Building Local Power

By Institute for Local Self-RelianceSociety & Culture News News Commentary

Building Local Power episodes

April 14, 2022 Building Local Power Highlight: People Love Local Food. Yet Local Farmers are Disappearing. What’s Going On?
Leah Douglas is a reporter at Reuters covering the politics of food, agriculture, and the environment. Douglas discusses how the poultry industry is structured by contract production, how dairy farms are the bedrock for many rural communities, and Earl Butz's conviction for farmers to plant "fence row to fence row" to enable economic food production.
6 min
April 07, 2022Corporations Rake in Subsidies at Communities’ Expense
On this episode of the Building Local Power Podcast, Stacy Mitchell, Co-Director of ILSR, is joined by Arlene Martínez, Deputy Executive Director and Communications Director at Good Jobs First. Good Jobs First promotes government accountability in economic development and tracks corporate subsidies. Stacy and Arlene discuss the use of nondisclosure agreements, the acceleration of mega-deals during the pandemic, and what true economic development looks like.
Highlights include:
How states have used the Care Act and American Rescue Plan funding for economic development.
Defining opportunity zones and exposing how the wealthy are profiting from their favorable tax treatment.
Revealing how one of the main consequences of subsidy giveaways is exacerbating racial disparities.
Why a campaign called Ban Secret Deals is trying to end the use of nondisclosure agreements.
“Amazon is eager to use its power to get what it wants.”- Arlene Martínez
“For the 4.1 billion that cities gave to Amazon over the last ten years we could have built 672 new locally-owned grocery stores in underserved communities – connected to, say, local farmers and food producers. The scale of this money is extraordinary.” – Stacy Mitchell
“The problem with the way that so much of economic development is done in this country, and the ways that these deals are structured, is that the community loses in the end, because the giveaways are so big that tax money that was given will never pay for itself.” – Arlene Martínez
Related Resources
Transcript
Jess Del Fiacco:
Hello, and welcome to Building Local Power. A podcast dedicated to thought provoking conversations about how we can challenge corporate monopolies and expand the power of people to shape their own future. I’m Jess Del Fiacco the host of Building Local Power and communications manager here at the Institute for Local Self-Reliance. For more than 45 years, ILSR has worked to build thriving, equitable communities. Where power, wealth, and accountability, remain in local hands. This week, ILSR Stacy Mitchell talks with Arlene Martínez. Arlene is the deputy executive director and communications director at Good Jobs First. Good Jobs First is an organization that promotes corporate and government accountability, and economic development. As well as smart growth for working families. Stacy and Arlene are going to discuss Amazon’s use of public subsidies to advance their growth, the company’s tax avoidance and more. Without further ado, I’m going to hand things over to Stacy to lead the interview.
Stacy Mitchell:
Well, Arlene, it’s so great to have you on Building Local Power. Thanks so much for joining us today?
Arlene Martínez:
Thanks for having me Stacy.
Stacy Mitchell:
You all, Good Jobs First, your organization just does extraordinary work around the problem of corporate subsidies. These giveaways that happen across the country to big corporations. Tell us a little about what these corporate subsidies are all about? And maybe give a couple of recent examples of some of the kinds of bad deals that you’re tracking and why you see them as harmful?
Arlene Martínez:
Yeah. Corporate subsidies are when a corporation comes to a community and wants to bring a facility, a project, and they always promise a lot of jobs. They ask for public money to help [inaudible 00:01:44] the cost of the project. They come and they say they’re going to bring a lot of capital investment. They say they’re going to bring a lot of jobs and officials get excited and start opening up their wallets. The problem with some of these deals is that, first of all, it’s done out of public view. Sometimes the community doesn’t know the company name, don’t know how much money’s being offered. That’s the case even after the deal’s closed. In some states, we never know how much money the company got. A recent deal that just happened, first when you asked that question came to mind, was [inaudible 00:02:24]. Which is a company in West Virginia, a steel manufacturer in West Virginia.
Arlene Martínez:
They got a billion dollars. Over a billion dollars we think. It was a really rushed deal. There was no work requirements, which we like to see, in terms of wages. There was no location requirements or geography for workers. We think a lot of the workers will come from bordering states. They’re actually the real winners in this deal because they didn’t have to put any money up front and then they’ll get all the jobs. That was an example of a deal that we don’t like to see. There was no clawbacks, for example. If the company doesn’t deliver, taxpayers won’t get a lot of their money back. Another deal that came to mind right when you asked was a deal in Fort Wayne, Indiana. It was a deal that came under a code name, as a lot of these projects do. A majority of the city council didn’t know who the company was because of a nondisclosure agreement that the company had forced officials to sign. The council voted to give the subsidy anyway, and the company ended up being Amazon.
