Power to decide.

Whether a utility is public or private can make or break a relocation deal

One of the least-asked questions when businesses are thinking of relocating is "Who owns the power company?"

In fact, the question is heard much more often in Monopoly games than in corporate relocation decision meetings. The corporate decision makers, however, should be asking who owns the power company because the answer can make a big difference in their operating costs.

Manufacturers and other businesses can reap big benefits by locating in a city where the utility is municipally owned -- and in these days of economic belt-tightening, these advantages can even make or break a project's viability.

Utilities owned and operated by municipalities, cities, counties and other public groups now serve more than 35 million Americans, about a seventh of the population. The top 10 publicly owned utilities, measured by electric customers served in 1990, serve more than 5 million customers.

Our nation's 2,000 consumer-controlled power companies are located in communities of every size. They range from small towns like Radium, Kan., which serves 20 customers, to huge metropolitan areas, like Los Angeles, with 1.3 million customers. Regardless of their size, these public power companies provide dependable, high quality electricity and gas to business and industry at low rates.

Foremost among the benefits of a municipally owned utility is cost. In 1989, commercial customers of municipally controlled utilities paid 13 percent less for electricity than customers of investor-owned utilities, according to the U.S. Department of Energy's Financial Statistics of Selected Electric Utilities.

Commercial customers of public power companies paid an average electric rate of 6.37 cents per kilowatt hour, as opposed to the 7.34 cents per kilowatt hour paid by private power customers. Combined industrial and commercial rates at public-owned utilities are 7 percent less than at investor-owned utilities.

One reason for lower costs is efficiency. Administrative costs at public power utilities average 18 percent less than at investor owned utilities. And these savings are passed on to the customer-owners.

Although a manufacturer seeking a location for a new plant is primarily concerned about power cost and service for the plant itself, the cost of residential power is frequently a consideration. Quality of life factors, including the cost of power in a community, are important in any relocation decision, and residential customers of public utilities pay an average of 21 percent less than private power customers.

Another fundamental difference is that private power companies must answer to investors, who may be concerned primarily with short-term profits and immediate results. These investors, who frequently live in other cities, don't have a stake in the community but rather an interest in the profit of the utility.

Public power companies, on the other hand, are owned by the communities they serve. In these cities, people are concerned with the long-term integrity of the system. Public power companies typically invest "profits" back into the system and pay a percentage of revenues to the cities that own them. The results are lower tax rates, improved service and economic development.

In San Antonio, City Public Service (CPS), for example, paid more than $109 million to the City of San Antonio for the fiscal year ended January 1992. Since it began operation 50 years ago, CPS has paid the city more than $1.4 billion, which has been reinvested by the city in facilities and services.

When a new power plant must be built to meet growing demand for power or to create flexibility in the system, another difference becomes apparent. A municipal utility is not required to earn a return for its investors based on capital investments.

One good example of this difference is the South Texas Project (STP), a nuclear power project jointly owned by two investor-owned utilities (Houston Power and Light and Central Power and Light of Corpus Christi) and two municipally owned utilities (City Public Service of San Antonio and the City of Austin Electric Utility Department.)

When construction began on the project, San Antonio's City Public Service was able to add construction costs to its rate base, allowing ratepayers to begin paying for the project while it was being built. As a result, CPS customers didn't suffer rate shock when its plant began operating, as did customers of the investor-owned utilities in the project. By the time the plant became operational, CPS customers were paying lower bills as lower-cost nuclear fuel began replacing some of the system's gas/oil and coal-fired generation.

As industry leaders in load management, public power companies help customers control energy and maximize efficiency. They work closely with business and industry in their cities to reduce power costs through a variety of free services, such as conducting energy audits and assisting customers in planning for service requirements.

An interesting trend with municipally owned utilities is that increasingly they work hand-in-hand with economic development groups in their cities, coordinating services for potential new businesses and making a strong contribution to the effort to bring new industry and jobs to their cities.

In cities where this takes place, business representatives can get information from one point of contact. These joint economic development efforts can save time and money in the site selection process, in obtaining utility service and in the ongoing operation of a plant or facility.

A partnership between the Rock Hill Economic Development Corporation and the municipally owned utility in that South Carolina community has resulted in several corporate relocations, including Hall Dielectric Machinery Co. and Amida Industries.

When Golden Aluminum, a division of Coors, was seeking a location for its $150 million rolling mill, the coordinated efforts of the San Antonio Economic Development Foundation and City Public Service helped convince the company to select San Antonio. And Louisiana Energy and Power Authority, a joint action agency serving 20 cities, just last year initiated a program to assist these communities' economic development efforts.

Wherever their location, whether in large cities or in rural communities served by joint-action agencies, public power utilities are committed to providing business, industrial and residential customers with high quality energy, responsive service and low cost.

Through partnerships in economic development and activism in community action projects, they are helping to strengthen their cities and improve the quality of life in their communities.

Ten Largest Public Power Utilities by Electric Customers Served

(1990 Ultimate Users)

Los Angeles Department of Water and Power Puerto Rico Electric Power Authority Salt River Project, Phoenix, Arizona City Public Service, San Antonio, Texas Sacramento Municipal Utility District, California Memphis Light, Gas and Water Division, Tennessee Seattle City Light, Washington Jacksonville Electric Authority, Florida Nashville Electric Service, Tennessee Austin Utilities, Texas

City Comparisons
Typical Industrial Gas & Electric Bills
Major U.S. Cities
13-month Average
(March 1991 through March 1992)
1,000 kw/400,000 kwh
(*)San Antonio                      $18,841
Denver                               22,335
(*)Jacksonville                      25,306
Chicago                              27,572
San Diego                            33,789
(**)New York                         40,064
* Municipally owned
** Rates are from Con-Ed, which is investor-owned and buys
power from the New York Power Authority, which is publicly
owned.