The Green New Deal Must Put Utilities Under Public Control

Community ownership of power is the most promising path toward equity, democracy and renewable energy.

Jackson Koeppel, Johanna Bozuwa and Liz Veazey February 1, 2019

Investor-owned utilities have lobbied against rooftop solar projects and dug in their heels on transitioning to renewables. A Green New Deal should empower communities to kick them out. (Jeff Gritchen/Digital First Media/Orange County Register via Getty Images)

High­land Park, Mich., is a small, major­i­ty-black com­mu­ni­ty of three square miles, nes­tled in the cen­ter of Detroit, with some of the high­est pover­ty and unem­ploy­ment rates in the coun­try. It’s suf­fered a series of indig­ni­ties and set­backs over the years: a state emer­gency man­age­ment takeover of the city and sur­round­ing areas; a state takeover of the pub­lic water infra­struc­ture; pub­lic school clo­sures; and a col­lapse of tax rev­enue fueled by white flight, fos­sil-fuel-dri­ven sub­ur­ban devel­op­ment, and the rapid decline of the hous­ing mar­ket and auto industries.

In designing the Green New Deal, we must call for change that not only helps us meet our climate goals, but shifts the very structure of the institutions that created the problem to begin with.

Res­i­dents were hit again when, in 2011, an arma­da of flatbed trucks with work­ers bear­ing DTE Ener­gy logos moved through the city and start­ed pulling street­light poles out of the ground. Res­i­dents watched from their porch­es as their infra­struc­ture was tak­en away in real time.

DTE Ener­gy, the area’s investor-owned monop­oly ener­gy util­i­ty, repos­sessed over 1,000 street­lights from High­land Park because of $4 mil­lion in unpaid elec­tric bills accu­mu­lat­ed over many years. (To put that in con­text, the city’s debt to the util­i­ty was still sig­nif­i­cant­ly less than what DTE’s CEO, Ger­ard Ander­son, took home in com­pen­sa­tion that year: $5.4 mil­lion.)

The repos­ses­sion prompt­ed High­land Park res­i­dents to orga­nize and put up their own solar street lights. But it also forced the com­mu­ni­ty to reck­on with deep­er ques­tions of how DTE treat­ed res­i­dents. A 2017 sur­vey of 70 High­land Park house­holds con­duct­ed by Soular­dar­i­ty, a non­prof­it and com­mu­ni­ty orga­niz­ing group, found that close to half of those polled had trou­ble pay­ing their elec­tri­cal bills. A quar­ter had expe­ri­enced gas or elec­tric­i­ty shut­offs, the major­i­ty of which were dur­ing Michigan’s cold win­ter months. Nonethe­less, DTE has pro­posed addi­tion­al exten­sive rate hikes, rais­ing mon­ey that goes in large part to main­tain their cur­rent coal plants, build new fos­sil fuel plants and pay their CEOs millions.

While DTE’s actions are shame­ful, they aren’t too dif­fer­ent from the behav­iors of many investor-owned util­i­ties in the Unit­ed States.

The Green New Deal advo­cat­ed by mem­bers of Con­gress and pres­i­den­tial hope­fuls, includ­ing Detroit’s own fresh­man Rep. Rashi­da Tlaib, promis­es rapid action on cli­mate change. While the Green New Deal should encom­pass a mas­sive range of ini­tia­tives, a cor­ner­stone must be a pro­gram to free com­mu­ni­ties from the unjust pow­er of investor-owned util­i­ties — not only for de-car­boniza­tion, but in order to trans­form our econ­o­my so it serves every­one. Mod­eled after the orig­i­nal New Deal’s Rur­al Elec­tri­fi­ca­tion Admin­is­tra­tion, such a pro­gram could give com­mu­ni­ties the much-need­ed finance and capac­i­ty to kick out their investor-owned util­i­ties in favor of com­mu­ni­ty-run, renew­able-pow­ered utilities.