Stacy Mitchell:
Wow. You have a city council, is that common, the nondisclosure agreements? Where you’ve got a city governments’ voting to give away million, billions of dollars and has no idea who they’re giving it to?
Arlene Martínez:
That was a little unusual in that a lot of the council voted on the agreement without knowing the company name. But non-disclosure agreements are really common. In fact, they’re increasingly common that we’ve been seeing. Which is a really troubling new trend that we’ve been starting to see. We actually launched, us and a lot of different organizations, across the political spectrum by the way. Left, right and libertarian. We launched a recent campaign called Ban Secret Deals. The goal is to try to get an end to the use of these nondisclosure agreements. Officials and company officials will know what they’re agreeing on. The public will sometimes not know, often not know the company name. Because of the code name that I mentioned earlier. They won’t know how much money’s on the table until it’s a day or two before the vote.
Stacy Mitchell:
Wow. How common are these deals in general? How much money are cities and local governments giving away every year?
Arlene Martínez:
We have seen estimates anywhere from $45 billion to $90 billion per year.
Stacy Mitchell:
Year. Wow.
Arlene Martínez:
Yes. It’s a lot of money that we’re talking about. That’s just our best guess. We think it’s on the higher end of that, just because we know how much money we can track coming out, and we also know how poorly disclosure is in so many states. Couple states have next to no disclosure. It’s a lot of money that we’re talking about. We really saw an acceleration during the pandemic, and in terms of what we call mega deals. Which are deals which is $50 million or higher. It used to be really unusual to see a company crossing a billion dollar threshold. This year and last we saw deal, after deal, after deal. Our researcher who runs our subsidy tracker database, which is a collection of all the subsidy deals that we can find that companies have gotten, has been really struck by this trend. By just the flood of billion dollar deals that have come in the last year or two.
Stacy Mitchell:
That’s extraordinary. I mean, it’s an extraordinary amount of money for a single development project that a local or state government is handing over. More than a billion dollars. That’s just amazing. Let’s talk about one of the big subsidy getters that you’ve been tracking, which is Amazon. You all recently came out with a look back at the subsidy deals that Amazon has gotten. Walk us through what you found?
Arlene Martínez:
Yeah. Amazon in around 2012 created a new office that was designed specifically to go after subsidies. Brad Stone came out with a book called Amazon Unbound. He was able to access company internal documents that showed that Amazon set a goal of getting one billion dollars a year in public subsidies. But to our knowledge it hasn’t quite hit that but it’s still quite a bit of money that Amazon has gotten over the years.
Stacy Mitchell:
I think the number that you all found was that Amazon had gotten $4.1 billion since 2012. Since they opened that office of economic development?
Arlene Martínez:
Yes. They’ve gotten at least closing in on $4.2 billion in the United States alone by the way. We know they’re getting subsidies all over the world. But yes, that’s what we found. Last year was especially a banner year for Amazon. It got at least $650 million if not more than that. Again, that’s just what we can track down.
Stacy Mitchell:
I want to come back to that. I want to put a pin and come back to that issue of these deals really increasing during the pandemic. Because I find that surprising and I want to ask you a bit about why. But just staying with Amazon for a minute. I said their office of economic development, which of course we should put in quotes. Because that’s what they call it and that’s the line that they’re selling cities on. But in reality, this is a set of people within Amazon whose job is to go out and get free handouts from government, right. To get tax breaks and subsidies.
Stacy Mitchell:
What is the dynamic, why is it that so many cities fall into doing this, especially with a company like Amazon? Many of the cases I imagine these are warehouses or possibly data centers. There are not many jobs with data centers and warehouse jobs. In terms of Amazon, wages are very poor. I mean, these are not the kinds of jobs that you would think, “Oh, we should be subsidizing.” Of course, this is a growing company that has to have warehouses everywhere. Why do cities get suckered into this at that kind of level?
Arlene Martínez:
Yeah. I covered local government for many, many years as a journalist. I know that these elected bodies are made of community citizens who are doing public service. They really have joined, in a lot of cases, to help their community. They want to make it better, they want to bring jobs. I think they often think they’re doing a good thing by bringing Amazon in. Of course, there’s always the lure of the red ribbon cutting ceremony in front of the new facility with new jobs. That’s exciting too. But I think on a basic level, they’re excited to do something for their community and Amazon seems like such a get. I think in a lot of cases, perhaps the ripple effects that Amazon does when it comes to a community isn’t fully understood.
