Chapter 5: Local Action Plan
Best Bets (Municipal Utilities)

This section describes Municipal Utilities as a best bet for developing a local action plan.  See the menu on the left for other sections within Chapter 5.
The below table of contents is “click-able” if you wish to jump to different sub-sections on this page.
Encourage Utility Providers to Offer Energy Efficiency Services
Case Study: SCORE Pilot Program, TX
Encourage Utility Providers to Set a Minimum Commodity from Renewable Energy Purchases
CASE STUDY: Radnor Township, PA
CASE STUDY: Los Angeles, CA
Additional Resources
[DOWNLOAD] the “Municipal Utilities” section of Chapter 5 (311 KB .pdf)


Encourage Utility Providers to Offer Energy Efficiency Services


Cities typically obtain their electric and gas services either from municipal utilities or under contract from utilities that provide power to a much wider service territory. A few cities still derive their power from Rural Electric Co-ops.

Many of the best efficiency programs in the nation have come from municipally owned utilities.  The programs profiled elsewhere in this manual of Osage, Iowa, Seattle City Light, Sacramento, California, and Burlington, Vermont are representative of the sorts of programs that a “muni” can offer.  The difference between the efficiency programs offered by munis and those of “Investor owned utilities” has been so stark that many citizens have begun efforts to municipalize their service territory.[1]

But in truth, the privately held utilities can offer excellent efficiency and renewables programs, as well.  In the 1980’s Southern California Edison found it cost effective to give away over a million compact fluorescent light bulbs.  The energy saved this way was cheaper than just running SCE’s existing power plants.  Utilities like Burlington Electric lease efficient light bulbs to their customers for pennies a month and give free replacements.  Not only does this keep the bulbs from being thrown away, it enables customers to pay for the efficiency over time.  Burlington’s Smartlight program has 65,000 bulbs in circulation serving over 7,000 homes, achieving an annual savings of over $390,000.

For many years it was believed that it was in the financial interest of utilities to build more power plants.  Indeed, until the early 1970’s every new plant lowered costs for everyone in the system.  Utility regulations were structured to reward building more plants, customers were urged to buy “All Electric Homes” and incentives were given to use more electricity.  For a variety of reasons, this is no longer true: every new plant that is added to a system raises every customer’s rates, and has for almost 30 years.  In many states, however, utilities are still rewarded for building more plants.[2]

Various states have experimented with regulations to encourage utilities to meet customers’ needs in the cheapest way.  Programs like Integrated Resource Planning, which require utilities to compare the cost of building new capacity with the cost of doing the same job of meeting customers’ needs through energy efficiency, sought to level the playing field.[3]  Every competent analysis has shown that efficiency costs far less than new supply.  For example, good efficiency programs, to, say, retrofit light bulbs, cost about 1 – 2¢ per kilowatt hour saved, while just running a coal plant costs 4 – 5 ¢.  New wind, in good sites can cost as low as 3¢.  Running an existing gas plant typically costs 5 – 6¢.  The average price of electricity from the grid is at least 8¢ per kilowatt hour, and building a new nuclear plant can cost as much as 20¢.  And these numbers do not count the cost of emitting carbon and threatening the climate.

Obviously, it is in everyone’s interests to pursue efficiency first, but few utility programs achieve this outcome.  Until recently, utilities have tended to pursue only as much efficiency as regulators require them to.  Only a few jurisdictions decoupled sales of electricity from utility profits, so utilities will no longer be rewarded for selling more electricity nor penalized for selling less.

There have been some notable exceptions.  In California in the late 1980’s, the Public Utility Commission shifted its regulations to reward utilities with a portion of the savings they created for their customers by implementing efficiency.  Within a few years, no utility in California projected the need to build any more power plants, and all projected that they would meet all future demand growth through renewable generation.  Under this plan Pacific Gas and Electric, the country’s biggest private utility, spent $150 million in 1991 to help make its customers more efficient, and kept 15% of the resulting savings, boosting its 1990 profits by $40-50 million.  Doing this returned over $40 million to PG&E’s bottom line and saved its customers nine times that much.  The PUC found that between 1990 – 93 such efficiency measures saved customers a net present value of almost $2 billion.[4]  Unfortunately free market advocates overturned this program.

