American Public Power Association
Scott Corwin is CEO of the American Public Power Association.
Energy affordability is a tough subject to grapple with but is on the minds of utility leaders and regulators everywhere as they lead the charge in the energy transition. It is a big picture subject that requires a look at all costs faced by energy and utility companies.
The issues are made even more difficult in that a utility’s customers, and those with affordability challenges, are not a homogeneous group with uniform circumstances. It’s a lot to figure out and it is a subject that requires much information and discussion.
Here, Public Utilities Fortnightly examines the issues surrounding affordability challenges with leaders in the know. You can learn much from American Public Power Association CEO Scott Corwin.
PUF’s Steve Mitnick: What is most important that the energy and utilities industry should think about on the issue of energy affordability?
Scott Corwin: From a public power perspective, affordability is always top of mind. It is for all utilities, but especially in a not-for-profit entity that is owned by its consumers.
Those paying the costs are your governors, owners, and regulators, and that works well. It has throughout the history of public power. They are the stewards of public assets, and that’s an important dynamic because when you’re regulated locally, you see the impacts of affordability.
This isn’t just about rates or overall budgets and costs. It’s keeping in mind the customer at the end of the line. We see the impacts on these communities.
Public power communities number around two thousand across the country, and in each one of those, affordability is impacting the residents and the businesses. The trends are visible, and it rarely goes the other way.
Costs are going up in double digits for electricity, at twice the rate of inflation. It’s additive year over year on customers.
Public power fared a bit better with customers paying on average about nine percent less than the other utility models. In the majority of the states, public power has the lowest residential rates and the lowest average monthly bill with strong service and value for customers.
When we do surveys, positivity sits at over two-thirds. That’s increased within the last few years. Public power also has the highest reliability rates on average by hours of outages.
There are affordability and rate pressures. A key is to be able to handle that and balance the other aspects critical for our business. Reliability is right up there with affordability.
PUF: Is there a difference for this affordability issue between the bigger cities like Los Angeles and smaller towns?
Scott Corwin: There is some difference, though costs and the rates tend to be driven more by geography, state policy, and regulatory dynamics than size. Certainly, size impacts what a utility can do and some of the costs it incurs, but there are other large factors.
For a lot of utilities, the biggest factor is power supply, their generation and transmission costs. For other utilities, it depends on their service territory and customer profiles. One factor might be distribution system maintenance if there are enormous costs for vegetation management or perhaps it might be infrastructure investments. It varies that way.
PUF: For the most part, public power is a buyer of power. How’s that affordability trend looking?
Scott Corwin: It varies and can change quickly. It’s spotty depending upon what system you’re in; what interconnection or markets are available.
The gas side recently turned in a better direction, so those folks got some relief or at least a lack of rate increases. Other folks are seeing constraints both from a transmission perspective or for available capacity within their region. It depends on where you are as much as anything.
PUF: What are public power utilities doing on affordability that’s creative?
Scott Corwin: We see a lot of innovation in public power. The biggest costs often come with trying to manage system peak. To the extent you can shave your peak or manage around it, it will save costs, but we also see innovation in systems internally.
You’ll see that increasingly with artificial intelligence, building a better mousetrap for some of the daily operations that utilities have. It’s happened over the years with meter reading and meter data management systems, and with customer call center capabilities.
We’re not-for-profit utilities with not a lot of margins to begin with. They tighten their belts, and tighten them further, and look at a lot of things creating the cost pressures and how to take those on directly.
There’s been, out of necessity, innovations in how to address supply chain and supply chain constraints. Certainly, there are costs on how to source supplies.
They look at how to aggregate purchases and handle recycling and refurbishing. A lot of trying to be smarter with less, or do more with less, which is a public power ethic on how to innovate.
Another area is the workforce, because that creates cost pressures as well, so it’s recruiting, retaining, and training staff to wear multiple hats and address various issues. So yes, there are a lot of different ways to get at those costs.
PUF: Do the public power utilities have special programs for low-income households?
Scott Corwin: There’s a long tradition of trying to help those in need. On the innovative side, you’ll see programs that make it easier for consumers to manage their own usage and to prepay amounts.
Public power always had programs, especially for need in areas where weather impacts usage. We’ve always advocated for, and supported, the LIHEAP funding and other programs, as well.
PUF: Are there state or federal policies, that APPA on behalf of the membership, is aiming to impact that would have a positive effect on the customers of public power?
Scott Corwin: There’re several policies we’ve been working on in our mission to serve public power and to enable their operations and control their costs. That’s at the heart of what we do on the policy side.
There’s work on policy issues at the federal, state, and local levels that impacts their costs. For a long time, we have been working to try to reduce the regulatory burden that utilities face. It comes in many forms. Certainly, it’s the length to permit and site new infrastructure along with increased costs.
The energy and transmission costs are impacted by many things, and those wholesale costs tend to be affected by federal policy as well, both in the regulatory and legislative realm, and with reliability standards.
Cyber and physical security’s another issue that is both a set of policies to keep systems more secure but also has a cost to it and can have a cost if you’re attacked and suffer. So, security issues, hardening of systems; there are policies that can help promote those and can help save costs.
The big issue we’re looking at this year is one that could impact capital costs in a public power utility; the need for tax-exempt municipal financing is important. The tax-exempt status is needed and would instantly raise costs if it were taken away.
As the government looks for potential offsets in the budget processes, we want to make sure that the message is out on how important tax-exempt finance is to local communities.
We’ve had about seven-hundred-fifty major projects in the last decade with tax-exempt financing at public power utilities. That’s important on the policy side.
PUF: Is public power strong, and is it growing?
Scott Corwin: Yes. It’s certainly strong. As a business model it’s got the great strength of local governance and being connected to the community. It has a strong record of service and reliability. There’s always potential for growth.
It’s growing regardless though, because the population’s growing and the business opportunities are growing. Loads have been growing for public power, and it’s an exciting time.
These public power utilities are located across the country and are just a great business model of public service. At APPA we try to help members keep moving forward into the future, being stronger together through public power.
Affordability conversations at fortnightly.com:
