Thumbnail: David Ciscel, professor emeritus in economics at University of Memphis, proposes a nonpolitical approach to reaching a decision about TVA’s future in our community.
By David Ciscel
Over the past couple of years, the pop-up question about MLGW has been: Should the electrical part of the utility stay with TVA as its sole electricity supplier? The question has been an interesting one. Claims of savings of hundreds of millions of dollars fuel the continuing debate. But are we really asking the right questions about MLGW? I think we are debating the wrong question.
The debate over the MLGW/TVA relationship is clearly politicizing an important business decision. The City Council and the Mayor, who jointly control the utility, have jumped into the fray. Various people stand behind various studies that emphasize different benefits and costs of a MLGW/TVA divorce. And earlier, there was a similar long-term debate concerning the rate structure at MLGW. Should rates increase to improve the utility’s infrastructure or should rates remain stable to provide services to Shelby County’s vast population of poor people.
Sadly, neither the City Council nor the Mayor should be considering these issues. These are issues that should be decided by executive management and the Board of Commissioners, not elected officers of the City.
Yes, MLGW is a Division of the City of Memphis and owned by the City. But it has long outgrown its original charter. The utility is large – it provides all three services: water, gas, and electricity. It serves all the cities, towns, and areas in Shelby County. It acts as a collection agency for the city in other services like sewer and garbage collection. It is time to recognize that it is a large publicly owned utility that deserves independence from the day-to-day political turmoil of the cities that it serves.
Should the City Council have any business deciding where the utility buys its electricity when the Council has no expertise in the area, except for hanging onto one report or another? Should the City Council have any business approving rates or prices when it has no expertise in the area? Clearly, the answer is ‘no.’ Almost by definition, these elected public servants don’t have the knowledge base to make good business decisions. They end up being opinion driven, not fact driven. For privately owned utilities, most states have public utility commissions that review all these issues with public appointed commissioners who are advised by a professional staff.
Having a publicly owned utility is especially important. MLGW serves the public without the need to satisfy stockholders. They can adopt other agendas, like regional economic development, that would normally subtract from profit seeking behaviors. But a business cannot be run effectively and efficiently if elected officials regularly introduce political issues into daily operations.
The current organization of MLGW may have made sense 50 years ago. But today, MLGW is a complex and large utility company. It needs to be run by its management. And that management needs to be overseen by a powerful and active Board of Commissioners. The City Council/Mayor should appoint those Commissioners, then step aside. That way MLGW will have a real future serving the utility needs of our region.
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This is what I know. While I like to wade into various debates, I don’t plan on wading deeply into this one because, I can in no way assess the technical risks associated with changing to another supplier. Next, what I know is $450M in savings or 45% on already nationally low electrical rates reeks of an EDGE economic impact study. And finally, generating our own local electricity from renewables sounds like a win-win to me…..
Maybe a Board of Commissioners as Dr. Ciscel suggests is best.
The electric rates are low but one of the poorest cities in America has the highest electric bills in the country.