fiber optic network division of Holyoke Gas and Electric (HG&E) in Holyoke, Massachusetts. HG&E is one of 41 longstanding municipal light plants providing electricity service in Massachusetts, of which 10 offer Internet access and other telecom services to retail customers, and 31 do not. HG&E Telecom competes with Comcast and Charter and serves approximately 300 business customers. It saves the municipality more than $300,000 per year. Its revenue has increased by 10 percent over the past two years and it has expanded into new lines of business. Given that data transport needs are growing while electricity sales are flattening, the record of HG&E Telecom suggests opportunities for other municipal electric utilities across the country, as long as they are in states that haven’t raised barriers to the provision of such services.

Targeting utility customers to improve energy savings from conservation and efficiency programs

Electric utilities, government agencies, and private interests in the US have committed and continue to invest substantial resources – including billions of dollars of financial capital – in the pursuit of energy efficiency and conservation through demand-side management (DSM) programs. While most of these programs are deemed to be cost effective, and therefore in the public interest, opportunities exist to improve cost effectiveness by targeting programs to those customers with the greatest potential for energy savings. This article details an analysis of three DSM programs offered by three Florida municipal electric utilities to explore such opportunities. First, we estimate programs’ energy savings impacts; second, we measure and compare energy savings across subgroups of program participants as determined by their pre-intervention energy performance, and third, we explore potential changes in program impacts that might be realized by targeting specific customers for participation in the DSM programs. All three programs resulted in statistically significant average (per-participant) energy savings, yet average savings varied widely, with the customers who performed best (i.e., most efficient) before the intervention saving the least energy and those who performed worst (i.e., least efficient) before the intervention saving the most. Assessment of alternative program participation scenarios with varying levels of customer targeting suggests that program impacts could be increased by as much as 80% for a professional energy audit program, just over 100% for a high-efficiency heat pump upgrade program, and nearly 250% for an attic insulation upgrade program. Findings are directly relevant for utility program administrators seeking to improve program outcomes.

Joint-Action Efforts Communicate the Value of Public Power

Municipal electric utilities rely upon the good will of customers, commissioners, council members, and other leaders to function well, which requires that they proactively communicate the benefits they bring to the community. Through joint action, Wisconsin's WPPI Energy assisted its 51 member utilities with these efforts, which have received a positive response and enhanced public perception at the local level.

Municipal electric utilities’ role in telecommunications services

Municipal electric utilities (MEUs) are increasingly expanding into telecommunications services. Such entry is interesting in several respects. First, MEUs marry two potential pathways for the growth of telecommunications access infrastructure and services: public ownership of last-mile facilities and electric power company expansion into telecommunications. Second, municipalities are key early adopters of next generation access technology in the form of both fiber-to-the-home (FTTH) and broadband wireless (e.g., WiMax) systems. Third, MEUs are at the nexus of the debate over the proper role for local government in promoting broadband Internet access. Most homes in the United States are served by investor-owned local telephone and cable television providers, using company-owned wireline infrastructure. These providers have generally opposed municipal entry, arguing that it will crowd out private investment and represents an unfair and less efficient form of competition. A number of states have acted to limit—or in some cases—to promote such entry. Before engaging in this debate, it is necessary to have a clearer picture of the current state of municipal entry and the local demographic, cost, industry, and policy factors that influence its evolution. To address this need, this paper reports the results of an empirical analysis of MEUs that provide communications services to the public. This analysis shows that MEUs are more likely to offer such services if they also provide internal communication services to support their electric utility operations (scope economies); are relatively close to metropolitan areas (lower backhaul costs); are in markets with fewer competitive alternatives (cable modem and DSL service availability limited); and which are less encumbered by regulatory barriers to entry (in communities in states which do not restrict municipal entry into telecommunication services). Of these results, the competitive impacts are the least straight-forward to interpret, suggesting richer dynamics and avenues for further research.

Local government broadband initiatives

A growing number of communities across the United States are adopting policies to promote advanced telecommunication services, including broadband access. This paper offers a taxonomy for classifying these local government initiatives and provides preliminary empirical results for a sample of communities with municipal electric utilities 1 1 The database on MEUs and their communications service offerings was provided by the American Public Power Association (APPA), a trade association of public power companies (http://www.appanet.org). In particular we acknowledge the assistance of Ron Lunt, Director of Broadband Services for the APPA, who provided invaluable help in acquiring and interpreting the data. that are in the forefront of efforts to deploy publicly owned communications infrastructure.

Consumer behaviour in restructured electricity markets

AbstractWith many electricity markets around the world now open to retail competition, it is increasingly valuable to understand the attitudes, motivations and behaviour of residential electricity purchasers. Drawing upon two sets of survey results from an Ontario (Canada) community, this paper answers two questions. First, what ‘kinds’ of people are more or less likely to switch electricity supplier? Secondly, what motivates those who are more or less likely to switch electricity supplier? After answering these questions, the paper advances marketing strategies for new retail electricity suppliers and proposes business plans for established municipal electric utilities. Copyright © 2004 Henry Stewart Publications Ltd.

