We need to shine the light on electric utilities

Commentary — By on March 4, 2013 at 9:44 am

by Justin Owen

With cold weather come slimmer wallets, as Tennessee families watch their electricity costs skyrocket in winter months. However, there may be more to your rising electric bills than you realize. Public utilities are up to some interesting things these days, and it’s costing you quite a bit.

If you wonder why your electric bills continue to rise, you might want to check the salary of your local public utility’s top brass. For example, the general manager of the Cumberland Electric Membership Corporation, which provides electricity to the Clarksville area, makes a whopping $357,000 a year in total compensation.

Similarly, the president of the Middle Tennessee Electric Co-Op, which powers Murfreesboro area homes, takes in $390,000 a year. That amounts to nearly seven times more than the median income of the utility’s customers and more than double the salary paid to the governor of Tennessee.

Another reason for heightened costs is that your electric utility might be dabbling in services already covered by private businesses. Numerous public utilities, mostly created to provide electricity throughout the state, have begun to compete with private companies by offering cable and even Internet service to their customers.

These risky and costly ventures require public utilities to backstop their investments with electricity ratepayers’ money. In many cases, the electricity customers who are on the hook for these costs do not even purchase Internet through the public utility, meaning that they are literally subsidizing other customers’ web habits. As of 2012, nine utilities in Tennessee had already lost approximately $176 million competing in the Internet business.

Public utilities across Tennessee are also investing in “Smart Grid” technology in a purported effort to reduce waste and promote efficiency. However, this technology comes with a huge price tag. Nationwide, public utilities have received $700 million in federal stimulus money to implement Smart Grid projects.

Among them, the Knoxville Utilities Board received $3.5 million in stimulus funds, while the Memphis Light, Gas and Water Division received more than $5 million. This pales in comparison to the state’s most ambitious public utility, the Chattanooga Electric Power Board, which received $111 million in stimulus funds.

Experts, meanwhile, say that the Smart Grid projects represent a colossal waste of money on technology that will soon become obsolete. When these efforts fail, electricity ratepayers and taxpayers will both be left holding the bag.

Public utilities are supposed to be owned by the very customers they serve, but they often represent “good ol’ boy” networks that squander ratepayer—and taxpayer—money while leaving consumers in the dark. It’s time to shine a light on what these public utilities are doing.

By requiring public utilities to conduct their business in the sunshine, preventing them from competing with the private sector in the television and Internet business, and weaning them from the taxpayer handouts that fuel their reckless habits, we can help shield Tennesseans from overzealous public utility executives.

If we bring transparency and accountability to public utilities, maybe by next winter, it will only be the cold weather driving up your family’s electric bills.


Justin Owen is president & CEO of the Beacon Center of Tennessee, the state’s premier free market think tank.


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