Municipal Electricity & Eminent Domain

There have always been three primary functions of public electric utilities: generation (production of electricity), transmission (sending high voltage power to distribution points), and distribution (delivering power to your business or home). The first public utilities typically controlled all three functions. Because of recent deregulation, utility companies such as Ameren have legally separated the functions into 'independent' companies.

The planning and management of these systems was once the exclusive purview of private business. Energy suppliers would go where the markets were most lucrative. Initially, companies chose urban cities to install their systems. Rural America was left without electric power unless power was provided by small-scale electric wind energy systems that typically served one homestead. Back in 1975, some 40 years after REA began, I spent some time scouring farms along the back roads of North Dakota to salvage abandoned wind systems that could still be found. Many of these systems have been refurbished and work today. Most farmers eventually allowed their wind systems to fall into disrepair after the federal government got into the energy planning, production, transmission and distribution business by enabling rural electrification with the REA. Some farmers are returning to their earlier energy producton roles by insstalling wind power and biomass power systems.

In some cases, individuals and small communities read from a different book than the REA bible and chose to provide themselves with their own public utility power. They didn’t rely upon the federal government; they did it themselves. As a result there are now 70 municipal utility companies that are members of the Illinois Municipal Utilities Association. Flora, IL is unique among them as they own and operate all of their utilities: electric, gas, water, and sewer.

Most of the 70 Illinois municipal utilities are ‘transmission-dependent’ - meaning they buy their power from larger suppliers, yet maintain their own distribution and customer service infrastructure. This is essentially the type of system proposed by Carbondale Mayor Brad Cole. The biggest difference being that rather than build the distribution system from scratch, Cole proposes to pay for the system while obtaining ownership through the legal process of eminent domain. This is a commonly used method to acquire property necessary for the completion of projects such as removal of blight or the construction of railroads, highways, public buildings, and open space that are deemed for the public welfare.

Eminent domain use is not without its critics. Its use is generally opposed if its purpose is to provide other private parties unfair advantage in the marketplace. Yet, eminent domain can be used to remove harmful blight and acquire resources for needed badly needed public infrastructure. The downside of eminent domain is the potential to be sued by the owner of the property being taken and having to pay the plaintiffs court costs if the case is lost. Interestingly, Mayor Cole thinks the fight is worth it to acquire the valuable utility infrastructure of the Ameren electric distribution utility, and not worth the effort in the case of the blighted American TAP bar in downtown Carbondale - a major downtown health, safety, and aesthetic nuisance.

Energy planning and regulation duties have increasingly become the purvue of states as a result of improper behavior of utility companies. The Illinois Commerce Commission has the role of protecting consumers from unfair pricing and investigates informal complaints against public utility companies. They are the just one of the entities that bears responsibility for the devastating effects of the January 2007 Ameren price increase.

The latest twist in the Illinois legislature’s grievance against high-priced Ameren electric service is the proposal to reapply the freeze on electric rates long enough to allow competition to enter the Illinois market, thus giving consumers a choice of which provider to use. The rationale being that in a competitive market, electricity prices should go lower as the market prices adjust to supply and demand pressure. Competition in the form of alternative Energy Service Companies (ESCos) will theoretically produce business innovation and new technologies will replace older, inefficient, and expensive systems. Consumers are supposed to benefit. So far they haven't and probably won't!

I’ll soon write about ESCOs and options open to communities that want more energy self reliance.