Scale economies in electricity distribution: a semiparametric analysis

We estimate the costs of distributing electricity using data on municipal electric utilities in Ontario, Canada for the period 1993–5. The data reveal substantial evidence of increasing returns to scale with minimum efficient scale being achieved by firms with about 20,000 customers. Larger firms exhibit constant or decreasing returns. Utilities which deliver additional services (such as water/sewage), have significantly lower costs, indicating the presence of economies of scope. Our basic specifications comprise semiparametric variants of the translog cost function where output enters non-parametrically and remaining variables (including their interactions with output) are parametric. We rely upon non-parametric differencing techniques and extend a previous differencing test of equality of non-parametric regression functions to a panel data setting. Copyright © 2000 John Wiley & Sons, Ltd.

Generation Business Strategies and Risk Assessment among Municipal Electric Utilities in California

MUs must determine their position along a risk spectrum that ranges from actively owning and managing generation assets to adopting a more passive role as a load aggregator that reduces risks and potential financial rewards to the city.

LCP/IRP strategy development using an optimising energy-emission model

This paper proposes an energy-emission modelling approach for the development of least-cost planning and integrated resource planning strategies for electric utilities, and presents results of the model application to the municipal electric utilities of Karlsruhe and Rottweil. The LCP/IRP strategy employed is based on the regulatory practice in Germany, also with regard to liberalisation issues. Furthermore, emphasis is given to the adequate modelling of demand-side management (DSM) programmes, including their effects on electricity generation, capacity expansion and electricity purchase. The results show that selected DSM programmes in the household sector lead to a cost-effective reduction of electricity demand. When ecological considerations, such as a reduction of carbon dioxide emissions, are included, the cost of electricity generation increases, as does the potential for DSM savings. However, when a revenue-based approach is used, it is evident that extrinsic economic incentives for DSM need to be given by, for example, regulatory authorities.

The establishment and transformation of municipal electric utilities

Passage of the Energy Policy Act and consequent actions by FERC to open access to the bulk power system have stimulated new interest in establishing municipal utilities and expanded opportunities for existing municipal utilities to pursue alternative power suppliers. But the issues remaining in the path of munis—a potentially high stranded cost burden and the difficulty of securing or developing a distribution system—make it unlikely the near future will see significant growth in their numbers.

Probabilistic production costing under integrated operation agreements and joint power agency financing

Municipal electric utilities have the options of either remaining captive markets for adjacent larger utilities or acquiring transmission and generation capacity. Utilities pursuing the second option continue to rely, often for decades, on purchase agreements with adjacent larger utilities, while financing construction both independently and through joint powers agencies. This paper extends the method of probabilistic production costing for electric utilities to the case of an ‘integrated operations agreement’. The results of probabilistic production costing are combined with a financial model of publicly owned utilities, generalized here to include the case of ‘off balance sheet’ financing via joint powers agencies.

Municipal/Utility Synergy: Opportunities for Partnerships

There has always been a good rapport between the State Urban Forestry Assistance Program and Ohio's public and municipal electric utilities. As stakeholders in the urban environment, we have mutually attainable objectives that afford us the opportunity to develop sustained partnerships in which to facilitate the proper management of the urban forest resources.

An Examination of the Effect of Ownership Form on Price Efficiency: Proprietary, Cooperative and Municipal Electric Utilities

Recent works by De Alessi [5; 6], Furobotn and Pejovich [10], and Demsetz [7] suggest that the different structures of property rights conveyed by different institutional arrangements result in cost-reward distributions which affect economic outcomes systematically. Privately owned, profit maximizing firms which are regulated are subject to a profit constraint which weakens the owners' property rights. The consequences of the profit constraint are possibly very significant. If the property rights of the owners are reduced by an effective constraint on profits, the owners have less to gain from increased economic efficiency, and managers may have more flexibility in increasing their own personal utility. Private ownership has generally been equated with profit maximization as the objective of the firm, while public ownership has been equated with objectives other than profit maximization. An entire class of firms, the cooperatives, have been virtually ignored in the literature. Cooperatives, while privately owned, presumably do not seek to maximize profits. Since cooperative firms lie along a continuum between proprietary and municipal firms, they offer an unusual opportunity to separate the effect of ownership form from the profit maximization objective. Most of the literature dealing with the economic effects of ownership form has contrasted publicly owned presumably not-for-profit municipal utilities and privately owned presumably profit maximizing proprietary utilities. While substantial theoretical and econometric problems exist in the area, it appears that municipals are less economically efficient than the proprietary utilities.

Tax Equivalents of Municipal Electric Utilities in Minnesota

Tax Equivalents of Municipal Electric Utilities in Minnesota