The prob­lem with investor-owned utilities

DTE and its fel­low investor-owned util­i­ties have a long his­to­ry pri­or­i­tiz­ing mon­ey-mak­ing over the needs of com­mu­ni­ties or the envi­ron­ment. As com­pa­nies that are large­ly trad­ed on the stock mar­ket, their pri­ma­ry dri­ver is share­hold­er gain and growth. They dump pol­lu­tion on poor peo­ple and peo­ple of col­or, sit­u­at­ing their nox­ious fos­sil fuel plants, land­fills, incin­er­a­tors or refiner­ies in black and brown neigh­bor­hoods, where the res­i­dents have less cap­i­tal — be it time, mon­ey or polit­i­cal influ­ence — to object.

House­holds in low-income neigh­bor­hoods and com­mu­ni­ties of col­or across U.S. cities expe­ri­ence a high­er-than-aver­age ener­gy bur­den — a high­er ratio of ener­gy costs to earned income — in part because they often live in old­er, ener­gy-inef­fi­cient build­ings. The investor-owned util­i­ties also use regres­sive pric­ing mech­a­nisms that squeeze the poor to the ben­e­fit of their share­hold­ers and high­er-use ratepay­ers: High-ener­gy com­mer­cial users get low­er rates, while ordi­nary con­sumers who seek to save mon­ey through con­serv­ing ener­gy or installing solar sys­tems find them­selves being hit with high­er fixed rates from util­i­ties just to get access.

Through­out Wayne Coun­ty, which includes High­land Park and Detroit, house­holds at 50 per­cent or less of the pover­ty lev­el are spend­ing a stun­ning 30 per­cent of their income on ener­gy — three times the thresh­old that qual­i­fies as liv­ing in ener­gy pover­ty.” And across the coun­try, much as in High­land Park, shut­offs are an all-too reg­u­lar occur­rence, putting res­i­dents at risk of being with­out air con­di­tion­ing in extreme heat, home heat­ing in extreme cold, or even the abil­i­ty to oper­ate life-sup­port­ing med­ical equipment.

These big com­pa­nies con­sol­i­date polit­i­cal pow­er through cam­paign con­tri­bu­tions, lob­by­ing and tac­ti­cal phil­an­thropy. They have built up seri­ous polit­i­cal and eco­nom­ic machines where they oper­ate, often so much so that the reg­u­la­tors bend to their will, quash­ing com­mu­ni­ty needs. For exam­ple, Domin­ion Ener­gy of Vir­ginia is the largest cor­po­rate con­trib­u­tor to elec­toral cam­paigns in the state. No sin­gle com­pa­ny even comes close to Domin­ion in terms of its wide-rang­ing influ­ence and impact on Vir­ginia pol­i­tics and gov­ern­ment,” says Lar­ry Saba­to, a Uni­ver­si­ty of Vir­ginia professor. 

The pri­vate util­i­ty indus­try shows no mean­ing­ful sign of being will­ing — or even able — to adapt to the urgent need for a shift to renew­able ener­gy. In large part, this is because their busi­ness mod­el revolves around a cen­tral­ized dis­tri­b­u­tion sys­tem and a deeply-vest­ed inter­est in fos­sil fuel infra­struc­ture, from pipelines to pow­er plants. These com­pa­nies have used their eco­nom­ic and polit­i­cal machines to dig in their heels in on the ener­gy tran­si­tion — from fight­ing rooftop solar tooth and nail to chang­ing rate struc­tures in ways that make renew­able ener­gy finan­cial­ly infeasible.

While some investor-owned util­i­ties are start­ing to shift to renew­able ener­gy, their com­pul­sion to recoup their sunk costs and oblig­a­tion to gen­er­ate share­hold­er prof­its con­tin­u­al­ly impede progress. If not for pres­sure from munic­i­pal­iza­tion cam­paigns in Boul­der, Colo., and Min­neapo­lis, Minn., the much-laud­ed elec­tric util­i­ty Xcel may not have made com­mit­ments to increase its use of renew­able ener­gy so quickly.

Where they’ve giv­en in to renew­ables, investor-owned util­i­ties active­ly cam­paign against any projects that would fall out­side of their own­er­ship. For exam­ple, DTE has been push­ing a pro­pos­al that would change how net meter­ing works—a move that could seri­ous­ly hurt rooftop solar because those who have it would ben­e­fit less from the ener­gy they con­tribute to the grid. In response to DTE’s pro­pos­al, Becky Stan­field, senior region­al direc­tor of Vote Solar says, It is very clear that DTE is try­ing to put a dag­ger in the heart of rooftop solar in Michigan.”

