Hey, Tacoma, your electrical utility faces big challenges that will affect you

What do you want your electric utility – the one you supposedly own – to do?

For many, keeping the lights on at a reasonable price is job enough, and what it ought to focus on. How it accomplishes that task is not a concern.

Others might like to see the local utility be more of a business enterprise, offering other services such as internet and cable TV.

And still others see the utility as an instrument of social engineering, using its operations and finances for environmental causes or to promote (to use the buzzword du jour) “equity.”

That basic existential question is always in play when discussing the status of Tacoma Power, but the voltage has been raised in recent months, the announced retirement last week of Bill Gaines as director of Tacoma Public Utilities being just one more episode in an ongoing debate.

Gaines is leaving in the midst of a tussle over what to do with cable-and-internet provider Click – whether it should expand its menu of services, whether the whole thing ought to be sold or leased, who subsidizes what, whether it’s a business the city ought to even be in.

There’s also the broader argument about who gets the most say in posing and answering questions about goals, strategies and policies – TPU management, the utilities board or the City Council.

Gaines’ successor and the various factions fighting over control of Tacoma Power might resolve the disputes of the moment, but as long as there’s a municipally owned electric utility there will be issues about its status, purpose and future.

Especially because some big trends and shifts in the electric-utility industry are coming at Tacoma Power. Governance and Click are issues Tacomans chose. Those big shifts and trends are headed this way whether the locals want them or not.

People who have grown up in this part of the country might not understand what an odd duck the Northwest is when it comes to electric utilities.

Here, we have to rely on the term “investor-owned utility” to distinguish the municipals (Tacoma and Seattle) and public utility districts such as Snohomish from what the rest of the country thinks of generically as “public utilities.”

Nationally, investor-owned utilities represent 68 percent of the electric-utility customer base in the United States. In Washington, half of the state’s residential customers are served by public power; the other half are customers of Puget Sound Energy, Avista or Pacific Power.

Arguments in favor of public power include local control and lower rates. In the Northwest, the rate advantage derives in large measure from the presence of the Bonneville Power Administration, the federal power-marketing agency that sells electricity generated at Northwest dams (and one nuclear plant) at preferential prices to public utilities.

BPA is subject every decade or so to proposals to privatize it, providing the opportunity for politicians to look stern and issue dire warnings until the whole idea goes back into hibernation. The more pressing issue is where electricity will come from to meet demand from more people, more businesses and more server farms, and how much it’s going to cost.

Conservation will deliver some supply. The drive for renewables will deliver some supply, but those cost more than the installed hydro base, and you need something reliable such as natural-gas-fired generation to back them up.

Or maybe we’ll all be our own utilities.

Take a look at an aerial view of this region, and note the expanse of rooftops (especially on warehouses) that could be decorated with solar panels, generating power to be used on site or sold to the local utility, which also gets to provide power a night.

That trend, which has huge implications for the financial structure of many utilities, isn’t that far off.

The smart grid that will make that day possible will cost a lot of money. So will new generation and energy-storage systems. So will cybersecurity.

Many utilities won’t have the resources, even with rate hikes, to keep up. The American Public Power Association says “most public power utilities have fewer than 4,000 customers.”

Already we’re seeing those trends push one more – consolidation. Spokane-based Avista, which has both power and natural gas operations, has agreed to be acquired by Toronto-based Hydro One. Greater scale and consolidation were both mentioned as drivers of the combination.

That leaves the Northwest publics in a bit of a bind, because the whole point of establishing a local utility (as was done a few years ago in Port Townsend) is local control.

Would a public utility consider merging with other publics? Would a community ever decide that the utility business is one it can no longer afford to be in? How much will independence for a modestly sized utility like Tacoma cost?

Add those to the heaping plate of contentiousness to be set before the lucky guy or gal who wins the job as Tacoma Public Utilities’ next director.

This story was originally published August 12, 2017 at 1:24 PM with the headline "Hey, Tacoma, your electrical utility faces big challenges that will affect you."