America's Public Power Utilities: Key Partners for Business in a Challenging Economy

The past year or so has been filled with tough business decisions for practically every company. Customers are spending less and in many cases are going out of business. Lenders have reined in credit dramatically. It has been increasingly difficult to keep everyone on the payroll, to keep benefits in place, and to keep from becoming overwhelmed by red ink. Companies have to mind their business and look out for their own interests - because who else will?

Yet as it happens, not everyone is guided solely by self-interest, even today. Communities are pulling together to support their people and their businesses, realizing that all will benefit when those who are struggling are given some assistance. Local and state governments know that they must help their employers survive and return to hiring mode, and are using whatever tools they have to provide that help.

Those communities served by publicly owned utilities are finding that they have an especially well-stocked toolkit. That's because public power providers serve no master other than their own communities - they have no profit motive and no investors to satisfy, only local leaders whose objectives are fully aligned with the needs of the community and its businesses. With the economy on the ropes, the public power sector has re-energized its programs designed to help business and residential customers achieve greater energy efficiency and manufacturing productivity, lower their costs, and weather the economic slump as successfully as possible.

Collectively, the effort supported by the American Public Power Association (APPA) is known as "Public Power Is Good for Business." The association is helping its member utilities do all they can to assist customers - commercial and industrial as well as residential - in energy management, conservation, efficiency, and carbon reduction. The results can be significant.

Helping Businesses Save Big
We've been trudging through what is often called the worst economy since the Great Depression. Can energy efficiency initiatives really make enough of a difference to be worth the effort? You bet. Consider some examples from public power communities across the country:

• Mention solar energy and most people are likely to think first about using sunshine to generate electricity. But the sun provides an excellent way to heat water as well. Solar thermal energy systems can be used to handle a building's main hot water consumption. North Carolina Municipal Power Agency Number 1, or NCMPA1 for short, offers commercial customers rebates of $700 for each certified solar thermal panel they buy and install.

• When 3M decided to undertake a major energy-efficiency assessment at its Hutchinson, Minnesota, plant, it found a willing partner in the local municipal utility. The company sought to increase efficiency by at least 4 percent a year, and the Hutchinson Utilities Commission offered generous rebates for lighting improvements. The plant also focused on such areas as heat recovery, heat utilization and cogeneration.

• "Cool roofs" may sound like places for apartment dwellers to party on hot summer nights. To building owners, though, the term refers to roofs that reflect the sun's heat rather than transferring it to the building below. Having this kind of roof saves on energy costs, improves comfort and reduces the urban "heat island" effect that is bad for air quality. Providers of public power help businesses adopt cool roof technology through rebate programs - among the many that have developed such programs are the Sacramento Municipal Utility District (SMUD) and San Antonio's CPS Energy.

• Helping businesses adopt cost-saving, energy-efficient technologies is a major endeavor for the Salt River Project in Arizona. The utility provides an impressive menu of rebates through its SRP PowerWise Standard Business Solutions program. To help pay for lighting improvements, the utility offers 25 cents per watt of reduced demand and $30 for each occupancy sensor installed. Upgraded heating/cooling equipment can net a rebate of up to $100 per ton, and new motors can land a rebate of up to $990 apiece. There are rebates covering compressed air and refrigeration equipment as well. Any of these projects can reduce energy consumption as well as maintenance costs. The utility also connects businesses with expert consultation, information services and energy-efficiency training.

• In the public power community of Anaheim, California, businesses that are retrofitting inefficient equipment with approved energy-efficient equipment can qualify to have their building permit fees waived. That can be worth up to $5,000. There are heat pump incentives worth up to $25,000, special energy rates for new or expanding businesses that implement cost-effective and energy-efficient practices, low-interest financing for energy-efficiency projects, and incentives to help pay for thermal energy storage, to name just a few.

• Businesses can save a bundle - up to 20 percent - by ensuring that their heating/cooling systems are tuned up and working efficiently. California's Imperial Irrigation District Energy will help customers pay for tune-up services.

• As helpful as energy savings can be, it takes money to implement efficiency projects. Idaho Falls Power in Idaho helps businesses make the leap by offering zero-interest loans as well as rebates.

• It also takes expertise to reap the most savings through energy efficiency. In Springfield, Illinois, City Water, Light & Power operates a technical assistance program for business and residential customers. Services are free and are available to customers that have efficiency questions or that are experiencing efficiency-related problems. The program will even help customers design energy efficiency into new structures.

• Interest-free loans with terms of up to five years also are available from public power provider Holyoke Gas & Electric in Massachusetts, and the utility is in the technical assistance business, too. Its complimentary technical services include energy audits, power quality analysis, and rate analysis.