This is espe­cial­ly prob­lem­at­ic because we only have 12 years to imple­ment a 45 per­cent reduc­tion in our col­lec­tive green­house gas emis­sions to avoid the worst con­se­quences of cli­mate change, accord­ing to the lat­est report of the Unit­ed Nations Inter­gov­ern­men­tal Pan­el on Cli­mate Change. 

The Unit­ed States is already feel­ing the effects of cli­mate change, with the costs dis­pro­por­tion­ate­ly falling on low-income com­mu­ni­ties and peo­ple of col­or. The investor-owned util­i­ties’ per­sis­tence in a cli­mate-change-fuel­ing busi­ness mod­el is a threat to us all. 

Time to take the power

This fail­ure begs the ques­tion: Is it time to lib­er­ate our­selves from for-prof­it util­i­ties in favor of com­mu­ni­ty con­trol? By cut­ting ties with investor-owned util­i­ties to build new, pub­licly owned and oper­at­ed ener­gy util­i­ties, com­mu­ni­ties could put them­selves back in charge of deci­sion-mak­ing, seek to low­er their ener­gy bur­den, tran­si­tion more rapid­ly to renew­able ener­gy and place equi­ty at the cen­ter of ener­gy policy. 

Now elect­ed offi­cials like Tlaib and Rep. Alexan­dria Oca­sio-Cortez (D‑N.Y.) have teamed up with cli­mate activists to demand adop­tion of a Green New Deal.” Ocasio-Cortez’s pro­pos­al man­dates the rapid elim­i­na­tion of fos­sil fuel use and calls for a renew­able, resilient ener­gy future with social, eco­nom­ic, racial, region­al and gen­der-based jus­tice and equal­i­ty” at the core. 

Com­mu­ni­ty con­trol of util­i­ties is a key way to deliv­er on a just Green New Deal. One way to bring this about is to have the fed­er­al gov­ern­ment fund this own­er­ship shift through patient, low- to no-inter­est loans (as well as grants and oth­er incen­tives) to sup­port the cre­ation of com­mu­ni­ty-owned, non­prof­it util­i­ties, allow­ing com­mu­ni­ties to ditch their cur­rent for-prof­it util­i­ty con­tracts and take over their local wires. 

The par­al­lel: elec­tri­fy­ing rur­al America

This is not unprece­dent­ed. The U.S. gov­ern­ment took very sim­i­lar steps in the 1930s when Con­gress passed the Rur­al Elec­tri­fi­ca­tion Act as part of the New Deal to sup­ply pow­er to areas that for-prof­it com­pa­nies had writ­ten off as unprofitable.

When that act was signed into law by Pres­i­dent Franklin D. Roo­sevelt, investor-owned util­i­ties had left nine out of 10 rur­al homes with­out access to elec­tric­i­ty. Writes author John L. Neufeld in his book, Sell­ing Pow­er: Eco­nom­ics, Pol­i­cy and Elec­tric Util­i­ties Before 1940, Sto­ries abound­ed of farm­ers com­ing indi­vid­u­al­ly and in groups to util­i­ty exec­u­tives beg­ging for ser­vice, only to be flat­ly reject­ed, even when their need came from ill­ness in the fam­i­ly and even when they were close to an exist­ing pow­er line.” 

This cre­at­ed deep divides between America’s cities and coun­try, leav­ing rur­al areas behind. Beyond [city lim­its] lies dark­ness,” wrote one advo­cate for rur­al elec­tri­fi­ca­tion. Rur­al res­i­dents were sub­ject to gru­el­ing labor each day, with women bear­ing a dis­pro­por­tion­ate bur­den of the back-break­ing work. With­out run­ning water, gas or elec­tric­i­ty, process­es like laun­dry and cook­ing took much longer, detract­ing from women’s abil­i­ty to make life rich­er and fuller, recounts William Leucht­en­burg in Franklin D. Roo­sevelt and the New Deal.

