Sparking Debate: Private or Public? The Effect of Ownership on Electric Utility Performance

The privatization of municipal electric utilities has prompted the public vs private debate among local government leaders. Private utilities want to increase their profits by expanding their territory and municipalities hope to see an influx of cash from the sale of their utility. Public administrators are left with questions about how this will serve their community. This research addresses the topic of performance differences between public and private ownership among electric utilities in Florida. Specifically, the research question is, Does ownership type (public or private) affect the performance of electric utilities in the State of Florida? All of Florida’s 19 generating capable electric utilities are examined in this study, seven Investor-Owned Utilities (IOUs) and 12 Publicly Owned Utilities (POUs). The two metrics used for measuring performance are rates and reliability. Using Independent T-tests to compare means to measure their performance, the research looks at 14 tiers of rates (two residential, eight commercial, and four industrial) and two common reliability metrics, SAIDI (System Average Interruption Duration Index) and SAIFI (System Average Interruption Frequency Index). The results showed that POUs have statistically significant lower rates on the two residential tiers and two lowest commercial tiers, while IOUs showed statistically significant lower rates on the five highest commercial rate tiers and all four of the industrial rate tiers. There were no statistically significant differences in performance across reliability metrics SAIDI and SAIFI. Results suggest a difference in philosophy between public and private utilities on how rates are structured. Keywords: Privatization, electric utilities, ownership, public vs private