• Energy efficiency has been top-of-mind for decades in Washington's Snohomish County. The area benefited from successful energy-efficiency programs way back in the 1980s. Times and technologies have marched onward, and the Snohomish County Public Utility District has more recently replaced some of the lighting that it had upgraded in those 1980s efficiency efforts. The utility tends to get its customers interested in efficiency through lighting projects, and when those prove successful, it's a natural to move on to more major initiatives such as HVAC efficiency upgrades.

By the Public, For the Public
Many people, including business owners, don't pay all that much attention to who is providing their energy. After all, electricity is electricity, right? On the contrary, what matters is who is on the other end of the power line - or more to the point, what kind of utility.

Those utilities known collectively as public power systems are owned and operated by local or regional governments or public utility districts. Their function is simply to provide reliable electricity at a reasonable cost, in a businesslike manner. In these respects, they are very similar to other types of electric utilities, including investor-owned corporations.

What sets them apart is the nature of their mission. Public power systems operate as a public service, just like the local police and fire agencies and the street department. Public service is what they're all about. They are not in the business of making money and turning a profit. They are not-for-profit operations, with no investors or stockholders who are expecting a return on their investment.

Also, public power systems answer to local bosses, not corporate structures that might be based in a faraway city. Ultimately, the local bosses in many cases are mayors and city council members who not only live in the city but are answerable to voters and taxpayers.

In short, public power systems are really working on behalf of the people and businesses that they serve. There are no other masters with conflicting priorities, just local leaders and taxpayers and voters, all of whom happen to also be electric customers.

So how does this distinction make a difference? The most obvious way is cost of power. Because public power systems are not-for-profit operations, their rates typically are among the lowest in the country. Commercial customers of investor-owned utilities pay an average of 9 percent higher rates than commercial customers who are served by public power systems. For residential customers, the rates charged by investor-owned utilities average 14 percent higher. Public and investor-owned utilities average similar industrial rates.

Public power systems operate in more than 2,000 American cities and towns, in all but one American state. The first public power system was created in 1880, and on the whole these organizations have deep roots in their communities. By 2010, a third of all public power systems will have celebrated their centennials.

Communities of all sizes are served by public power - the largest include Los Angeles and Sacramento, California; Long Island, New York; San Antonio and Austin, Texas; Seattle, Washington; and Nashville, Tennessee. The majority of the systems, however, are relatively small - 1,400 of the roughly 2,000 serve communities with populations of 10,000 or fewer. As a result, though there are 10 times as many public power systems as there are investor-owned utilities, the share of the population served by public power is about 15 percent, while nearly 70 percent get power from investor-owned utilities.

Public power systems may often be small, but they defy any stereotypes suggesting that bigger is better. In fact, their customers in many cases will hail the benefits of smallness. That's because having customer service representatives and repair crews located right there in town, rather than somewhere else, can translate into particularly responsive customer service - whether it's resolving a billing issue or restoring power following a storm.

The other key point to consider is that because public power systems typically answer to the same bosses as the rest of the local government, they maintain a strong interest in the economic health of the community. That's an especially important priority these days, with the economy struggling.
This interest in local economic health manifests itself in a number of ways. Public power systems provide a direct benefit to communities through payments and contributions to state and local governments. These may be payments in lieu of taxes, property-tax-like contributions, transfers to governmental general funds, as well as free or reduced-cost services offered to governmental agencies. This type of support averages about 5 percent of electric operating revenues. Of course, investor-owned utilities support governments through taxes and fees, too - those average just over 4 percent of electric operating revenues.

And as mentioned earlier, public power systems also are heavily involved in supporting the health and profitability of their business customers. They frequently offer efficiency audits, financial assistance for customers implementing cost-saving efficiency projects, and technical assistance that typically covers energy-related matters but also supports manufacturing improvements and other initiatives.

Having a connection to local government is also helpful in supporting companies that are expanding or are in the midst of picking a site for their next manufacturing facility or distribution center. Economic development incentive packages can be that much better coordinated when more players sit around the same table. Plus, that coordination often extends beyond electricity, because many public power communities are also served by municipally owned natural gas utilities, and some even have their own publicly owned broadband providers. All of these other publicly owned utilities promise the same non-profit mission as their public power counterparts.

Finally, even though they're often relatively small systems, public power providers are a collegial crowd. Because they're not competitors and they're not driven by a profit motive, they're willing to join forces for the common good through such organizations as the American Public Power Association. They'll share ideas, jointly pursue legislative priorities, cooperate on training and R&D initiatives, and in general ensure that all public power systems are able to look out for number one - the public that they serve.

For more information about the benefits of public power, contact the American Public Power Association at 202-467-2900 or 800-515-2772, or visit www.appanet.org.