Arlene Martínez:
Now, we know we’re in this space, we know what happens to… We know that the workers are underpaid, they’re paid poorly, they’re in unsafe working conditions, their shifts are atrocious. We know that small businesses are in impacted when Amazon comes to town. We know all these things. We know public government could be spending the money and doing economic development in a much more thoughtful, effective, meaningful way. But for the people who are serving on the city council [inaudible 00:09:49], they may not have that understanding or they just think that it’s a good project coming on. Amazon is really effective by the way at selling this story. They’re really effective of it coming in there, they hold all the cards, they can say whatever they want. A lot of times they don’t show officials their internal company documents, right. It’s not an equal playing field. Amazon’s holding all the cards and they can make a lot of fancy promises and people buy it.
Stacy Mitchell:
I suppose they’re also sitting there saying, “Well, if you don’t do what we want we’re just going to go to another city.”
Arlene Martínez:
That’s exactly what they say. I mean, even in this case in Fort Wayne, Indiana, that I mentioned earlier. Where a majority of the council didn’t know that they were voting on Amazon. Amazon came back for a second subsidy after the first $16 million that they got. They came back asking for another seven million dollar subsidy. But by then the public knew who it was and they weren’t happy about it. There was a lot of pressure now on the council to reject this second subsidy. The council actually did reject it and Amazon still threatened to walk. Even though construction had already started and even though they’d already gotten their $16 million up front. Amazon is I think a bully, and is very eager to use its power to get what it wants.
Stacy Mitchell:
I did a bit of math, the $4.1 billion that you have documented Amazon getting over the last 10 years in the U.S. alone. We’ve been in touch with a community and neighborhood in North Tulsa, Oklahoma. Which is, in that part of the city there has not been a grocery store for a long time. We’ve been working some with a city counselor there because they’d been inundated by dollar stores, and they were trying to figure out how best to regulate and limit the dollar chains from coming in. She has also been working towards getting a full service grocery store. The community finally succeeded just recently. In the last few months Oasis Market, a locally owned grocery store, opened. It was a mix of some city financing and so on, to make the project happen.
Stacy Mitchell:
But it’s a full service grocery store, obviously in a community that really needed it. The project all told, land, building, everything, cost about six or seven million dollars. For the $4.1 billion that cities gave to Amazon over the last 10 years, we could have built 672 new locally owned grocery stores in underserved communities. Connected to, say, local farmers and food producers. I mean, the scale of this money is extraordinary and the opportunity cost of what we’re not doing… In addition to empowering Amazon even further, and making a very wealthy company, and wealthy founder, Jeff Bezos, even wealthier, and more powerful. In addition to that problem, it’s the opportunity cost of what we could be spending these dollars on that’s just so extraordinary?
Arlene Martínez:
Yeah. Stacy, you know that’s something that we talk about a lot, the opportunity cost. Because it’s such a poor use of money to give one of the world’s most richest, powerful companies money. When there’s a lot of better other uses for it. Good Jobs First is often labeled as anti-subsidy and we’re not. We think that public money, when it’s going to a public good that benefits a community, is a good way to spend money. But the problem with so much of the way that economic development is done in this country, and the way that these deals are structured. Is that the community loses in the end because the giveaways are so big. That tax money that was given will never pay for itself, right. A job won’t pay the amount of taxes that they’re getting in tax breaks. Yes, opportunity costs are huge when you think about what is true economic development. And that’s building great schools, great public schools, and making sure that there are safe and healthy parks, and that roads are paved. So many better ways to spend money than the way that these deals are being structured.
Stacy Mitchell:
I’m curious, you mentioned that Good Jobs First is not anti-subsidy. This isn’t something that I’ve really struggled with and that we’ve debated and talked about a lot at ILSR. Is, I can see there’re lots of good ways that we might spend public economic development dollars. I certainly think there’re communities that need grocery stores, for example. That’s a really good way to invest in developing those locally owned grocery stores. There are neighborhood business districts and down towns that have fallen into disrepair, and are not going to be brought back without some public investment to offset those higher costs of revitalizing those areas. Anyway, I could go on with a list of these things. In the food sector we’ve seen a real loss of the intermediating small scale processors and distributors.
Stacy Mitchell:
We’ve got a whole bunch of new local farmers and food producers, and we’ve got a lot of eaters who want to eat local. But we’re missing that in between distribution. It’s often because those types of businesses require a higher level of capital investment than a lot of entrepreneurs have. Again, there’s a place where you could say, “Oh, that’s a good use of like public economic development dollars.” That’s one train of thought. But then I think, I look out at these crazy subsidy deals, this maybe $90 billion that’s spent every year. According to Good Jobs First research, almost all of that going to the biggest companies who clearly have the ability to game the system to make it work for them. I think maybe we’re better off just banning subsidy deals. But at the end of the day, if we could pass a federal law that said, “No more of this.” That would actually be better even though it would tie our hands, in terms of being able to do good things. That the scale of what corporations are able to get is… We just can’t beat that back?
Arlene Martínez:
Yeah. A lot of the research that we’re seeing now is really pointing to investment in public goods. I just talked about some of them. But workers want to live… And talent that a lot of these companies seek. They want to live in good communities with good schools, with good roads, they want amenities, they want natural resources, good parks, safe neighborhoods, good housing, affordable housing. They want all these things and that’s what drives them into a community. They’re willing to pay higher taxes for that. We’ve seen that all over the country, or at least the research that we’re looking at, is showing these trends. For the governments to invest in those types of things, so then the community becomes a natural attractor for talent. Maybe that’s one way to go.
Arlene Martínez:
That problem that you mentioned of so many subsidies going to large companies is a huge one. It’s just so overwhelming. How can a small business compete with a company that’s being subsidized? Right. That’s why libertarians hate them so much. Really, it’s an unfair playing field when you’ve got the government helping pick winners and losers. But I think we still see value in the right kind of subsidies and subsidies that include living wages for workers, health benefits, with sick benefits, with health insurance, those types of things. Where workers can have a say in what their workplace looks like, what their hours look like. That could all be written into these deals. I think we forget how much power local officials have to tailor these deals in ways that really protect workers and their neighborhoods. Too many of them don’t do that, again, because of the power of these big corporations. They come in with their high powered, expensive, glossy attorneys. What they’re up against is not anywhere near many city’s resources.
Stacy Mitchell:
What do you think it will take to solve this? What are the key things that we should be focused on trying to do?
Arlene Martínez:
Well, I think Greg LeRoy, our executive director, thinks ultimately federal action is needed. Of the type that you were just talking about, right. Saying, states cannot give these subsidies out and local communities can’t give these subsidies out. The problem is, there’s never been any real movement on that. Is that realistic or practical? It has never come close. I’ll say that. We focus a lot of our effort at the state level because what happens at… So much of this money is given out through local communities, through state enabled legislation. If the states could reign in some of what local communities are allowed to do, that could be a big help in reigning in these really terrible subsidies. But one challenge is, both parties, Democrats and Republicans, both seem to really love giving away these subsidies. It’s just a challenge getting bipartisan support to make these big changes that need to happen at the state level. But we think that’s probably the best place. That’s where we put a lot of our energy.
Stacy Mitchell:
Are there states that do less of these subsidies, have good policies? I mean, there’s other states that stand out as at least more in the right direction?
Arlene Martínez:
That’s a good question Stacy. I train a lot of journalists at different sessions and I get that question a lot. It’s hard to point to a state that does it really amazing. But we do appreciate some for things like transparency. Michigan, for example, has given away a lot of money. But they’re quite transparent about how much money they’re giving away and what companies are getting it. We appreciate the transparency. Illinois is another place that has very transparent about the way that they do it. Because secrecy is a big problem with a lot of these places. In terms of states that do it well, I would need to look a bit more into that.
Arlene Martínez:
I will say there’s an interesting community in the Minneapolis area. So that they would stop this regional competition that goes on, where one county’s fighting with another county. In the Minneapolis area, a lot of counties came together many, many years ago. Now if a project comes to one, they all pay the cost of it coming. They’re all splitting the cost of subsidies, they’re all allegedly reaping in the rewards. We like to see that type of regional cooperation, we’d like to see more of it. Of course, those multi-state compacts where you agree not to poach jobs from one another, it’s also something that we really strongly support. We saw that happen in Kansas and Missouri. Although, again, during the pandemic and these deals, we saw a little of that happening anyway.
Jess Del Fiacco:
I’m sorry to interrupt. Stacy and Arlene will be right back after a very short break. Thank you for listening to our show. If you’re enjoying this episode, I hope you’ll consider hitting over to archive.ilsr.org/donate to help support our work. Your donation not only makes this show possible, but it also helps us to develop the research and resources we make available for free on our website. You can head over to archive.ilsr.org/donate to contribute today. Any amount is sincerely appreciated. All right, now back to the show.
Stacy Mitchell:
You mentioned earlier in the conversation that these deals had really gone on steroids during the pandemic. I found that surprising I guess because I would’ve thought that local governments would be so busy with the frontline needs of their communities. Also, there was a sense during the pandemic of a bit of a more fundamental reset around a lot of areas of policy. I’m surprised by that. I’m curious if you could tell us, is that a big trend and if you have any sense of why it happened?
Arlene Martínez:
Yeah. You used the word surprising when you hear that. I use the word outraging. To me it is something that my head’s been spinning. I joined Good Jobs First in August 2020, so it was a few months into the pandemic. I just started seeing, a few months after I started, major deal, after major deal, after major deal. Our research analyst who tracks these closely was noticing that too. She was bringing it to attention all these major deals. Then of course we know that the cares act in ARPA, the American Rescue Plan Act. Both of those gave a lot of money states and gave states a lot of flexibility with how they could spend that money. A lot of states are using it and have used it for economic development subsidies. We’re seeing these massive packages.
Arlene Martínez:
It’s hard to directly link it to this flood of money that’s coming to their states. But it happened at the same time. We know that several states got together to sue so that they could use the money for tax breaks. Then they won. It’s hard not to link it to the cares and ARPA money that came into states, to really work with. That was really money designed to help with, so that families could stay housed, they could keep food on the table, they could keep their jobs, their small businesses could stay open, all the thing. On top of that, after we saw right that the economic impact wasn’t as big as we first thought. Then there was a lot of opportunity to do new things with that money.
Arlene Martínez:
We’re still hopeful that a lot of the money that hasn’t been spent will be used for things like better parks, and upgrades to schools, and increased broadband, and all these types of things. In my neighborhood we’re trying to get our school to use the money to open up the campus after hours to the public. Right now it’s closed off after school hours. There’s an open park [inaudible 00:24:30] there in my neighborhood. Some communities we’ve found are using the money for things like that. Unfortunately, some other places have used it as major giveaways to large corporations. Always large corporations.
Stacy Mitchell:
Yeah. We’ve been working a lot around helping communities use it for broadband and also for nurturing their local economies, entrepreneurship development. And that sort of thing at the local level, and supporting the whole economy. As you said, there’s a really important policy distinction here between a giveaway for one company, a big tax break. Versus investing in infrastructure, schools, education, training. All the things that we know from the research are directly linked to business growth, and new jobs, and opportunities, and all of that. Trying to steer communities into making those kinds of choices, those broad based economic investments that are very different from the kinds of corporate giveaways. But it’s challenging because that requires a lot more work obviously from city governments to go that route. And to actually steward those resources as opposed to just writing a tax break for Amazon?
Arlene Martínez:
Yeah. You’re absolutely right. I think one area that we think about and talk about too a lot are planning schools. The planning schools across the country, and the MBA programs across the country, and to get planning schools. Some do this but we’d like to see more of it. But where economic development isn’t about writing a check to a big company or trying to entice a big company. How do you do that? It’s more holistic than that. Like you were talking about, making a community age friendly, more ADA friendly, always education. Education we think should be a key part of economic development. But right now a lot of the way that the planning schools are, that’s not that forefront.
Arlene Martínez:
The same with a lot of the MBA programs too that are structured to, how do you make the most money? Profit, profit, profit. Rather than, what makes a corporate citizen? What’s the role of a company in making the world a more just and equitable place. As corny as that sounds, business schools have a great opportunity there to nurture those kind of leaders. I think too many programs are missing that and the same with the planning schools. It’s a lot harder to do that, the type of thoughtful investment that you’re talking about. Yes. But it can be done as I know you agree.
Stacy Mitchell:
I think you’re right about this, thinking about the next generation of people who are coming into these fields. As being a really important way to think about how we shift directions. So much of it too seems like is almost ideological you could say. In the sense that, for the last 40 years or so in the frameworks that we’ve been living in. We think about spending money on schools or community infrastructure, around say pedestrians. Making communities walkable, which is really good for small business development. We think of those kinds of public expenditures as expenditures.
Stacy Mitchell:
Whereas, we think about, when we give away money to a big corporation that somehow it’s an investment or something. We categorize it mentally, it seems like as a society it’s something else. Like, “Oh, this is an investment that’s going to pay off in jobs.” But we don’t think about that in terms of those public goods. I’m hopeful that maybe we’re at a moment where that’s shifting. It seems like there’s at least some signs that we’re waking up to how wrong that way of looking at things is?
Arlene Martínez:
Language is so important. I think the pro subsidy, the pro large corporation movement has been so effective in calling their types of projects investments. As you just mentioned, instead of… And categorizing other things as giveaways, or to let people not sit on their couch, or whatever the case may be. Yeah, I think reframing this whole story and challenging that narrative that somehow they’re creating jobs. Which, if they are creating jobs, they’re poor paying and they’re so heavily subsidized that they don’t contribute to the tax base.
Stacy Mitchell:
I want to ask you in particular about a certain kind of, I guess, subsidy deal. I don’t totally understand it myself. But there are these things called opportunity zones. This was a law that was, I guess, passed several years ago. Where communities, I guess, could create these zones. The idea, as I understood it, was we’re going to create special tax incentives in areas that are really struggling. Yet when I read about a lot of what’s actually happening in opportunity zones, I’m seeing luxury condo development. I mean, what is going on and why are there no parameters apparently around what places can do with these zones?
Arlene Martínez:
Opportunity zones are part of the 2017 tax cuts and jobs act, right, the Trump tax cuts. They were inserted in there pretty quickly, very quickly. David Wessle who was a reporter at the Wall Street Journal wrote a book about opportunity zones and it was a really fascinating. Look at how Netflix founder, he’s the one got opportunity zones eventually passed as legislation. Because he was trying to avoid paying capital gains on some of his tech gains, right, for him and his friends. They put a few hundred dollars in and now they were billionaires. I’m exaggerating, but you know. They were looking for a place to not have to pay those capital gain. I think the Netflix founder, Sean Parker, really had a… It started from a good place. At least this is what David Wessle told me, we talked about it. Where he really thought they could put their money into communities that were struggling and they would really help them thrive.
Arlene Martínez:
The problem is, of course, how the bill was eventually passed. Which was, as it went through all the stages, any type of safeguards were stripped out. In the end, you got the same amount of money, whether you invested in a really downtrodden community or a gentrifying more affluent community. Which is where we’ve seen most of the investment. There was no necessity to engage community groups or grassroots groups. They didn’t have to do any type of engagement. There was no worker protections, there was no affordable housing requirements. You saw things like a storage facility with one job, literally one job because it’s automated. That was an acceptable opportunity zones project.
Arlene Martínez:
There was a project in Portland, Oregon, where it was constructed and they already had their major tenant which was a gas company. By changing the deed of occupancy ownership, they were able to qualify suddenly now for the opportunity zones, really at the last minute. That was because of the way the legislation was written, where it was so poorly written. The only project that really makes sense under opera opportunity zones, as they’re currently written, are these more mid to high projects. I think one developer said, “It doesn’t make a bad project good but it makes a good project great.” They’re a real problem and they won’t solve any things that they were trying to solve. Because they can, because that’s just not how they’re structured.
Stacy Mitchell:
Right. You make these choices at the policy level and you get the outcomes that you set up. Is there any effort in Congress or anywhere else to put some guardrails and try to fix that program?
Arlene Martinez:
There is. One thing that David Wessle did throughout the book was say, “Don’t blame the player, blame the game.” But I wrote a review of the book and I said, “I will blame the players because they… It was a group of people who consciously made this decision as it goes along.” Didn’t come out of thin air. This was purposely meant to be a program that you didn’t have to report. By the way, there’s no reporting requirements. Everything could be done secretly and you could focus on luxury housing. Yes, I’ve been cheered to see actually a couple different efforts trying to reform. Trying to get things like storage facilities banned, trying to get certain types to projects like college housing for example, which tends to be pretty lucrative. Because there’s always college students, they can pay more rent often.
Arlene Martínez:
Trying to get some of those projects out. Trying to reduce the number of zones just so the hardest hit ones qualify. All those efforts have been talked about and introduced. We know of other legislation that’s at least being discussed. People have reached out to us to look it over and see what might be missing and propose legislation. We’re hopeful for that. I mean, obviously we think it shouldn’t exist, that would be best case. Would just be to get rid of it. Second best case would be for it to end when it’s supposed to end. While it’s in existence, tighten it quite a bit and require reporting about what projects it’s being used for. Which is not currently available. Right now there are also efforts to extend it. Ohio, for example, just doubled the amount of tax breaks that was allowed. It’s a temporary doubling. But it took what opportunity zones allowed and doubled it for the next couple of years. Obviously, there was some sweet heart deal, I think anyway that was meant to ultimately benefit. But that passed too in the last few months.
Stacy Mitchell:
One of the consequences of these big subsidy giveaways is that they exacerbate racial disparities. That they benefit some groups and undermine other communities. Can you talk about what your research has found and what you’re seeing out there?
Arlene Martínez:
Yeah. One of the big problems with subsidies is who gets them. We’ve talked a lot about the fact that a lot of large corporations get them. Well, large corporations are typically often majority white men who are running these companies. You have a real disparity, just fundamentally, in who’s getting these subsidies. Our research has also shown, particularly when we look at money that schools lose through these property tax breaks and other tax abatements. In some states we’ve found that communities with higher black and Latino populations lose more money to these tax breaks.
Arlene Martínez:
In fact the Kansas City Public Schools superintendent, for example, called the way that the city does economic development subsidies, systemic racism. Because his schools, which were primarily black and Latino, were being drained of revenue that they really needed. While the white suburban districts were losing very little. Again, going back to the way that these programs are structured, so there’s a real racial and ethnic disparity that happens. Both who gets them and who pays.
Stacy Mitchell:
I mean, just so many ways in which these deals just drive inequality. Yeah, that’s really extraordinary to think about black and brown communities actually shouldering the cost of these deals. In addition to not benefiting from how the deals are structured in the first place. But also ultimately having to pay more for them?
Arlene Martínez:
When you think about student and the way that schools are financed, it’s often through property taxes. When property taxes are drained they’re losing that money. Even when states make some communities whole, states sometimes will return the money that was taken out through subsidies. It still isn’t enough funding often to make up for what they lose. Communities with poor population have higher needs and should be funded at a higher level anyway. They lose in a couple different ways, many different ways.
Stacy Mitchell:
I want to close out by asking a little about, Good Jobs First has some great tools on your website that individuals and community groups can use to understand what’s going on with subsidies in their area. I was wondering if you could talk a bit about those? If you have any suggestions for how somebody who’s hearing this and wants to become an advocate for reforming these kinds of giveaways, what they can be doing in their own community?
Arlene Martínez:
We have a great resource on our website. It’s really just a beginner’s guide to economic development subsidies. It breaks down all the terms of what subsidy is, how all the different types of subsidies that are offered, because it’s often a collection. A lot of times a project will layer various subsidies upon one another. There’s a lot of different ways that a company can get money from a community. We walk you through some of the different ways that companies can do that. How to look for a deal, because sometimes, again, these project code names make it difficult to find out whether it is a project getting subsidies. We walk you through that. We also have a lot of resources for how to submit public records requests and how to… Even down to what kind of language to use when you’re requesting these documents.
Arlene Martínez:
We also have corporate research guides, so that you can look at company. When you’re exploring whether a company coming to town, if you can find out who that company is, and you can do some research into the company’s track record. One argument is, should a company that has stolen wages from workers, harm the environment, or otherwise committed theft, or fraud against the government. Should they be getting a subsidy? Well, you could make the case. No. And you can use our resources to search the company to see what kind of track records they have.
Arlene Martínez:
We also have model legislation too. Everything from nondisclosure agreements, what something [inaudible 00:38:28] that could look like. Also, we have what’s called a unified budget, so that give governments ideas for how to better report their subsidies if they’re so inclined. But a lot of resources in there for communities. We also work closely with community groups too, so engaged in certain fights. We’re always happy to reach out if a community is looking at something or wants us to look at an agreement. But those beginners guides and research guides are just full of valuable information. I read it from top to bottom and I’d already been here a year and a half, but I learned a ton.
Stacy Mitchell:
That’s great. Yeah, those are all really… Your resources are great. I always find it fascinating to be able to go look up subsidies by location, by company, and really just have all of the data. At least the data that’s public. As you know, in some cases we don’t know the total value of these deals. I feel like small businesses are really a constituency that maybe can become increasingly activated around this issue. We just did a survey of over 900 independent businesses nationally. One of the questions we ask them is, which of these policies actions would be most effective in improving the survival and success of independent businesses? The number one vote getter was ending subsidies and tax breaks for big businesses. Because it creates a huge un-level playing field. I’m hoping that argument, in addition to the ways in which workers and communities lose around these deals, might help us get some more traction with local governments?
Arlene Martínez:
We would love to see more activation among the small business community. I know there’s a lot of effort there, I know your organization has been doing quite a bit in that area. Because I do think that that’s a really important group to mobilize and work against these small businesses who are so hurt by a company like Amazon and others coming in, in getting a ton of money. Now they have to compete with a company that can offer subsidized shipping, right. Amazon doesn’t… Their Prime doesn’t pay for their shipping costs, is one example. Yes, I think the small business community is one that would be such a valuable voice in this fight and stand to gain so much. I think one point that Greg LeRoy, our executive director, always makes is looking at small business stats and how they’ve gone down, and how alarming that is. Because small businesses have really been the backbone of this country. Any healthy country has a lot of small businesses. That’s alarming. It’d be great to see more small business movement around this and pushing, lighting against it.
