2301 M St. N.W.
Washington, D.C. 20037-1484
202/467-2900 fax: 202/467-2910
Local Control: Public Power's Defining Characteristic
June 21, 1999
Good morning, and welcome to the APPA Annual Conference.
I suggest we pause for just a moment to consider what a significant event this is for public power and APPA. While the calendar doesn’t technically agree, most people would regard this as our last conference of the decade, the century and the millennium. But it is definitely not public power’s last conference.
Individually and collectively we are stronger today than ever before. We have risen to the practical, economic and political challenges of restructuring. And new public power leaders and new public power systems are emerging. They will help us carry the message of how public power benefits all electric consumers well into the next century.
Your persistence and perseverance has come as a surprise to our critics and competitors alike. Not long ago, industry pundits, ideologues, and a host of other opponents were predicting our demise.
Despite their hopes and desires, public power is not only surviving through this monumental transition of our industry, it is thriving.
Three years ago at our annual conference, there was an aura of concern. What was the role of public power? What was our place in a restructured industry? Would we be leveled by calls for the proverbial, but unattainable, level playing field? Two years ago, that concern was turning to cautious optimism. Last year, caution was turning to confidence. It was in the air. As APPA President Walter McGrath pointed out a moment ago, your optimism has even infected the hard-nosed analysts in the New York rating agencies.
That optimism doesn’t exist in a vacuum. It is grounded in your own assessment of what it takes to make it through this transition, and then acting on that assessment to prepare for the future.
Public power communities continue to reject calls to privatize their systems. And despite the obstacles placed in their path at the local, state and federal levels, interest in creating new public power systems continues to grow.
Earlier this year, the Long Island Power Authority celebrated its first anniversary. This new public power system, the third largest in the country in terms of customers served, is bringing the benefits of lower cost and better service to millions of people on Long Island. These have been, are and will continue to be the hallmarks of public power.
More communities today than at any time in the past few decades are actively exploring the public power option. Tomorrow morning you will hear from a representative of the Long Island Power Authority, along with the Mayor of Las Cruces and a city manager from Alma, Michigan, two communities in the process of establishing their own public power system. They want to tell you why public power is in their future.
There are lots of reasons why public power should be in their future, and in the future of other communities looking at this option, from Long Beach, California, to Buffalo, New York, from Portland, Oregon, to Wichita, Kansas, and lots of cities and towns in between.
Our record of lower rates and better service is outstanding. We provide faster response to outages. We have been an engine for economic development in the communities we serve. We have offered innovative solutions to local problems. More than a century ago, we brought the miracle of electricity to cities and towns across the country. Today, many public power systems are following the same model, bringing 21st century communications technologies to their communities.
This is a record to be proud of. But it doesn’t quite answer the question – why now? Why are there so many communities across the country that want to obtain what those in this audience already enjoy – public power?
A public power advocate in Portland, Oregon offered the best answer. "With all the madness of deregulation," he said, "it is my view that the best thing the city (Portland) can do is gain as much control of its energy future as it can."
Local control. That is what it is all about. It is the defining characteristic of public power. Local political control is the one factor that has differentiated us from other types of utilities for more than a century. It distinguishes us from private power, and from private, consumer owned rural electric cooperatives. Local control will continue to be the single most significant feature that defines and differentiates us from all of our competitors as we move into the next century.
Public power is local democracy at work. Through the democratic process, communities have the undeniable basic right to meet their own needs.
This principle has long been recognized. As presidential candidate Franklin D. Roosevelt said in a campaign speech in 1932 "where a community – a city or county or district – is not satisfied with the service rendered or the rates charged by the private utility, it has the undeniable basic right, as one of its functions of Government, one of its functions of home rule, to set up, after a fair referendum to its voters has been had, its own governmentally owned and operated service."
This idea did not originate with Roosevelt and his New Deal. Public power has been around since 1882. And the strength and significance of this concept has not dissipated in the decades since. Most Americans today believe in the importance of local control, despite changes in our political landscape.
