Democratic Public Utilities
The following is meant to be lecture notes more than anything. I am sharing them in case they are helpful to anyone, but I apologize for the many typos I should have removed before publishing.
Democratic socialists don’t have all of the answers. We know twentieth century socialism failed, and we know capitalism is proving that it is incapable of the international collective action necessary to address climate change.
The Democratic Socialists of America (DSA) website says “Democratic socialists believe that both the economy and society should be run democratically-to meet public needs, not to make profits for a few.” We are skeptical of the dominant ideology that says the free market and the concentration of profits, wealth and power into the hands of the capitalist class, is the only rational way to organize a modern economy. We haven’t worked out the details of the alternative, but know it will require an informed and engaged people. We believe when the public becomes complacent, letting those in power to do as they may, the consequence is inequality and social unrest.
Democratic socialists believe in truth, science, competence and mastery. We will need a little political imagination, but more importantly, we must get organized, get educated, and work together to win democratic control over the economy and institutions that will otherwise push us past the carbon tipping point. This will require hard work, research, and honesty.
This essay is not a sales pitch for public utilities. It is not propaganda. The data is not crystal clear. The evidence shows that public ownership of utilities works, and we have reason to believe it will be critical in the struggle for democratic control of our economy, and a major step in the fight against climate change, but it may come with shortfalls; shortfalls about which we must be willing to admit and mitigate. Key to a successful strategy is an awareness of one’s weaknesses.
For starters, I don’t really want to live in a world where I have to spend my free time worrying about my utilities. I want them to just work. Utilities are boring. But unfortunately, when we’re not paying attention our prices go up, and the quality of service goes down. This is true of most things. We call it “class warfare” when a it is the business owners and Wall Street investors who are paying more attention to utilities than the rest of us. It feels as if someone made this stuff intentionally complicated and boring.
So let us learn a little about how utilities work (and don’t work), how they tie into the fight to address climate change, and what people are doing to democratize their utilities.
My understanding of utilities is very primitive. Most of what I have learned is self-taught. I apologize if my account of utilities is dramatically inadequate.
The scope of the term “utilities” is contested. We generally accept that electricity, water, telephone and sewage are utilities, and even transportation. Internet is increasingly becoming recognized as a utility. Utilities are essential infrastructure in the modern world. It is nearly impossible to work and live in a city, or even rural, without these things.
There are three ownership models (or more, depending how you categorize them).
1. Publicly owned
2. (Customer) Coop owned
3. Investor owned (usually Wall Street)
Public utilities are owned and operated by the municipal, county, or state government. There is a history of publicly owned utilities in the United States. They are theoretically accountable to their citizens, though historically democratic control and transparency were not values of the politicians and technocrats that created them. Most of them, to this day, have a very top-down hierarchical structure.
There are also a significant number of cooperative (coop) utilities, owned by their customers. They are also (theoretically) democratically accountable to their customers, though often a lack of transparency and complicated jargon are used to alienate many customers, functionally leaving the utilities in the hands of a small group of people.
The third category, investor owned utilities, are generally the least democratic. Like any investor owned business, they exist to create profits for their investors. The lack of democratic control is mitigated by the existence of a Public Utilities Commission (PUC) at the state level. Each state’s PUC regulates activities and rates. The Idaho PUC regulates gas, water, electricity or some telephone services for profit.
While we are discussing the basics of utilities, it is worth mentioning that some utilities are delivered by multiple parties. For example, energy is often divided into generation, transmission, and distribution. Energy generation comes from damns or coal plants, for example. Distribution actually delivers the energy to residential customers. When it makes sense to do so, they purchase and sell energy to other distribution companies. Energy generation companies can sell their energy on a market to various distribution companies. Residential customers rarely pick their distribution organization. Distribution organizations typically invest a significant amount of capital in infrastructure in a region, making it unaffordable for any other distribution organizations to create redundant infrastructure, resulting in a natural monopoly. When the distribution organization is investor owned, customers depend on the PUC to ensure rates are “reasonable,” while still allowing investors to make a profit.
WHY PUBLIC OWNERSHIP?
Since the 1980’s there has been consensus among economists, politicians, and most Americans that government is inherently inefficient and wasteful. In contrast, they hold, the free market forces inefficient private businesses to become sufficiently efficient in order to compete on the free market. If they cannot bring in more revenue than they spend, the market forces them to close their doors. This belief is central to an ideology called “neoliberalism.”
