Public Power and IOUs: The Same Yet Different

What separates investor-owned utilities (IOUs) and public power companies these days? Less than you might imagine.

In early June, while the Edison Electric Institute (EEI), the trade association for IOUs, was holding its annual meeting in New Orleans, I was in Minneapolis at the annual conference of the American Public Power Association (APPA), which represents public power—municipal and state-owned utilities. I attended the EEI event last year, and this year I wanted to hear how municipal utilities (munis) and their brethren are seeing the world as the APPA celebrates its 75th anniversary.

The Numbers

You probably know that the primary difference between IOUs and munis (and cooperatives, which have their own industry group, the National Rural Electric Cooperative Association) is ownership structure: Public power and co-op utilities are community- or member-owned not-for-profit entities. (There are also regulatory, governance, and legal differences that are too detailed to go into here.)

To understand public power—essentially, locally controlled utilities—it helps to understand the numbers. Public entities supply power to roughly 14% of U.S. customers. Though the percentage of customers is small, there are far more publicly owned utilities in the 50 states (2,009) than IOUs (192) and co-ops (871). Yet, when it comes to generation, publicly owned utilities generate only 9.8% of all power, against 37.7% by IOUs and 40.6% by independent power producers, with federal power agencies (6.9%) and co-ops (5.0%) supplying the rest.

Common Causes

There’s been a historical tension (some would use stronger language) between IOUs and public power utilities over issues concerning policy and financing in particular, but these days it appears that the IOUs, munis, and co-ops have more in common with each other than not. Whether it’s skepticism about the administration’s proposed Clean Power Plan (especially its timing), or the need for industry and government information sharing on cybersecurity, or concern about reliable and affordable coal deliveries by rail, the power industry’s various lobbying groups are either working collaboratively or at least using the same playbook.

One reason: Two-thirds of public power systems buy their power on the wholesale market. Whether they self-generate or purchase power, they are as concerned as their for-profit counterparts about regulatory changes and their potential effect on reliable, affordable power.

Defining Differences

Differences between the for-profit and nonprofit providers remain, though, as do unique challenges.

Local control is currently a plus for public power in terms of consumer preferences (as can be seen from attempts in Minneapolis and Boulder, Colo., to municipalize distribution systems), but having a utility staff that is subject to municipal pay scales can, as more than one person at the APPA event noted, constrain hiring options. That competitive disadvantage further complicates the workforce challenges being faced by the entire sector. To help address this challenge, said APPA President and CEO Sue Kelly, new hires “will have to reflect the diversity of our communities,” not only because “it’s the right thing to do” but also because “it’s a matter of survival.”

Every utility says it operates in the public interest, but there is a difference between being owned by a community and being owned by shareholders. Janet McTague, project engineering supervisor for the City of Fort Collins Utilities (one of three winners of an APPA Personal Service Award), told me that munis really do have closer relationships with their customers. That’s good for munis, because they are more likely to have earned the loyalty of customers when third-party service providers roll into town offering anything from a smart thermostat to the promise of going “off the grid” with rooftop solar panels. But, she noted, customers also expect more because of that local connection, as opposed to a shareholder-owned utility that may have its headquarters in another state.

That customer relationship is nothing to take for granted, as Kelly noted in her opening remarks. “We need to find more ways to engage with our customers,” she said, because you can’t assume that the customers will always be there.

Common Solutions

Concern about customer retention is one more thing all utilities have in common these days. Another is grappling with the unceasing deluge of new technologies. Kelly noted that today’s public power company employees need new sorts of skills, from social media to cybersecurity savvy. One of the conference headline speakers suggested one way to address that need.

Futurist Jack Uldrich recommended using a “reverse mentor”—someone younger who can help you “see the world differently.” Newer hires who have technical skills that might be unfamiliar to older employees but essential to today’s operations—from social media to virtual reality technology for training—could be valuable to any utility. That sort of reverse mentoring is likely happening in ad hoc ways, but formalizing cross-generational knowledge transfer (not just from the “old hands” who have a lifetime of experience that needs to be shared) could be one way to acknowledge the value that new hires bring to the table. ■

New Generating Company Advisory Team MembersPOWER’s Generating Company Advisory Team members serve two years, and our first three members (whose affiliations you can find on p. 4) are leaving the roster after this issue, having shared valuable insights with us: Melanie Green, Randy Livingston, and Sharon Pfeuffer. With this issue we welcome three new members, including one from a public power company: Pat McCarty, Generation Manager, Tacoma Power; Mark C. McCullough, Executive Vice President, Generation, American Electric Power; and Sarah P. Orban Salati, Managing Director, New Energy Solutions, AES.

Gail Reitenbach, PhD is POWER’s editor.

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