In the early 1990’s there were an array of experiments underway to enable the market for delivering customer value to function better.  Eight states request for proposals to vendors to compete in an open auction for all ways to make or save electricity at, say 1¢ per kilowatt hour.  On receipt of bids they signed contracts.  If they needed more capacity, they then reopened bidding for efficiency or supply at 2¢ per kWh, then 3¢.  At around 2 – 3¢ they met all of their required capacity, dramatically cheaper than building a new fossil fired plant.

Some utilities traded saved electricity, rewarding customers for actively reducing electricity use, or for saving other customers´ electricity.  There is talk of creating spot and futures, markets in saved electricity  (In 1993, Britain created such a futures market).  Some electric utilities sold unregulated electric efficiency in other utilities´ territories.  Some jurisdictions implemented programs to charge fees to connect inefficient buildings to the grid, and paid rebates for connecting efficient buildings, both on an open-ended sliding scale.

Cities should discuss all of these are measures with their utility or Public Utility Commission.

It is important to recognize that despite the fixation of utilities and most policy experts on supplying kilowatt-hours at the lowest price, what customers really want are the services that energy can deliver at least cost.  And it is essentially always true that efficiency will do this cheapest, most reliably and with the fewest carbon emissions.  Two programs, ENERGY STARÒ, run by the Federal Department of Energy,[5] and the State Scorecard on Utility Energy Efficiency Programs, run by the American Council for an Energy Efficient Economy[6] offer assistance to utilities wishing to create energy efficiency programs.

Many states are now reviewing their utility policies.  Simply entering “utility efficiency programs” in Google will return a wealth of information on what different states are doing.  This is now a realm in which policy is evolving very rapidly, and a city would be unwise to assume that the past must govern the future.

In New York, state regulators have imposed what is called a “system Benefit charge” (SBC) on all sales of electricity to pay for energy efficiency measures.  Since 1998 most low-income energy efficiency programs have been funded through this SBC on electricity bills and administered by the New York State Energy Research and Development Authority (NYSERDA).

The SBC program, known as New York Energy $mart SM, provides efficiency programs for all customer classes, including low-income renters and homeowners.  The SBC program was created to ensure that certain energy efficiency and energy research programs were adequately maintained during the state’s transition toward a more competitive electric market.[7]

As part of its utility restructuring, electric utilities in the State of New Hampshire established energy efficiency programs for statewide implementation by utilities regulated by the Public Utilities Commission.  These programs serve residential, commercial and industrial customers. They include programs for new construction, retrofitting existing structures, and rebate programs for selected lighting and appliances.  In addition to the statewide programs, individual utility-specific programs exist, including a pilot Pay-As-You-Save (PAYS) program.[8]

Energy Efficiency Program

Case Study: SCORE Pilot Program, Texas

TXU Electric Delivery operates the largest distribution and transmission system in Texas, providing power to three million homes and businesses and operates more than 114,000 miles of transmission and distribution lines in Texas.  In 2006, TXU Electric Delivery’s sponsored the Texas Schools Conserving Energy (SCORE) program, enabling seven participating school districts representing 95,416 students at124 campuses to save enough energy to power 376 homes.  In 2006, the programs saved 1,787 kilowatts and 4,257, 483 kilowatt hours of energy through energy efficiency measures. 95,416 students at 124 campuses In 2007 SCORE will enlist an additional eight to ten school districts.