While neoliberalism has always had its skeptics, growing awareness of the absence of evidence is challenging these beliefs. The evidence is complicated, and I am not qualified to interpret it, but it is clear that, on the whole, the private sector’s competitive free market cannot produce significantly better results that the public sector. The World Bank and the International Monetary Fund (IMF), two notoriously neoliberal organizations, both have researched the efficiency of public and investor owned utilities worldwide. Both found that there was no significant difference between the efficiency of public and investor owned.
Critics of neoliberalism are making the case that the evidence shows public utilities are not only more efficient, but they deliver higher quality service too, while simultaneously being more democratic and environmentally sound. The Public Services International Research Unit came to this conclusion after performing a study of 80 studies. According to the American Public Power Association, residential customers of public power utilities pay 13% less than customers of investor owned utilities. According to Food & Water Watch, coop and investor owned water utilities cost 37% more than publicly owned utilities.
The focus of the public verses private debate is always focused on efficiency, which is important, but there are other factors to consider, such as quality of service, quality of service for all customers, not just for those that can afford to pay for it, environmental sustainability, and alignment with competing societal priorities. Proponents of public ownership argue that investor owned utilities, with their almost exclusive focus on the bottom line, are unable to deliver in these other areas. The problem of climate change presents a clear example of this.
Capitalism has attempted to solve climate change almost exclusively through the bottom line by prioritizing carbon trading, green consumer-driven technology, and placing the ethical burden on the consumer to consume less and consume green.
Focusing on the consumer hides the reality than investor owned utilities continue to invest in their existing fossil fuel infrastructure, building new pipelines and coal plants, and drilling new oil and gas wells. In order for investors to receive dividends, investor owned utilities have to focus on short term returns. Investing heavily in new, renewable technology will hurt short term returns, or even worse. In some cases solving climate change will require decentralizing power generation. If consumers own their own solar panels on their roofs, eventually they will not need the power companies. This puts the very existence of the investor owned utilities at risk. From their perspective this outcome must be avoided at all costs.
The common refrain about government is that it only grows, it never willingly shrinks. Public utilities, if there is appropriate democratic oversight, will need to be able to address this critique. Even if the critics are right, and once government grows, it is nearly impossible to shrink it again, we can rest assured we will be able to find new problems to be solved in the age of the visible effects of climate change, new things for government to address.
Public ownership offers the greatest hope for a just transition to a democratic, green economy, assuming there is vigorous public discourse, and sufficient transparency in the process, government, and utilities. The science of climate change says the only rational response is a radical transformation of our infrastructure. This transformation will create jobs. We have the opportunity to invest in marginalized communities that have been neglected for generations. We can demand this of public utilities. We have less control over investor-owned utilities. Every inch with them is a battle. We can regulate them, but they will always exist primarily for the generation of profits for their investors.
In my investigation I did not find a wealth of research or discussion around democratic governance. Historically public utilities were constructed by technocrats, confident in their abilities to manage public resources in the name of the people. While many of them may have been well intended, and even wildly successful at times, top down management inevitably fails to account for the needs of a portion of its customers, often the poor and minorities. Coal mining and coal power plants directly pollute the water and air of those without the political power to resist these things from happening in their communities. The water crisis in Flint, Michigan was another example of this. By giving them everyone a say in the process, they can do something to make sure their basic needs are met without sacrificing the health of their children. Democratic public ownership requires transparency, checks and balances, and dependence upon the engagement of citizens. We need the left to explore the best ways to keep utilities out of the hands of the 1%.
THE MOVEMENT FOR DEMOCRATIC OWNERSHIP OF UTILITIES
Bernie’s website has only one bullet point addressing public ownership of utilities, though he has said more at campaign rallies and other forums. Most importantly, he would “inject $1.52 trillion into renewable energy expansion and $852 billion into energy storage, working particularly with publicly or cooperatively owned utilities.” He would take the bold move towards increasing democracy by providing “assistance to states and municipalities so they could start their own democratically owned utilities — ones driven by the public interest and a climate-resilient future.” Bernie’s focus is on both the democratic ownership of the power generation, as well as the distribution to customers.
