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Inward Investment Guides

Public Power Communities: Future-Focused

America’s public power communities are places where local governments and other public entities have taken charge to deliver services their communities need to prosper.

Steve Stackhouse-Kaelble (Q1 2014)
It was the late 1800s. Electricity was capturing the attention of a lot of Americans, but for most people, large-scale transmission systems bringing power to businesses and homes were more a dream than a reality. Still, there were some forward-thinkers who knew that electric power was the way of the future and took steps to make it happen.

Some of those forward-thinkers lived in the small community of Lafayette, Louisiana. They put a measure on the ballot in 1896, asking property owners to allow a municipal utility to build an electric system and a water system. When the ballots were counted, 100 percent of the voters gave a thumbs-up. Construction began the next year. “Lafayette had a 30-year head start, and that was very beneficial,” says Terry Huval, director of Lafayette Utilities System. Thanks in part to the fact that it had power three decades earlier than many neighboring communities, the city attracted a university and enjoyed healthy growth.

"Public Power" might be just part of the services these municipal utilities provide. A little more than a century later, history repeated itself in Lafayette, with a different technology. “In 2005, we had an election to get into the telecommunications business, providing fiber,” Huval says. “We wanted to provide fiber to the home — it was to provide the infrastructure of the future. By having fiber there, it gives you an advantage.”

Lafayette is just one community, but it provides a great illustration of the forward-thinking mindset that led many American municipalities into the utility business. In some cases, local leaders got a glimpse of the future and worked to bring it to their communities ahead of the curve. In other cases, they found that the profit-driven business model that works so well in much of the American economy had left them behind when it comes to certain kinds of services.

The fruits of these local efforts are America’s public power communities — places where local governments and other public entities have taken charge to deliver services their communities need to prosper. As the Lafayette example illustrates, “public power” may be just part of the services these municipal utilities provide. Many are also in the business of water and sewer service, some provide natural gas, and an increasing number are venturing into broadband communications — from high-speed Internet to telephone to cable television. The small community of Chanute, Kansas, is another example. About 9,100 people live there, and local leaders were concerned about poor access to advanced Internet services. A bit more than a decade ago, the city was rebuilding the broadband network it was using to control its power system, “and we overbuilt it because of the lack of broadband in our community,” says Larry Gates, director of utilities. “We really wanted to connect the anchor institutions in our community.”

A few years later, Chanute was in the Internet business, offering gigabit fiber as well as Wi-Fi and WiMAX services, and anchor institutions were quick to take advantage of the technology. The local hospital now uses it for practicing telemedicine, Gates says, and the local community college has had such success ramping up online study opportunities that it now ranks among the nation’s five fastest-growing community colleges.

A Boost for Business
Needless to say, governmental and educational users aren’t the only ones eager to plug into broadband. “Broadband is an essential element for industry,” says Joe King, city manager in Danville, Virginia. “We were finding a decade ago that telecommunication providers were doing a satisfactory job with basic needs, but if someone needed more than a T1, the utilities were not providing the services needed by companies. That’s why we stepped in.”

The city’s broadband network is called nDanville, and it works hand-in-hand with private partners to bring advanced technology to businesses and residents alike. It’s very much an economic development matter, King says. “We are using broadband to help attract new business.” Publicly provided broadband is, in fact, an important element as Danville works to build a stronger local economy. As with lots of communities in that part of the country, Danville’s economy had for generations been driven by textiles, tobacco, and furniture manufacturing — industries that were shrinking dramatically. Through the years, the city lost some 12,000 jobs, and it needed to transition to a new and different economy. “Having the municipal government make broadband available has made it possible to attract companies that consider broadband to be essential to their business,” King says.

A dramatic illustration of the transformation into the future is the Noblis Center for Applied High Performance Computing, which set up operations in Danville and plugged into nDanville as a secondary broadband link to its other locations. “That would never have been possible if we had not been able to provide the service to them,” King observes.

The interest in Danville has been global, he adds, including companies from such places as Poland, Japan, and India. Affordable access to the most advanced broadband services can really make a difference for fledgling companies, King says, and his community is proving to be attractive to up-and-coming businesses. “We’re dealing with small entrepreneurs starting businesses that need broadband,” he says. “In the last five years we’ve attracted 15 new industries that are growing nicely.” These kinds of examples underscore one of the pluses of picking a location in a public power community: All of the players are on the same page, with interests in full alignment. The local utility is not just there to provide electricity or water or broadband — it has a powerful interest in the success of local businesses, because those with ultimate oversight of the utility also are responsible for growing the business base, creating jobs, and fostering prosperity in the community. The utility does not exist to turn a profit for itself, but instead has a strong desire to help its customers turn a profit, all the while building a healthier business environment and creating a better quality of life.

One of the companies that picked a Chanute location and plugged into that community’s broadband network found that the technology met some of its needs better than what was available at one of its other locations, in a large metropolitan area. So, Gates says, the company moved its computer servers to Chanute. The utility’s future-focused mindset was beneficial for a local employer, and that became a positive for the community. That’s how things work in public power communities.