SCORE is a public-private partnership and a component of TXU Electric Delivery’s Energy Efficiency Program, providing viable energy efficiency and demand reduction solutions for public schools.   Since its inception in 2006 this program has saved over 350 megawatts of peak demand or enough energy to power 73,500 homes.   Participating school districts identify the least energy-efficient facilities and develop an energy master plan so that they can reduce the district’s energy bills.  Reduced energy demand lowers budget pressures, provides infrastructure improvements, and better learning environments.[9]


Encourage Utility Providers to Set a Minimum Commodity From Renewable Energy Purchases

When a utility has achieved all of the cost effective efficiency it can, the next best bet is often the various renewable forms of supply.  Renewable energy sources include wind, solar power, geothermal, hydropower, and various forms of biomass.  Increasingly, electricity customers are being given supply options, either as retail power markets open to competition or when their regulated utilities develop green energy or efficiency pricing programs.  More than 50% of retail customers in the U.S. now have an option of purchasing a green power product directly from their electricity supplier.[10] [11]

Utilities have created programs to help finance solar installations on customers’ homes and factories.  For Earth day 2005, Alameda County in California commissioned a 2.3 megawatt power plant, spread out on roofs all over the county, using solar cells.  It will cut the county’s energy bill $700,000 a year, and the local utility paid for half of the cost.

Since 1975, the city of Santa Clara, CA has taken a leading role in the development and promotion of the use of solar energy.  That year, the city established the nation’s first municipal solar utility.  Under this program the city will supply, install and maintain solar water heating systems for residents and businesses within Santa Clara.[12]

Utilities across the country are offering wind electricity to their customers.  Fort Collins was the first utility in Colorado and among the first in the nation to deliver wind energy to customers.  Its Wind Power Program started in 1998.  Strong customer demand expanded the program in 1999 and 2000.

In June 2004, the program expanded again in order to meet the goals of the City Council’s Electric Energy Supply Policy.  At that time, the price for wind energy dropped from 2.5¢ per kWh to 1¢ per kWh.[13]

Other utilities offering wind power include Austin, Texas, Xcel Energy, Basin Electric in Montana, Oklahoma Gas and Electric, Florida Power and Light and many others.[14]

Cities can purchase renewable energy directly.  Many municipalities are realizing the benefits of diversifying their energy portfolio not only by implementing energy efficiency, but also by investing in renewable technologies (often called green power).  Doing this can strengthen the local economy, have a positive impact on the local job market.[15]  Using local renewable power also increases the security of the community.[16]  Fossil fuel generated power generally comes from across state and even international borders, far from customer demand; whereas renewable energy sources are mostly smaller in size and locally owned and operated.[17]

Cities that purchase a green power product demonstrate increased demand for renewable technology.  Such demand helps to develop further renewable energy sources, which can reduce the burning of fossil fuels.

Municipal or commercial utilities can set up green power programs for communities.  In these programs residents have the opportunity to purchase renewable energy for their homes, businesses, etc.  Such programs often charge a premium rate, although increasingly renewables such as wind power are cheaper than running existing coal plants.[18]

In a green power transaction, a utility (or power marketer) buys renewable energy from a renewable energy facility.  This electricity is delivered into the power pool, where it mixes with all the other electricity being generated at the time.  Finally, the power is delivered to all customers of that utility.  The mix of “green” and “brown” power is actually shared by everyone while the environmental attributes are credited to the customers who have paid a premium to create that benefit.[19]

Many cities, states, federal agencies, universities and businesses have worked with their municipalities to offer green power purchasing programs.[20] [21]  For more information about Renewable Energy Planning, refer to Chapter 5, Long Term Initiatives.

Renewable Energy Purchasing

 CASE STUDY:  Newark, DE

On January 24, 2005 the Newark, Delaware City Council unanimously approved a resolution to increase the city’s purchase of renewable energy to 2% of total electricity use by 2006 or approximately 7.5 million kWh annually.  The vote followed a recommendation made by the City’s Conservation Advisory Commission to increase renewable energy purchases from the current level of 0.1% to 0.5% in 2005 and 2% in 2006.  It is estimated that the purchase will increase the average household electric bill by 14¢ per month in 2006.  The city, which operates its own electric utility and purchases power on the wholesale power market, currently uses about 373 million kWh of electricity annually.[22]


Director of Finance

George Sarris

(302) 366-7080