Through the Rur­al Elec­tri­fi­ca­tion Act of 1936, Roo­sevelt launched the Rur­al Elec­tri­fi­ca­tion Admin­is­tra­tion (REA) as a way to jump­start rur­al elec­tri­fi­ca­tion by pro­vid­ing long-term, patient cap­i­tal in the form of low- to no-inter­est loans. Orig­i­nal­ly, they were offered to for-prof­it util­i­ties, but the util­i­ties reject­ed the loans, con­tin­u­ing to deem REA projects unprof­itable. But, farm­ers and rur­al com­mu­ni­ties applied in huge num­bers to start elec­tric coop­er­a­tives, pub­lic pow­er dis­tricts and munic­i­pal util­i­ties in order to bring elec­tric­i­ty to their areas. In 1935, Con­gress appro­pri­at­ed $410 mil­lion in loans over the first 10 years of the pro­gram (more than $7.5 bil­lion in 2019 dol­lars), and with­in a decade of open­ing up the pro­gram, rur­al areas went from hav­ing lit­tle to no elec­tric­i­ty to more than 90 per­cent elec­tri­fi­ca­tion, spurring faster growth of rur­al economies. Near­ly all of the loans were ful­ly repaid and the ulti­mate cost to the tax­pay­er was low. REA is now con­sid­ered one of the most suc­cess­ful of the New Deal agencies.

While REA con­trolled the flow of fed­er­al funds to the region and super­vised their use, com­mu­ni­ties were giv­en a sub­stan­tial amount of auton­o­my to build out elec­tri­fi­ca­tion in their areas and were large­ly owned and oper­at­ed by cus­tomer-own­ers. As Bri­an Can­non describes in his analy­sis of rur­al elec­tric co-ops in the West, Pow­er Rela­tions: West­ern Rur­al Elec­tric Coop­er­a­tives and the New Deal,” Although REA pro­grams were planned and admin­is­tered in Wash­ing­ton, D.C., west­ern res­i­dents rather than New Deal admin­is­tra­tors ini­ti­at­ed most of the region’s rur­al elec­tri­fi­ca­tion efforts.”

REA pro­vid­ed impor­tant tech­ni­cal and legal capac­i­ty to sup­port the local­i­ties, help­ing the new­ly formed coop­er­a­tives and pub­licly owned util­i­ties with con­tract nego­ti­a­tion, man­age­ment tech­niques, audit­ing, con­struc­tion of their sys­tems and even with shap­ing new norms around how to inte­grate elec­tri­fi­ca­tion into rur­al lifestyles. Today, there are more than 900 rur­al elec­tric coop­er­a­tives that start­ed through the pro­gram. The admin­is­tra­tion is now housed under the U.S. Depart­ment of Agri­cul­ture, and con­tin­ues to pro­vide loans to rur­al areas for new invest­ments in their grids.

The pro­pos­al: Com­mu­ni­ty Own­er­ship Pow­er Administration

Cur­rent investor-owned util­i­ties think of shift­ing to renew­able ener­gy in much the same way as the util­i­ties of the 1930s thought of rur­al elec­tri­fi­ca­tion, as a non-eco­nom­ic social good, and have active­ly opposed being man­dat­ed to act. This clear mar­ket fail­ure, along with investor-owned util­i­ties’ immense polit­i­cal pow­er, has stymied action on many com­mu­ni­ty solar, ener­gy-effi­cien­cy and non-exploita­tive rate projects across the country. 

A Green New Deal should eman­ci­pate com­mu­ni­ties from these investor-owned util­i­ties, fix­ing the mar­ket fail­ure by deploy­ing the much-need­ed finance and capac­i­ty to kick out their incum­bent util­i­ties for pub­licly run, renew­able-pow­ered ones. The real­i­ty is that the new, renew­able grid we are try­ing to build will be based on more decen­tral­ized assets amenable to the scale of local pow­er, not the old, top-down mod­el of investor-owned utilities.

