Public power faces both challenges and successes

APPA national conference offers up case studies and new thought

Kate Rowland | Jun 21, 2012

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One of the most difficult tasks at any conference is deciding what to cover, what to share with readers, what to pull out of the 80+ pages of notes I have taken over the course of a few long and exhilarating days.

 At the American Public Power Association (APPA) national conference earlier this week, that challenge was especially pronounced, as numerous breakout sessions offered a wealth of industry information, while keynote sessions also produced a broader state-of-the-nation view for public power going forward.

 And then there was the more personal challenge delivered by a fellow session attendee from Dannville, Virginia, who told me he especially liked to read my conference coverage. (I hope I meet and match that challenge yet again over the next two weeks of coverage of the APPA conference.) So this time, I am splitting my coverage in half, in an attempt to cover the most ground. This week, I am setting the backdrop with a state-of-the-nation overview. Next week, I will cover specific breakout sessions, with a particular focus on energy efficiency case studies presented.

 Mark Crisson, APPA's president and CEO, opened the general session with cautious but hopeful news concerning public power in today's environment. "The good news is that our economy is growing more than its pre-recession peak he said, pointing to a 2011 GDP that is greater than 2007's was, and corporations holding more than $2 trillion in cash. But with persistent unemployment averaging greater than eight percent and a national debt of nearly 100 percent of our GDP, there's still work to be done.

 Against an electric utility industry backdrop of regulatory pressures and the general lack of understanding of the industry as a whole by consumers, the industry itself is getting more complex, power is getting more expensive, and customers are expecting more, Crisson pointed out.

 This is creating challenges for public power. "We have 2,000 public power systems in the U.S.," he said. "Approximately 2,200 meters is a medium-sized public power system. We have about 1,000 public power systems smaller than that.

 "I'm really concerned about the impact on them of increased complexity."

Add to that the mix of increased regulations, workforce issues, more stringent rating agencies and governance issues, and the path is less than clear. "I think this governance management has to be a prime focus for senior managers going forward," Crisson said.

 He pointed out, though, that public power has strenghts relative to the rest of the industry. These include a broad execution of the business model (with the caution that this is going to be more difficult going forward), a strong track record in finances and resource development, a reflection of community values, excellent reliability, the ability to develop infrastructure, good customer relationships and competitive rates. "We enjoy about an eight percent advantage relative to IOUs," Crisson said.

Following Crisson, Howard Fineman, editorial director of The Huffington Post Media Group and former chief political correspondent and columnist for Newsweek, managed to discuss the political mood of the country -- and the relative strengths and weaknesses of President Barack Obama and presidential hopeful Mitt Romney -- without actually predicting the results of the upcoming November election, but for this: "It's going to be a very, very close election. Barack Obama won the [last] election with 53 percent of the vote, which was considered a colossal landslide." (He also mentioned that, should Jeb Bush be persuaded to stand as the Republican vice-presedential nominee, thay a Romney-Bush maych-up "would be a pretty hard-to-beat ticket.")

 Fineman did, however, have some important points to make about the issues coming to the fore in the upcoming election. "The key issue is a very big one," he said. "It is about the role of government in our lives. We're not dealing with external enemies ... We're facing the question of whether a democracy can discipline itself ... We have it within our capacity to fix it."

 Specifically, the economy has been raised as an election issue in 80 percent of the polls to date. And the world economic crisis and what it means for the U.S. was precisely the topic of the first afternoon's keynote, presented by Greg Ip, U.S. economics editor for The Economist. Ip answered one of the biggest questions on the minds of the nation early on. "Are we dipping into another recession? I don't think so," he said. "At least not yet. Yes, things have slowed down, but not as much as they did a year ago."

 Housing, one of the three components of the GDP that indicate a boom or a recession, Ip compared to the guy who is the life of any party, then gets into trouble the more that he drinks. It's an odd analogy, but particularly apt. "The housing market is flat on its back sleeping it off," he said, "and not in any shape to get us into trouble again."

 Housing prices are normal again, Ip added, and the overvaluation of the recent past is now gone. This is important in two ways: a house is the No. 1 source of wealth for the consumer, and also the No. 1 source of collateral for the banking industry. Unfortunately, while the banking industry is now back in shape to loan money again, housing is one of the places in which it is still difficult.

 Ip said the three biggest risks that could derail our economy are oil, emerging markets and Europe. But there is reason to hope in all of these areas. In terms of oil prices, he pointed out, "The amazing thing is that the laws of economics actually work. When oil prices shot up, domestic  supply went up, and consumers are using less -- net imports are the lowest they've been in years."

 As far as emerging markets go, Ip noted they are going through a deliberate slowdown, which seems to have worked, as inflation is now decreasing in those countries.

 But Europe? "The only thing I can say with confidence about Europeans is that they never waste an opportunity to waste an opportunity," he said. "Spain's debt is much lower than the U.S., and yet it is more likely to go insolvent than the U.S." The reason? Spain gave up its currency to become part of the Euro Zone.

 The solution? "Europe has a half-finished currency union," Ip said. "it needs some form of a common banking union, and a common treasury bond."

 Next week I'll hone the focus from the path to a more efficient post-recession economy to a specific focus to -- and the public power successes in -- energy efficiency.

Kate Rowland

Editor-in-Chief, Intelligent Utility magazine Energy Central

krowland@energycentral.com

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