Is public power an appropriate role for local governments? Seventy percent of the respondents to a public opinion survey conducted earlier this month by two well respected public opinion polling firms, Fabrizio, McLaughlin & Associates and The Mellman Group, said yes, it is. And most of the respondents to this survey are served by private power companies.
This sentiment crosses political and ideological boundaries. Sixty five percent of the Republican respondents and 66 percent of those who identified themselves as "conservatives" agreed that public power is an appropriate function of local government. Ideologues who try to paint us into a partisan corner are out of touch with the average American.
There is, of course, a determined minority who for ideological or economic self interest reasons, oppose public power.
The ideologues are convinced that governments should not be in the electric utility business. Most Americans disagree. Americans are pragmatic. What works is what counts, and public power is an American tradition that works. When asked whether they favored an all public, all private or mix of both types of electric utilities, 56 percent of the respondents to the Fabrizio/Mellman poll favored a mix of public and private, 25 percent favored all public power. Only 13 percent favored all private.
And then there are the big private power companies (growing bigger month by month). They know we have lower rates, superior performance, and local community orientation. That scares them, and they are doing whatever it takes in Congress to use their political power to wipe us out. Not since the 1950s have we seen such an onslaught of anti-public power advertisements.
A group called Citizens for State Power, undoubtedly funded in large part by large private power companies, has slandered you, the leaders of public power. They say you are pirates who steal from the U.S. Treasury. They say you are representatives of corrupt city hall operations, profiting at the expense of others.
Recently a new coalition, Taxpayers for Tax Equity, has launched its own campaign to wipe out "Big Government Utilities." Maybe they don’t realize that even the biggest public power system, Los Angeles Department of Water and Power, is relatively small when compared to the private power company, Southern California Edison, that completely surrounds it. Maybe they don’t realize that the median size public power system serves about 1,700 metered customers. Or maybe they just don’t care.
In a blitz of advertisements targeted at policy makers in Washington, the Taxpayers for Tax Equity are pleading with Congress to get public power off the backs of taxpayers. They call for the enactment of legislation introduced by Rep. Phil English, a Republican from Pennsylvania. The English bill would tax your revenues, and deny you access to tax-exempt bonds.
Interestingly, the Taxpayers for Tax Equity is comprised of "tax reform" groups, most if not all of whom oppose tax increases of any sort. Yet they want to tax your revenues.
These are private organizations, so it is difficult to find out who provides their financial support. They won't reveal their source of funds. Chances are, were they to do so, it would be quite embarrassing. But the odds are there is a lot of private power company money behind these anti-public power activities.
Private power clearly has the money to spend. Over the past two years, the Edison Electric Institute and a few of the giant private power companies spent over $64 million on lobbying activities. That amounts to $120,000 for each and every member of Congress. Not every dollar was focused on anti-public power activities. But a lot of it was. The collection of consultants under contract to EEI and the major IOUs is a virtual who’s who of Washington power brokers. And of course, we can’t trace the massive amounts of money that continues to flow to these bogus "grassroots" organizations like the Citizens for States Power or Taxpayers for Tax Equity.
Not all the IOU activities are so well hidden. Giant private power company fingerprints, for example, are all over an anti-public power policy statement prepared by a task force of the U.S. Chamber of Commerce. Ten of the 18 members of this task force represent private power companies. It came as no surprise, then, when we learned that the task force resolution would put the U.S. Chamber of Commerce squarely behind the English bill, and in support of taxing public power revenues.
Earlier this month, the U.S. Chamber of Commerce Board of Directors, which incidentally includes the president of the Edison Electric Institute, approved this policy resolution. If you disagree with the U.S. Chamber’s position, I urge you to work with your local and state Chambers to register your opposition.
The U.S. Chamber of Commerce is an influential organization in Washington. But its credibility on this issue has taken a serious blow. The Chamber’s process was so one-sided, so private power company-oriented; that it has brought down a firestorm of protest from members of the Chamber excluded from the process. One member of the Chamber complained that the draft position reflects "a pro-monopolist mindset that hurts small business." Influential House Republican leaders have also registered their displeasure with the draft policy statement and the undue influence of the private power companies that drafted it.
