For most of us, purchasing electricity for our home is as simple as calling up the local utility or shopping around for a local electricity provider. In most cases, your local utility is defined by the city that you live in, as are the rates in which you pay for the electricity you consume. In addition to residential service, these utilities provide electricity to commercial and industrial businesses or organizations as well.
But what about the city you live in? How does your city acquire the electricity it needs to ensure that you get power in all the right places, whenever and wherever you need it?
Electric Utilities
The government itself owns many electric utilities in the United States. That being said, a utility can be publicly or privately owned. Either way, electric utilities are typically regulated by the state’s Public Utility Commission (PUC). The PUC has a very important job. They ensure that the rates and services provided by a city’s electric utility are fair and abide by appropriate laws and regulations. PUC’s also issue certificates to the organizations that offer electricity services. This is how utility services areas are defined.
Electric utilities offer services at the consumer level – regardless of the type (residential, commercial, or industrial). This means that utilities can sell or buy wholesale energy through the available electricity grids. Some cities within the US have their own electric utility that they own and operate. Again, these utilities must abide by the laws and regulations set forth by the PUC.
For example, Texas has 72 Municipally Owned Utilities (MOUs). Some of these MOUs include:
- Bellville
- Boerne
- Bowie
- Brownfield
- Brownsville PUB
- Caldwell
- Castroville
- Denton
- Electra
- Farmersville
- Flatonia
- Fredericksburg
- Garland
- Georgetown
- Giddings
- Hempstead
- Hondo
- Jasper
- Kerrville PUB
- Kirbyville
- New Braunfels Utilities
- Newton
- Robstown
- San Antonio CPS
- San Augustine
- San Marcos
- San Saba
- Sanger
Regulation versus Deregulation
Starting in the 1990’s, some areas of the United States decided (and acted upon) the fact that the electricity utility companies had become monopolies. To introduce competition into the market, “energy deregulation” was introduced. Deregulation separates the delivery of electricity (and in some cases natural gas) from the supply. It means that utilities are still responsible for the delivery and maintenance of electricity to homes and businesses, but the supply of electricity is opened up to competition and can be provided by a local utility or a private REP (Retail Energy/Electricity Provider).
Since then, Retail Energy Suppliers have established themselves within the energy market, which has flooded the industry in deregulated markets with more options for consumers. Since there are more options, it generally coerces individual suppliers to offer the best rates (as they’re competing against many other suppliers), services and products in order to retain their customers.
There are many states in America that are deregulated. A few of these states include:
Regulated states do not offer consumers the choice between retail energy suppliers. They must receive their electricity by the city defined electricity utilities. Some states that are currently energy regulated include:
- Alabama
- Alaska
- Hawaii
- Idaho
- Mississippi
- Minnesota
- North Carolina
- Wisconsin
Setting Electricity Rates
Historically, electricity rates were set at the city level, which allowed the municipal government to regulate electricity rates. This was because most utilities provided services within a specific city or cities. In 1975, the Public Utility Regulatory Act (PURA) went into effect. As a result, the rate making decisions were gradually moved over to the state itself.
Today, cities typically have control over the rates for distribution and transmission – but within the city’s limits as is defined by the PUC. However, it is very common for rate increase requests to be consolidated, appealed and decided upon by the PUC instead of the city itself. Both the city and the PUC must ensure that the suggested increase and general rates are reasonable and fair.
City Electricity Acquisition – Key Roles
Note: this is just a general guide and varies from city to city.
Depending on the size of the city, several different roles or positions within the municipal government might differ from one to another. In addition, the title of the role might be a little bit different from one city to the next. Despite these facts, there are typically three roles at the municipal level that help to acquire electricity for the city.
City Manager: is a person hired to manage or provide administrative management services for a city. In some cities, this position is also referred to as, Chief Executive Officer (CEO) or Chief Administrative Officer (CAO). The City Manager is responsible for many tasks including,
- Management of day to day operations for all departments and staff
- Public Relations
- Does not have voting privileges but attends all city council meetings
- Primary technical advisor for overall operations
- Management of city budget
A City Manager’s responsibilities depend on the size of the city, as well as the different laws and regulations in place within that city.
Energy Manager: the person filling this role is responsible for regulating, planning and monitoring the energy consumption for the city (or organization). Typically, only very large cities within the United States have someone filling these shoes.
Chief Financial Officer: is the person responsible for managing and maintaining the financial aspects of the city budget. Typically, this person is in charge of financial planning and providing financial reports. They are also responsible for acquiring funding, budget, and forecasting.
Acquiring Electricity for Small Cities
Population: 7,500 and below
Example Cities: Baker (MT) – 1,741, Tecumseh (OK) – 6,457, Ambler (PA) – 6,501
Typical Electricity Usage: Average US household uses 11,700 kWh per year.
Small cities tend to run on a shoestring budget. This means that the City Manager is the person wearing the most hats – they do everything. From answering phones, to purchasing, administrative tasks to payroll, the City Manager handles it all! While the City Manager or City Operations Manager is an important role for any city, for small cities, they are akin to a king or queen.
Acquiring Electricity for Medium-Sized Cities
Population: 7,500 to 25,000
Example Cities: Champlin (MN) – 23,894, Alamo (TX) – 19,246, Oak Harbor (WA) – 22,075
Typical Electricity Usage: Average US household uses 11,700 kWh per year.
In medium cities, either the City Manager or a CFO/Finance individual is responsible for the acquisition of electricity for the city.
Acquiring Electricity for Large Cities
Population: 25,000+
Example Cities: Houston (TX) 2.196 million, New York (NY) – 8.406 million, San Francisco (CA) – 837,442
Typical Electricity Usage: For a city like San Francisco, approximately 18,000 MW hours of electricity is consumed each day.
For large cities, either the City Manager or Operations Manger is the person responsible for the acquisition of electricity. If the city is very large, they will typically have an Energy Manager.
Do you manage the energy for your municipality? Call Eisenbach Consulting, LLC at 800.977.4020. We’re a full-service energy management and procurement company. We can help lower your energy costs and advise you on how you can manage your energy more efficiently on a city-wide level.
