A question from Bob Frieberg of Beresford, SD:
Among the most benefited patrons of electric utility retail consumers are those residing in cities which own and operate their own utility. Historically, these utilities have been limited to serving their own citizens and do not engage in related activities like the investor-owned utilities and the rural electric cooperatives do. Will you allow these local communities to continue to serve their own or will you require them to engage in competitive retail marketing, and even among those who benefit not at all from the local ownership?
Rep. Schaefer responds:
I believe public power systems should be allowed to continue to offer
electric services to their citizens, but not be allowed to deny their
citizens choice. The fact of the matter is that just because public power
systems do not collect profits does not mean their rates are low. The system
in Beresford, South Dakota charges 5.22 cents per kilowatthour, which is a
pretty low rate. However, other systems in South Dakota charge even lower
rates -- Miller, South Dakota charges only 3.67.
Importantly, H.R. 655 gives states, municipal utilities and rural
cooperatives the tools they need to plan their transition to a competitive
market. The legislation honors the independent nature of municipalities and
rural co-ops by giving them the same guidelines as states for designing their
plans for getting to an open market by December 15, 2000.
Rep. Dingell responds:
From all I have learned at this point, there is no reason for Congress to step in with a heavy hand and tell the states when and how to embrace retail competition. It may well be that municipal service is the best thing for some cities, and I have not seen any evidence indicating that Congress needs to interfere with state decisions on this issue.
In all candor, however, I must also tell you that there is a widely held perception that municipalities enjoy significant advantages over independently owned utilities. In fact, the fear is that munis could enter newly competitive retail electric markets with an unfair competitive advantage. That's why some have called for stripping them of existing tax and other preferential treatment.
Again, this is one of the difficult issues Congress will have to deal with if it adopts a one-size-fits all approach directing states to restructure their electric system. Your concern illustrates one of the risks of going down that path; to wit, that aspects of the current system that are working well could be jeopardized in the rush to embrace a nearly theological faith in competition for its own sake.
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