While the complaints regarding the Chamber’s policy did not focus on the anti-public power section of the statement, it is apparent that all of these critics have recognized what a pervasive, indeed perverse, influence giant private power companies have had on the process.
There are silver linings in this dark cloud of IOU dollars and political muscle.
For example, the U.S. Chamber, an influential voice in Congress on many issues, has lost a lot of credibility on this issue because it has clearly been captured by private power company interests. With the help of local Chambers in public power communities, we can counter the opposition of the national organization.
In addition, the IOU proposal that Congress should tax revenues of state and local governments has mobilized our community like nothing else could, and has brought to our side like-minded organizations such as the National League of Cities, the National Conference of State Legislatures, and the National Governors Association. It has made us, and our allies, more determined than ever to repel this challenge.
The current challenge to public power has come about in large part because we need the U.S. Congress to change tax code provisions that govern how we can use electric utility facilities financed with tax exempt bonds. Asking Congress to pass legislation is an invitation to counterattacks by our opponents, who want to advance their own agenda. Taxing public power revenues is a long-standing objective of private power companies, and today they see an opportunity to advance this old, and still bad, idea.
Tax-exempt bond financed generation and transmission facilities are governed by "private use" rules. These rules hamstring us in dealing with a more competitive utility environment, and must be changed to give us the flexibility we need to deal with changes in our industry brought about by state restructuring initiatives. We are not seeking a competitive advantage, as our critics allege. We are simply trying to address a very real problem in a way that protects our investors, our communities and our consumers. And we are trying to do it in a way that is fair to all concerned.
Senator Slade Gorton has been instrumental in developing a resolution to this problem that really is a compromise. Frankly, it is more of a compromise than many public power systems want. But we can see the equity in what he has proposed, and we are willing to accept it.
But we can not and must not accept the price the giant private power companies and their allies are demanding. We must not accept the proposition that, because some members of the public power community need changes in the tax code, all members of this community must pay a penalty of taxes on our revenues or the elimination of tax-exempt financing for local electric utility infrastructure facilities. That price is too high. That price is unfair. We must protect our local control of these fundamental elements of public power. And that is precisely what Senator Gorton has proposed.
Critics contend that the Gorton bill is unfair because it does not force public power to play by the same rules as private power. The response to that is, why should we? Public power is not just another type of electric utility. Public power systems are units of state or local government subject to their own unique set of rules, such as sunshine laws and open record requirements. All things considered, the rules that govern our behavior are far more protective of the interests of consumers than the regulatory controls imposed on private power companies in a sometimes futile effort to control their greed. Perhaps they should play by our rules.
Walter McGrath thanked you for a number of things in his comments. I want to add my thanks for your overwhelming support for APPA’s Campaign for Local Control. We don’t need $64 million to deal with this problem. We have a resource that is every bit as potent as money if properly organized, motivated and utilized. It is our grassroots. That, after all, has always been our strong suit.
To organize our grassroots, APPA needed seed money. And you were generous enough to provide it. With modest contributions from public power systems from across the country, we have put in place a program that is focusing the political support from the grassroots level on elected officials in Washington, D.C. Over the past few months, we have embarked on a concerted effort to obtain letters from elected officials and utility managers, formal resolutions from your governing boards and city councils, phone calls to and visits with your members of Congress. And we have engaged in activities to enlist the support of organizations from across the political spectrum to help us resolve this problem.
Your efforts have been impressive. Every week, more Senators sign on as cosponsors of the Gorton/Kerrey Bond Fairness and Protection Act, and additional Congressman lend their support to the identical bill in the House sponsored by Representatives Hayworth (R-AZ) and Matsui (D-CA). These lead sponsors in this effort, and the cosponsors who have joined them, deserve your support and appreciation.