To do so, we advo­cate imple­ment­ing what we call the Com­mu­ni­ty Own­er­ship Pow­er Admin­is­tra­tion (COPA), a financ­ing and tech­ni­cal capac­i­ty pro­gram sim­i­lar to the REA of the first New Deal. COPA would pro­vide a cat­alyt­ic tool for a new ener­gy sys­tem based on local, com­mu­ni­ty ben­e­fit. Munic­i­pal­i­ties, coun­ties, states and sov­er­eign trib­al nations could gain the nec­es­sary legal author­i­ty along with access to a suite of patient financ­ing and fund­ing mech­a­nisms — includ­ing low-to-no-inter­est loans, grants and oth­er incen­tives — need­ed to ter­mi­nate their con­tracts with investor-owned util­i­ties, buy back the ener­gy grid to form a pub­lic or coop­er­a­tive util­i­ty, and invest in a resilient, renew­able system. 

The funds could be used by the com­mu­ni­ty util­i­ties to invest in a vibrant local econ­o­my. Work­ing with com­mu­ni­ty mem­bers, the util­i­ties could build or spur projects in ener­gy effi­cien­cy, grid resilien­cy, shared solar and elec­tri­fi­ca­tion, and pro­vide afford­able ener­gy rates, good jobs and access to com­mu­ni­ty-based enter­prise along the way.

This approach could increase buy-in from orga­nized labor, as well. Unions have his­tor­i­cal­ly pushed back on renew­able ener­gy devel­op­ments since util­i­ty and fos­sil fuel com­pa­nies have typ­i­cal­ly had union rep­re­sen­ta­tion, while renew­able ener­gy com­pa­nies to date have large­ly not been union­ized. The pub­lic sector’s high­er rate of union­iza­tion — about five times high­er than pri­vate sec­tor work­ers — could increase unions’ trust that a pub­licly-owned util­i­ty would secure labor agree­ments with fair wages and good work­ing con­di­tions through­out their oper­a­tions and con­tract­ed work.

These com­mu­ni­ty-based util­i­ties could even take over oth­er pub­lic goods — such as broad­band inter­net and water — to ensure that these neces­si­ties are owned and oper­at­ed by the com­mu­ni­ties that use them. Already more than 800 com­mu­ni­ties in the Unit­ed States have invest­ed in pub­lic or coop­er­a­tive broad­band net­works to pro­vide afford­able, local­ly con­trolled access to telecommunications.

Much like the REA, COPA would also pro­vide tech­ni­cal assis­tance that helps com­mu­ni­ties nav­i­gate legal and tech­no­log­i­cal chal­lenges through­out the takeover and start­up process. The pro­gram could even help to pro­vide ideas and guide­lines for set­ting up insti­tu­tions that allow for par­tic­i­pa­to­ry democ­ra­cy, dis­trib­uted own­er­ship and deliv­er­ing on a vibrant econ­o­my, while still leav­ing room for local design.

These util­i­ties could imple­ment mul­ti-stake­hold­er boards, where work­ers, com­mu­ni­ty mem­bers and elect­ed offi­cials make deci­sions togeth­er. They could also include con­sis­tent neigh­bor­hood meet­ings on top­ics rang­ing from work­force needs to how rates are affect­ing res­i­dents to new renew­able ener­gy projects in order to decen­tral­ize par­tic­i­pa­tion and draw upon local knowl­edge — be it tech­ni­cal exper­tise or pure lived expe­ri­ence — across their ser­vice area. These meet­ings would pro­vide avenues for peti­tion­ing and enable bet­ter mech­a­nisms for trans­par­ent, acces­si­ble infor­ma­tion. While REA mobi­lized elec­tri­fi­ca­tion and broad­ened com­mu­ni­ty asset own­er­ship, many of the rur­al elec­tric coop­er­a­tives of today oper­ate as old boys’ clubs” with­out clear avenues for com­mu­ni­ty mem­bers to engage or even know they have an own­er­ship stake. By tak­ing clear steps to democ­ra­tize com­mu­ni­ty util­i­ties, COPA iter­ates upon and builds bet­ter insti­tu­tions that will specif­i­cal­ly ensure that low-income res­i­dents and com­mu­ni­ties of col­or have access and agency in this process. 

