Dark Side to Municipal Takeover of Utilities

“Municipal Power Struggle” (Dec. 27) shed welcome light on how consulting firms drive city attempts to create municipal power utilities and the uncertainty about the costs and benefits of doing so. But it left some things out.

First, people should not be fooled that a city takeover of electricity will mean low costs. True, California’s municipal utilities were shielded from the worst of recent price increases, but their prices are still way above the national average. Where electricity prices are falling is in states such as Pennsylvania and Texas that did not botch their deregulation plans.

Second, virtually all nations around the world, from China to Germany, are getting out of the electricity business. Municipalization and the state’s long-term electricity purchase agreements leave California and Cuba alone in the world embracing government electric utilities.

Third, in the U.S. more utilities have been privatized than municipalized in recent years. Fairbanks, Alaska, sold its utility a few years ago. Since 1988, fewer than 10 cities have tried to municipalize electric utilities, and some of them are still bogged down in red tape.

Fourth, municipalization is a long, contentious, litigious and costly process. In 1987, Las Cruces, N.M., decided to municipalize its privately owned utility. Thirteen years, dozens of lawsuits, and untold dollars later, the plan fell apart. The one sure thing in this process is taxpayers supporting the lawyer full-employment plan.

Any one of these issues should give one pause about municipalization. Together, they show that it is bad policy.

Adrian Moore

Vice president for research

Reason Foundation

West Los Angeles