It’s an Attitude, Too
Companies looking for attractive locations certainly appreciate such benefits as state-of-the-art broadband, as these communities have found. But the efforts to establish that technology can yield some less tangible but equally important value, too. They say something about the character of public power communities and the decision-makers leading them. There’s a “can-do” attitude that many site selectors find appealing.

Consider the example of the broadband push in Lafayette, Louisiana. It took a lot of perseverance to make it happen, because there were powerful forces aligned against the effort. Incumbent providers were not thrilled to see a municipality entering their line of business, and they fought the initiative in court.

“The fight we had to go through was a big thing. It took us going to the state Supreme Court,” Huval recalls. “One company was looking to locate here, and the owner of the company said he chose Lafayette because he thought a city progressive enough to move forward to put this infrastructure in place was the kind of city he wanted for his business.”

Danville, Virginia, followed a different business model that put it in partnership with private-sector providers. “We decided to create an open access system,” King says. The city makes the broadband connection to customer locations, but the Internet and telecom services carried on the network are provided by private companies.

Gates has been fighting legislative battles, meanwhile, against proposed state legislation that would potentially outlaw the type of community installation that Chanute has developed and wants to expand into residential areas. The bill emerged not long after Chanute’s City Commission voted to work toward “fiber to the home” access, and it sparked a furor that reached national technology trade publications.

The fate of that legislation is not yet clear, but Gates has warned, “It will kill our economic development efforts.” If his fight is successful, though, it will offer one more example of the spirit that public power communities bring to the task of providing services vital to citizens and businesses.
Expand Chattanooga likes to call itself “Gig City,” in honor of its taxpayer-owned fiber network that was one of the first of its kind and scale.
Close Chattanooga likes to call itself “Gig City,” in honor of its taxpayer-owned fiber network that was one of the first of its kind and scale.
Chattanooga likes to call itself “Gig City,” in honor of its taxpayer-owned fiber network that was one of the first of its kind and scale.
That spirit recently caught the attention of The New York Times, which traveled to Chattanooga, Tennessee, to learn more about the municipal broadband initiative there. Chattanooga likes to call itself “Gig City,” in honor of its taxpayer-owned fiber network that was one of the first of its kind and scale.

That development turned a lot of heads, and persuaded tech-savvy entrepreneurs and workers to put Chattanooga on their short lists of possible homes. The technology is attractive, advanced, and affordably priced; and the city’s pursuit of the technology set a tone that has appealed to business owners. The newspaper put the spotlight on Toni Gemayel, who heard about the Internet service and decided to move his software startup from Florida to Chattanooga. “People here are thinking big,” he told The Times, and city leaders believe their technology has created at least a thousand jobs in the past three years.

Why Public Power?
The story of public power in Lafayette, Louisiana, illustrates why a lot of communities got into the power business years ago. Though there are some very large American cities that have municipal utilities, many public power communities are small, and because their needs were not being met by other providers, they took matters into their own hands. Their relative size is apparent when you consider that there are about 2,000 publicly owned utilities and just fewer than 200 investor-owned utilities, but more than two thirds of the nation’s customers are served by that relatively small number of investor-owned utilities.

Chattanooga likes to call itself “Gig City,” in honor of its taxpayer-owned fiber network that was one of the first of its kind and scale. Another way to look at that statistic is to realize that the owners of public utilities — generally local governments — are by definition close-to-home. The people in charge of the utilities, as well as everyone from line workers to account representatives, tend to live in or near the communities they’re serving, and that helps them be especially responsive to the needs of their customers. That proximity is also helpful when there are outages, as the workers who fix problems can be onsite promptly — the result is that public power communities tend to have high reliability statistics.

One of the most important distinctions is the lack of a profit motive. There are no private investors who are expecting a share of the profit. In a public power community, rates can thus be held to a minimum, and any operating margin can be reinvested in the community. Don’t confuse small with unsophisticated, though. As these stories of broadband service suggest, even small communities are doing impressive things, technologically speaking. They’re also out in front when it comes to sophisticated environmental issues.

Consider Nebraska, a fully public power state where local utilities are served by the Nebraska Public Power District. NPPD has a goal that by 2020, at least 10 percent of the power it provides will be from renewable sources, and it’s getting there in a number of ways. It operates multiple wind farms, such as the 80-megawatt Elkhorn Ridge and Laredo Ridge farms. NPPD also notes that the public utilities in Nebraska have contracted to purchase more than 100 megawatts of hydropower from various sources.

Other states and regions have their own cooperative efforts that help municipal utilities thrive, provide attentive service, and offer attractive rates. ElectriCities, for example, serves public power utilities in North Carolina, South Carolina, and Virginia. It’s all about building economies of scale and allowing public power communities the best of all worlds — hometown flavor but collective access to technical expertise, economic development services, energy-efficiency offerings, and a wide range of other programs.
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