To date, com­mu­ni­ties that have munic­i­pal­ized util­i­tites have financed the takeover of investor-owned util­i­ties large­ly through munic­i­pal rev­enue bonds. They are gen­er­al­ly a major way for states and local­i­ties to pay for large, expen­sive cap­i­tal projects, but they are also a major con­straint on what cities can do. Munic­i­pal bonds, which are trad­ed on the finan­cial mar­ket, require pay­back with inter­est, with rates high­er for poor­er cities as a result of low cred­it rat­ings from pri­vate rat­ing firms. The COPA pro­gram would help by pro­vid­ing mul­ti­ple low-cost financ­ing path­ways to make the tran­si­tion more afford­able and acces­si­ble for com­mu­ni­ties across the Unit­ed States. 

Beyond financ­ing new­ly formed com­mu­ni­ty util­i­ties, COPA could also pro­vide financ­ing or fund­ing to already exist­ing pub­licly- or coop­er­a­tive­ly-owned util­i­ties tran­si­tion­ing to more renew­able projects. The poli­cies and sub­si­dies that the Unit­ed States has pro­vid­ed up to now for the ener­gy tran­si­tion, and infra­struc­ture writ large, have been too focused on for-prof­it com­pa­nies instead of com­mu­ni­ties or local gov­ern­ments — essen­tial­ly giv­ing away pub­lic funds to prof­it the 1%. As Oca­sio-Cortez puts it, For far too long, we gave mon­ey to Tes­la [and to oth­er tech­nol­o­gy entre­pre­neurs], and we got no return on the invest­ment that the pub­lic made in new tech­nolo­gies. It’s the pub­lic that financed inno­v­a­tive new technologies.”

A relat­ed prob­lem: since pub­licly owned util­i­ties or non­prof­its don’t pay tax­es, they cur­rent­ly can­not take advan­tage of fed­er­al invest­ment or pro­duc­tion tax cred­its to finance a renew­able ener­gy project. As a con­se­quence, they end up con­tract­ing with a for-prof­it cor­po­ra­tion that con­structs and owns the renew­able ener­gy assets, and claims the tax cred­it. This has led to pri­va­ti­za­tion of our renew­able ener­gy assets instead of direct invest­ment and own­er­ship by com­mu­ni­ties and local governments. 

COPA would avoid this. Instead of con­tin­u­ing to con­sol­i­date wealth among high-paid CEOs and share­hold­ers, com­mu­ni­ty util­i­ties could rein­vest wealth back into the grid and the larg­er com­mu­ni­ty. COPA would help by redi­rect­ing pub­lic invest­ments to pub­lic insti­tu­tions, focus­ing on cre­at­ing val­ue for com­mu­ni­ties through a renew­able ener­gy future.

In design­ing the Green New Deal, we must call for change that not only helps us meet our cli­mate goals, but shifts the very struc­ture of the insti­tu­tions that cre­at­ed the prob­lem to begin with. It means putting pub­lic goods under pub­lic con­trol, pro­vid­ing clear path­ways for com­mu­ni­ties like High­land Park to take ener­gy into their own hands and build util­i­ties that are for and by the people.

High­land Park­ers have orga­nized to install solar street lights, weath­er­ize homes and bulk-pur­chase solar. They’ve also cre­at­ed a pro­pos­al for city­wide solar light­ing and the Blue­print for Ener­gy Democ­ra­cy, a com­mu­ni­ty-wide plan to achieve sus­tain­abil­i­ty. With sup­port through the Green New Deal and COPA, High­land Park can build on this orga­niz­ing to become a mod­el of what local pow­er can do.

Jack­son Koep­pel is the exec­u­tive direc­tor of Soular­dar­i­ty, a grass­roots mem­ber­ship orga­ni­za­tion work­ing for ener­gy democ­ra­cy in High­land Park, Mich., and its neigh­bor­ing com­mu­ni­ties. Liz Veazey is net­work direc­tor at We Own It, a nation­al net­work for coop­er­a­tive mem­ber-own­er rights, edu­ca­tion and orga­niz­ing with a focus on rur­al elec­tric coop­er­a­tives. Johan­na Bozuwa is a research asso­ciate with The Next Sys­tem Project at the Democ­ra­cy Collaborative.
Limited Time: