Cities have taxpayers and monopoly utility companies have ratepayers. When the city owns the utility, the taxpayers are – more or less – the same group of people as the ratepayers. In this case, does it matter which group pays how much for what? Should, for example, the municipal utility buy vehicles for other city departments? Should electric ratepayers fund improvements to city parks?
Elliot Blackburn has a long story in the Sunday Lubbock Avalanche-Journal exploring the relationship between the city of Lubbock and it’s municipal utility Lubbock Power & Light. While it may sound like, and is, a story focused on Lubbock, it is also a good case for meditating on the principles of local political economy.
ALSO in today’s A-J, the editorial board weighs in with “When it comes to LP&L and city, ‘us’ vs. ‘them’ should just be us.” Beyond the question of whether the city council and electric utility board should just get along, the editorial does raise an important question about electric utility rates, utility surpluses, and transfers to the city. When the utility surplus is high, should rates be cut or the excess “shared” with the city? The newspaper says cut rates, and that is also the conclusion that makes the most sense economically.
(Is it too late to have Xcel buy LP&L’s assets in the city instead of the other way around? If we are going to have a monopoly utility in town, it might be a good idea to have a monopoly utility whose budget is a bit harder for the city council to dip into.)