Yardsticking It to the Man, Then and Now

This post originally appeared on the LPE Blog. It is part of a symposium on Sandeep Vaheesan’s Democracy in Power: A History of Electrification in the United States. Read the rest of the posts here.

In the 1930s, President Franklin Delano Roosevelt and like-minded thinkers advanced the idea of publicly owned utilities as a “yardstick” against which private utilities’ performance could be measured. When private utilities fell short, the threat of public power would discipline these entities into better behavior, or would result in full-out replacement by utilities owned and controlled by municipalities, state entities, or the federal government. This theory animated an impressive array of New Deal efforts at rural electrification, in which the government directly built out large-scale public electricity generation and funded communities to create their own local power systems in areas of the country that private utilities refused to serve.

In Democracy in Power, Sandeep Vaheesan argues that these twentieth-century rural electrification efforts can serve as a model for public power in today’s energy system. He notes the key challenges facing the system today—the need to rapidly transition to clean energy while maintaining affordable rates—and proposes revitalizing public power as a solution to these dilemmas. To realize this vision, Vaheesan outlines a bold legislative agenda that would pave the way toward a clean electricity system through public ownership.

I am sympathetic to Vaheesan’s vision, having previously argued that the theory of public power has renewed potency in today’s energy system. But of course, theory and politics are different matters. As I explore in this post, there are important differences between the political economy of rural electrification and that of today’s crisis. Understanding these distinctions can help us be clear-eyed about the political hurdles facing modern public power movements, which in turn helps us strategize the most promising forms and functions of public power today.

Vaheesan readily acknowledges that his proposed public takeover effort is “utopian and unrealistic” (283). But, he explains, the same appeared true in the 1920s; it was only through a sustained political fight that the proponents of public power achieved a democratic mandate in the 1930s. Vaheesan sees the stirrings of a similar political coalition today, pointing to the 2022 Inflation Reduction Act (IRA), the United States’ largest ever climate legislation, “as a first step toward a broader and deeper transformation of the national power system” toward more public forms of power (286). In particular, he highlights some encouraging IRA provisions that, if they remain intact, will make it easier for publicly owned utilities to build and own renewable energy infrastructure.

Nevertheless, there are significant political differences between rural electrification and today’s push for 100% clean electricity. It is going to be much more difficult to yardstick it to the man today than it was in the 1930s, for at least three reasons. First, rural electrification addressed a gap in service for farms and rural communities. As Vaheesan compellingly describes, utilities saw no profit in running expensive, far-flung lines to these consumers who could afford little power, and so they declined to invest. As a result, when public and cooperative entities stepped in to build in rural areas, they were entering new service areas. Although private utilities still resisted—Vaheesan colorfully recounts their attempted erection of “spite lines” to siphon off the wealthiest potential customers (116)—their opposition remained limited since they had little to lose.

Today’s landscape presents a stark contrast. Although a few areas of the United States remain woefully under-electrified, most places are now fully served by a monopoly provider. That means efforts by public entities to take over any distribution system will face considerably greater opposition: A utility will be losing a profitable piece of its existing service territory, not just declining to expand into a new one. This fundamental difference helps explain why modern public takeover efforts—such as the ones in Boulder and Maine that Vaheesan describes in the book—have been so politically challenging, with utilities pouring funding into opposing each phase of these movements.

Second, the harsh politics of stranded assets intensifies these challenges. Unlike rural electrification, which expanded generation capacity, today’s clean energy transition requires replacing existing infrastructure (even as the total system must expand). We simply cannot make electricity from fossil fuels any longer while preserving a livable planet. Currently, though, the U.S. electricity system runs on nearly 60% fossil fuels, mostly natural gas, delivered through a vast array of drilling operations, pipelines, and gas-fired generators. Many of these capital-intensive investments are relatively new, as gas use has ballooned in the electricity system in the past few decades. Thus, to address climate change, many of these assets will have to be stranded—that is, abandoned before the end of their useful life for cleaner replacement technologies. The premature retirement of hundreds of billions of dollars in fossil-fueled infrastructure creates a powerful industry lobby opposing clean energy—one that is currently ascendant in federal energy policy. This lobbying force is joined by public and private power entities alike, with publicly owned utilities potentially facing even greater pressure to retain “useful” assets without shareholders to absorb stranded costs. While Vaheesan proposes conditioning federal funding for public takeovers on 100% clean energy commitments, this very same fossil lobby makes legislating such a commitment politically challenging.

Finally, the macroeconomic implications of moving to clean energy are quite different from those of rural electrification. Rural electrification succeeded in part because of strategic public-private alliances. For example, as David Neuse describes, the Tennessee Valley Authority launched a cooperative effort with “appliance manufacturers, retail stores, and participating private utilities” to boost rural demand, thereby aligning “TVA’s goals with those of business.” This approach deliberately promoted increased consumption, generating accompanying revenue growth for manufacturers of an array of new products.