One of the key pillars of public power’s value to its customers and community has been local management, and the linchpin to that local control is the governing board that oversees the utility. For the first 100 years of public power’s existence, the essential role of the utility remained singular and unchanging, governance was straightforward and many of the “big” decisions were technical, relying on staff or consulting expertise.
For many boards, governance focused largely on approving budgets, capital plans, equipment purchases, and other expenditures. Life was simpler, and, frankly, not a lot was asked of many governing boards. Yet today, with an industry in flux, more is being demanded of public power governing boards than ever before.
I have had the honor of working with dozens of boards for public power utilities large and small since 1988. As I look at public power in 2023, I see an electric industry that has been turned on its head. Changing priorities, new competitors, greater legislative activism at the state and federal levels, and enormous advances in technology have altered the landscape.
These changes introduce new opportunities, new threats, and rapidly evolving customer and community expectations. For many of these challenges, a utility’s response does not, and should not, be determined by the CEO and his or her staff, regardless of how talented and capable they are. If the staff’s role is to do things right, then the governing board’s role is to do the right thing. In other words, the board must determine the most critical outcomes desired of the utility, while staff members determine the most appropriate means to achieve those outcomes.
For example, clean power sources are rapidly approaching fossil fuels as cost-effective options. If your utility wanted to increase its use of these sources, the board would be faced with questions, such as:
- Should the energy be green-priced, where subscribers pay a different fee, or should it be rate-based, where incremental costs of the new sources are folded into all rate classes?
- How much variable power should be pursued? What will be the effect on reliability?
- What risks are you willing to take? How do your customers and other stakeholders feel about this?
While staff must help answer most of these questions, these are not decisions the utility CEO should be making. It is the decision of the board, which must fully understand the risks, trade-offs, and advantages. Certainly, staff members and other experts are needed to help the board make as informed a decision as possible. Yet, ultimately, the board must decide whether pursuing new services is in the best interests of the utility’s constituents.
Offering community broadband is an excellent example of a decision many public power utilities have been grappling with. Can you offer broadband service? Probably. Should you offer broadband? That is the more fundamental question. More than one utility has gone down that road without having a good understanding of what it wanted to accomplish and how its customers — and the competition — would respond.
Although many utility initiatives are technical in nature, it is not the governing board’s role to be experts on those technologies. Rather, it is the board’s role to understand and translate what the utility’s and community owners’ needs and expectations are and how well an initiative supports them. The board should be encouraging — and participating in — a strategic conversation within its utility and its community, focusing not on the day-to-day, but rather the long-term outcomes it believes are necessary and important.
This leads to perhaps the most challenging board action: stakeholder engagement. If your task is to represent the community owners, then you must know who they are and what they need and expect. Historically, boards have done very little stakeholder engagement, and when they have, it is often delegated to staff members to conduct a survey or a focus group, or to meet with key accounts. This must change, and boards must take greater interest in or ownership of these kinds of communications.
Public power remains an incredibly viable model for success in our changing world, and local control will continue to be a key part of that success. Yet governing boards must be increasingly cognizant of those changes and how their role must adapt to ensure the utility, its customers, and its community continue to thrive.
Steve VanderMeer is a long-time public power professional and semi-retired consultant. He is the author of Policy Makers Handbook: A Nuts and Bolts Guide to Governance in Public Power.
