thumb|upright=1.35|Primary barriers to municipalization

Municipalization is the transfer of private entities, assets, service providers, or corporations to public ownership by a municipality, including (but not limited to) a city, county, or public utility district ownership. The transfer may be from private ownership (usually by purchase) or from other levels of government. It is the opposite of privatization and is different from nationalization. The term municipalization largely refers to the transfer of ownership of utilities from Investor Owned Utilities (IOUs) to public ownership, and operation, by local government whether that be at the city, county or state level. While this is most often applied to electricity it can also refer to solar energy, water, sewer, trash, natural gas or other services.

Between 2006 and 2016, there have been 13 different communities in the United States that have successfully switched from an IOU to a municipal utility. Most of these communities consisted of 10,000 people or less. Although proponents of municipalization have attempted to municipalize via ballot initiatives, many have failed.

Motivations

The key motivation for municipalization stems from a difference in priorities and goals of the community members and the incumbent utility. While incumbent IOUs have the objective of reliable and safe electricity that can provide a competitive profit for the investors, municipalized utilities are free from the need to provide for private profits and can focus on the pursuit of other policy goals, especially sustainability measures and experimentation with alternative energy policy. There is also a neoliberal argument stemming from the historical formation of utility conglomerates. The transition from direct current (DC) systems to alternating current (AC) systems in the early twentieth century allowed for greater access to electricity for Americans and enabled the electricity industry to shift to a larger scale. The economies of scale associated with providing a utility created natural monopolies and the associated consolidation of different types of electrical service in urban areas: street lighting, building lighting, industrial machinery, and streetcars.

In 2005, in response to having difficulty meeting the goals of Resolution 906 and wanting more energy decision-making control, the city created a task force to explore municipalization as an option for faster innovation capacity. In the 1990s, angered by power outages and rate hikes, residents engaged in various attempts to municipalize their electricity. One example is the community shares program used in Ellensburg, Washington. In this case electricity customers may buy shares in a solar field which was initially financed through the public utility and in turn receive a proportional rebate applied through their electricity billing. Customers also have the option of selling or giving away their shares to non profits or other customers.

Privatization: A process by which the for-profit private sector supplants the public sector's provision of goods and/or services. There are a number of methods of privatization including the transfer of ownership from public to private entities, the displacement of public spending by private financing, or private entities assuming management and operational responsibilities of public services.

Nationalization: Nationalization is a similar process to municipalization but shifts ownership and operational control towards the government at a national or federal level. There is often an assumed tradeoff between the promised equality under nationalization and the promised efficiency of privatization.

Notes

References

  • Scott E. Masten, Public Utility Ownership in 19th-Century America: The "Aberrant" Case of Water, Business School, University of Michigan [http://ssrn.com/abstract=596061]
  • David Hall, Public Services Work! - Information, Insights and Ideas for our Future, PSIRU, University of Greenwich [https://web.archive.org/web/20041213062400/http://www.psiru.org/reports/2003-09-U-PSW.pdf]
  • Survey of State Municipalization Laws