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Thursday, Dec. 20, 2012 09:43 am

Lousy socialists

Can CWLP be managed for the people’s benefit?

“The word ‘socialism,’” said Illinois governor John Peter Altgeld in a speech 115 years ago, “is used as a term of derision only by the ignorant or the servile.” Springfield has been the scene of an experiment in the public ownership and management of the means of production of a vital product since the days when women, not basketball players, wore bloomers. The merits of that approach has been a topic of conversation in Springfield since the 2011 city council campaigns. Nonetheless, the word “socialism” – the policy that dare not speak its name – is not used at all in Springfield.

The public ownership of utilities such as streetcar lines, waterworks and  power plants was a tenet of turn-of-the-20th century progressivism. Altgeld and other backers of this sort of  “sewer socialism” believed that putting city halls in the utility business would mean better service and lower rates for citizen-shareholders.

That’s why the new City Water, Light and Power department was set up in 1911. That’s worth remembering, though, as the city council argues about the future of the utility after years of indifferent management and rising costs.

Its critics complain that CWLP rates are not as low as they might be, because the department suffers from that endemic malady of Springfield public administration, partisan politics, particularly since then-mayor Tim Davlin in 2003 installed professional Democrat Todd Renfrow as general manager. A number of screw-ups – generators blowing up, bungled grant applications, bogus accounting for overtime, rising payrolls – suggest that the utility has been overstaffed and under-managed.  

Altgeld argued that what distinguishes public from private ownership is not profit, but who profits. He explained that a utility organized by the public it serves not only may but must pursue the best business methods in the best interests of its citizens in the same way that an individual capitalism pursues his interest and those of his stockholders.

CWLP’s moves were foolish, not because they tried to make money, but because they did so incompetently. In the 1990s CWLP contracted to supply power it could not deliver during a heat wave. Analysts later concluded that CWLP lacked the sophistication and/or financial resources to play in a volatile market with the grownups. When sued by the utility it stiffed, CWLP – I love this – claimed that the contracts were void because the utility did not have the proper authority under Illinois law to enter into them. Indifference to the law proved no defense, and the city had to pay out nearly $17 mill in damages.

More recently, critics wonder whether Dallman 4 was basically a half-billion-dollar bet that Springfield could become a player in the wholesale power markets. The hope was that the city would be able to pay its bills by taxing out-of-town power customers of wholesale power. The temporary collapse of wholesale electricity prices has meant instead that CWLP is struggling to pay its own bills.   

Several improvements in CWLP business methods have been advanced tenatively in the city council. Trim staff. Streamline middle management. Hire a professional GM or abolish the GM post, which has been vacant since Mr. Renfrow retired. (This one is a no-brainer, which should guarantee it some council support.) End the payments in lieu of taxes that CWLP makes to the city. Require regular financial updates to the council.

One or two aldermen have hinted at a more fundamental reform: eliminate CWLP’s problems by eliminating the utility. Of course, there is nothing magic about public ownership. Municipal socialism only works if it’s well-managed. But would commercially produced power be a better deal for Springfieldians? Private power monopolies only work if they are well-managed and well-regulated. In Illinois, that’s about as likely as that columnist you have a blind date with turning out to be both handsome and rich.

I believe it makes sense to keep CWLP but improve its governance. The city council acts in effect as its board of directors. A body to whom garbage collection or zoning are mysteries is not likely to shine when it comes to demand projections or utility financing. Also, politicians’ interests are not aligned with the public’s, since their priority is keeping rates low and thus keeping their own approval ratings high, whatever the longer-term investment needs of the people’s property.

Happily, it is not necessary that the city council provide competent oversight of  its utility department, only that it ensure that oversight is provided. That could be better done by a nonpartisan, independent utility commission. Half of Wisconsin’s 82 municipal utilities are governed that way, expressly to insulate operations from politics. It’s worth thinking about. If CWLP’s leaders have proved themselves to be lousy businesspeople, the mayors and aldermen that oversee it have proved to be even worse socialists.  

Contact James Krohe Jr. at KroJnr@gmail.com.

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