What the other “public option” can teach us

Community-owned-and-operated utilities are among America’s longest-running “public options.” So before writing off the healthcare public option completely and seeing it consigned to the junk bin of the messy health-reform debate of 2010, it might be illuminating to see what lessons we might learn from an historical precedent in a different service sector.

Let’s revisit the scorecard for publicly owned utilities. Consider that for more than 125 years a robust system of public, not-for-profit utilities has been reliably supplying water and electrical power to communities both large and small across America. Here are the astounding facts about this enduring, dependable, and highly successful “public option”:

• 45 million Americans receive their electrical power exclusively from public, community-owned and operated power companies
• 2.8 million businesses depend on public utilities for their electrical supply
• More than two thousand communities located in forty-nine states own and operate electric power providers, the largest of these being the Los Angeles Department of Water and Power (3.8 million customers) and the Long Island Power Authority (1.1 million customers)
• Rates paid by residential users of community-owned electrical supply are, on average, 13% lower than the rate paid by residential users of investor-owned utilities.
• Public utilities consistently have demonstrated better reliability, safety, and efficiency when compared with investor-owned utilities.

What accounts for the durability and success of the community-owned and operated utilities? First, there is their accountability to consumer/owners rather than to stockholders. Second, rates are set locally by citizen-controlled boards that operate with public oversight. Third, the utilities’ not-for-profit status and lower administrative costs result in lower rates. Fourth, they provide revenue to local governments. Finally, infrastructure improvements become valuable long-term assets of the communities themselves.

The fact is that these community-owned utilities act as a check on privately owned utilities and help to drive down overall rates. They also encourage privately held utilities to be more responsive to the needs of consumers, businesses, and communities. These positive benefits should sound a familiar note in the current debate about the role of the public option in healthcare.

If the lessons of 125 years of competition between investor-owned and public utilities in delivering tangible benefits and lowering costs can teach us anything, it is that greater competition for private health insurers in the form of a public option may reap similar benefits. The public option is not, as some would claim, a radical departure from the norms of competitiveness in the American marketplace. If, as seems likely at this time, the public option will not be part of the final health-reform bill, an opportunity to bring real competition, fairness, and affordability to health care will have been lost.