New Orleans power failure spotlights why we the public should control our energy
Hurricane Ida made it clear: The power grid is an essential public good that delivers other essential public goods.
The recent power outages in New Orleans are another lesson about the difference between public and private. Entergy, the local utility company, is a publicly regulated, investor-owned utility. There are lots of investor-owned utilities—some good, some not so good.
As the New York Times reports, the plant that Entergy built to provide power in storms failed to bring power back online as quickly they had promised. Let's step back to see the larger issue.
It couldn't be clearer that the power grid and access to electricity is an essential part of our infrastructure, critical for homes, businesses, schools, traffic lights, subways, the internet. It's an essential public good that delivers other essential public goods. That's why it's called a "utility.”
Therefore—whether public or private—it needs to be controlled and overseen by the public to ensure the basics: universal access, reliable service, and that it’s part of the solution to the climate crisis. And it certainly needs to be there for us in emergencies.
But how can we ensure public control?
First things first. We must recognize that the interests of private companies are different from the interests of the public. Of course, private utilities want to deliver good service (at least most do). But they have outcomes and constraints that don't completely align with ours.
Companies sell things. To get city council approval for the plant, Entergy hired actors at $60 a piece (who had to sign non-disclosure agreements that prevented them from telling anyone they were being paid) through a company called Crowds on Demand to testify in support of the deal at the local city council. That tells you something right there. TV scripts are fiction, not the voice of the community. Entergy could have been honest and testified themselves about the opportunity they saw—they could make money by building this plant. With help from hired actors, the council voted in Entergy’s favor. One of the council members, after learning about the rent-a-crowd scheme, claimed that “it had a phenomenal impact on public opinion.”
Karl Rábago, who previously served on the Public Utility Commission of Texas, told the Times: “[Entergy was] operating in salesman mode. They were trying to sell this power plant on the basis of one feature but they were less than complete in explaining the vulnerabilities and the limitations of their claims.”
Second, skilled public oversight and monitoring is essential. The plant is the only utility in the country overseen and regulated by a local government—rather than a statewide commission with expertise about power generation and distribution. There's an obvious story of influence worth exploring. But setting that aside, without cops on the beat who have the detailed knowledge and expertise, the company is left with too much unregulated authority—the kind needed to protect the public good.
A 2015 report by the New Orleans Office of Inspector General found that, “The Council’s overreliance on outside consultants prevented the development of in-house expertise and institutional knowledge regarding critical regulatory matters.”
Third, the utility is in the business of making money and earning returns for their investors. There’s nothing wrong with that—in the abstract—but that means the metrics driving their decisions are simple: sales volume, costs, net profits, and market share. (Investor-owned utilities have the whole market.)
There’s no guarantee that a public utility would have performed any better. Even public utilities have to pay attention to revenue and costs, and there are limits that could create problems for the system. That depends on whether needed investments are being made by the public—either through rates or government subsidies—or both.
But the private investors have the additional pressures of returns to investors—the need to get sales up and costs down so that there's profit left for the investors. A public utility without the need for returns to investors could use that extra money on fortifying the system.
The bottom line: The public needs control over the systems and goods we all rely upon. There is simply no way to deliver universally accessible, reliable, and publicgoods without it.
No doubt control comes with costs—the agency needs staffing with expertise and systems. But it also comes with benefits and the flexibility to respond to a rapidly changing world.
Public Things is a pop-up newsletter supporting the release of The Privatization of Everything, a book by me—Donald Cohen—and my co-author, Allen Mikaelian. You can order the book on Bookshop or through your local bookstore.
Photo by the Louisiana National Guard.