No matter what Bernie does concerning utilities, his campaign slogan captures an important principal. “Not Me. Us.” Even if we elect him as president, it is going to take a movement demanding public ownership in order to make it happen as fast as it needs to happen. Congress will not take the Green New Deal as seriously as Bernie. Fortunately there is evidence that a movement is already starting. Many people throughout the world are taking back their utilities from investor owned utilities. Several Democratic Socialists of America chapters throughout the country are forming campaigns to help in this struggle for public ownership and democratic governance of utilities, especially energy.
In Providence, Rhode Island, the local DSA chapter, at one point, strategically focused on a single campaign.
They realized that organizing against National Grid, a monopoly utility company that regularly used shutoffs and rate hikes that disproportionately affected marginalized communities tied together environmental justice, welfare reform, climate change, public ownership, poverty and capitalism. With their coalition partner the George Wiley Center, a local welfare rights and poor people’s organization, they began organizing in the summer of 2017 against National Grid’s proposed $71 million rate increase to ostensibly create a greener utility grid and build a liquefied natural gas (LNG) facility in South Providence. Since then, they were successful in agitating the public against National Grid, won the attention of state officials, and were able to win significant rate reductions for low-income ratepayers.
This example shows that the struggle for public ownership can make significant wins, even if only as intermediate steps towards fully realizing the end goal. They won reduced rates for low-income ratepayers, brought awareness of the issue to the people, and made the connection between diverse political struggles, laying the foundation for unified grassroots political coalitions. Together they have much more power, and much greater chances of winning.
Providence DSA learned several lessons through their campaign, a few of which they shared through DSA’s Socialist Forum.
• Look for partners with experience. When getting organized, find local organizations that are already knowledgeable about the vocabulary and laws. This allows one to put one’s energy in a more productive direction sooner, and help avoid making avoidable mistakes.
• Build an internal knowledge base. Knowledge is power. Providence DSA created a database for sharing between themselves what they had learned.
• Politicize depoliticized agencies. The PUC, a small state agency very few people pay attention to, is supposed work for the people. This is a strategic pressure point of any struggle against investor-owned utilities. Get to know how they function. Learn everything about them you can. Power map the employees. Power map the employees.
• Utilize utilities justice messaging. Tie together different struggles. “A conversation about utilities justice isn’t just about ‘typical’ environmental themes of decarbonization and sustainability, it’s also about issues of poverty and racism, housing and transport, public ownership and workplace democracy.”
The New York Public Utilities Commission recently approved New York City’s power company, ConEd, rate hikes to cover investment in the existing fossil fuel infrastructure. The local DSA chapter(s) are doing a number of things to stop them from further hurting poor and middle class customers that are already struggling to pay their utility bills, and stop ConEd from investing further into fossil fuels when they should be transitioning aggressively to renewable energy. DSA is working with local utility justice organizations, canvassing marginalized communities, bringing attention to the topic, showing how this could effect them. They held at least one town hall on the importance of public ownership and democratic governance of utilities, and got a crowd to attend a Public Utilities hearing on the rate hikes. The PUC did approve the rate hikes, but they are training renters and rate payers how to fight for their own interests.
The final campaign I will mention is the campaign to turn Pacific Gas and Electric Company (PG&E) in California over to public ownership. Californians have much to complain about with PG&E. If you have seen the Julia Roberts movie Erin Brockovich, we are talking about the same PG&E that in the 50’s and 60’s injected cancer-causing chemicals into the water, and then covered up their role in the contamination in spite of the fact that people near the facility were dying.
A little over a year ago PG&E customers primarily would have complained about poor service, including occasional brown-outs. November 8, 2018 neglected maintenance of power lines, in combination with climate change intensified drought, contributed to Camp Fire, the deadliest and most destructive fire in California’s history, that burned through the city of Paradise in a morning, killing 85 people and destroying 19,000 structures.
There is no clear path to public ownership of PG&E, but the scandal has brought the importance of the discussion to the mainstream. Bernie is hitting it as one of his campaign talking points. Nonetheless, it will be up to the people of California to get organized enough to challenge the powerful institutions profiting off of the current system.
Now replace “the people of California” in my last sentence with “the people of the United States” or “the people of the world.” This is only one of many struggles, and we should prioritize the struggles where we have the greatest chances of gaining the most strength quickly, especially when it comes to climate change, but we should remember that all of our struggles are connected, and we will win only by making that connection real in people’s lived experiences.