The Gorton bill was recently incorporated in the comprehensive electric utility industry restructuring bill introduced by Reps. Steve Largent (R-OK) and Ed Markey (D-MA). This is an incredibly important development. It lends additional credibility to the argument that the Gorton bill is a fair, reasonable and bipartisan resolution to this problem. And it adds to the growing momentum in Congress to enact this legislation this year.
At best, APPA has helped to orchestrate these legislative accomplishments. But you, those here and those who couldn’t make this conference, are responsible. You represent consumers, and local communities. Our opponents represent the interests of private corporations. I am not offering value judgments here. We are doing what we should do, and they are doing what they should do. In a democratic society, a debate such as this is extremely healthy. And in this debate, consumers, voters, are winning. You are responsible for this, and you should give yourselves a round of applause.
But the effort is far from over. There is no more difficult legislative task in Washington than amending the U.S. Tax Code. It is unlike any other legislative battle we have every undertaken.
You need to keep up the pressure. Politics is a contact sport. You can not win if you are not involved. We have a Campaign for Local Control booth set up here in the conference center. Stop by to find out what more you can do to help your utility, and the community of public power systems across the country, to convince Congress to enact Senator Gorton’s Bond Fairness and Protection Act.
With control goes responsibility. We can’t advocate local control without also accepting the responsibility that goes with it. Now is the time for leaders to step forward, to accept this responsibility, to speak out on behalf of their community, and their community owned electric utility system. And this is happening, as mayors, city mangers, city council members and public power executives rally around public power and local control, and lend their support to the APPA Campaign for Local Control.
Public power’s leaders must also accept the responsibility to keep their local utilities financially healthy. They must be cautious in the amount of funds transferred from the utility to the general fund. Excessive transfers can make your system less competitive. It is also essential to maintain a top quality, well motivated, and most important a competitively paid work force.
Passing the Gorton bill is the near term objective of our Campaign for Local Control. But this Campaign has a longer term objective as well – to build on public power’s strengths as we move into an uncertain future.
Public power has real, specific strengths over our competitors. Compared to private power companies, a majority of respondents to the Fabrizio/Mellman survey believes that public power cares more about the local community, is more attentive to local economic development, and offers lower rates. In contrast, private power companies are considered to care a lot more about profits than service.
These attributes, our positives and their negatives, define our market niche. If you listen to the ads of our competitors, it is clear they are trying to muscle in on that niche. They tout their community orientation, their community service, and their community involvement. They say they are your neighbors. They say they are concerned about your neighborhoods. But their ads ring hollow, and the public doesn’t buy it.
At the same time, the Fabrizio/Mellman survey found many consumers are unsure who provides their electric service. It is up to each of you here today to eliminate this uncertainty within your own community. I urge you to use the tools and tactics developed by the Campaign for Local Control to tackle the critical tasks of education and communication in the days ahead.
I have focused this morning on political issues. But dealing with the politics of restructuring is only one element in preparing for the future. In your day-to-day operations you need to deal with a broad range of issues -- Y2K readiness, telecommunications, employee retention strategies, managing risk, managing inventory, retaining control of billing and metering. All of these issues, and much more, will be covered during this Conference. You can also learn more about how Hometown Connections can provide products and services that will help you meet the challenges of the future.
To close on a personal note, I want to tell you what a privilege it is for me to represent you and public power. I admire and respect what you are doing locally to benefit your hometown communities. And I am proud to advocate the policy positions you have advanced and adopted as part of the American Public Power Association. These positions reflect the public interest, not corporate self interest. They reflect the fact that we are locally controlled institutions that put consumers and communities above profits. In the end, that is why we continue to beat the odds. That is why we don’t need $64 million to win. Every single electric consumer in America is indebted to you for what you have done, and will continue to benefit from what you will do in the future.
These are very challenging times, but I am enjoying what I am doing. Your confidence and enthusiasm to tackle the tough issues suggests that you are too.
Thank you for your attention this morning. Have a wonderful conference.The American Public Power Association is the national service organization representing the nation's more than 2,000 locally publicly owned electric utilities.
Return to Pressroom