Stacy Mitchell:
Thank you so much Arlene. It’s been wonderful to talk with you today. I really appreciate you taking the time to be on our podcast.
Arlene Martínez:
Well, thanks for having me Stacy, keep up your good work.
Jess Del Fiacco:
Thank you for tuning into this episode, the Building Local Power podcast, from the Institute for Local Self-Reliance. You can find links to everything discussed today by going to archive.ilsr.org and clicking on the show page for this episode. That’s I-L-S-R.org. While you’re there, you can sign up for one of our many newsletters and connect with us on social media. We hope you’ll also take the opportunity to help us out with the gift that helps produce this very podcast and supports the research and resources we make available for free on our website. Finally, we ask that you let us know how we’re doing with a rating or review on Apple Podcasts, or wherever you find your podcasts. This show is produced by me, Jess Del Fiacco and edited by Drew Birschbach. For the Institute for Local Self-Reliance, I’m Jess Del Fiacco and I hope you’ll join again in two weeks for the next episode of Building Local Power.

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43 min
March 24, 2022The Leaders Working to Build a Robust Small Business Economy
On this episode of the Building Local Power Podcast, we share highlights from a recent ILSR event called “The Progressive Fight for Small Business” featuring Congresswoman Pramila Jayapal and White House Advisor Tim Wu. Rep. Jayapal talks about the intersectionality between small business, health care, minimum wage, and racial inequity. Wu discusses how we need to relearn the virtues of a true American economy and how consolidation and the rise of a middleman are two of the biggest problems we face today.
Highlights include:
How the Paycheck Recovery Act would help small businesses if it is reintroduced.
The effects of Biden’s Executive Order and how the Competition Council are working towards a more equitable economy.
How the economic principles that our nation subscribed to 40 years ago were not interested in maintaining a diverse set of businesses.
Why it is critical for small businesses to thrive.
“We have a real opportunity to use the bipartisan momentum to prevent dominant companies from maintaining market power and using their extensive resources to stifle independent and small competitors from entering the market and also to think about our communities in a holistic way and I think that is what small businesses do particularly well.” – Congresswoman Pramila Jayapal
“Our country has become too centralized, too national, too centered on consumption as opposed to production, and too many of the returns go to too few people. ” – Tim Wu
Related Resources
Transcript
Jess Del Fiacco:
Hello, and welcome to Building Local Power, a podcast dedicated to thought-provoking conversations about how we can challenge corporate monopolies and expand the power of people to shape their own future. I’m Jess Del Fiacco, the host of Building Local Power and communications manager here at the Institute for Local Self-Reliance. For more than 45 years, ILSR has worked to build thriving, equitable communities where power, wealth and accountability remain in local hands.
Jess Del Fiacco:
For today’s episode, we’re bringing you highlights from a recent event that we put on. The event is all about the momentum that is building in Congress within the Biden administration and within many state houses to reign in monopoly power and level the playing field for small, independent businesses. You’ll hear from Congresswoman Pramila Jayapal, who’s the chair of the Congressional Progressive Caucus, and Tim Wu, who is a special assistant to the president for Technology and Competition Policy. This event was called the Progressive Fight for Small Business, and if you’re interested in watching the whole recording, you can find that and related resources archived on archive.ilsr.org.
Jess Del Fiacco:
With that, I’ll let you listen to the show.
Stacy Mitchell:
I’m Stacy Mitchell. I’m the co-director of ILSR, the Institute for Local Self-Reliance. More than a decade ago, I helped launch an initiative here at ILSR focused on independent business. We were, and continue to be, deeply concerned about the sharp decline in small, independent businesses that we’ve seen across virtually every sector of the economy. Back at that time, there were very few political leaders on either side of the aisle who had much concern about this trend. The widespread assumption at that time was that small business didn’t matter much, the bigger corporations were better, more efficient, more productive, and so on.
Stacy Mitchell:
Today, we know that economic concentration and the losses that we’ve seen, both for working people and for small businesses, have had devastating effects on communities, that the decline of small business and the growing concentration across our economy is really driving racial and economic inequality, and ultimately undermining our democracy. We know that the primary driver of this trend is concentrated corporate power, whether it’s the power that these corporations wield in the market or the political power that they have to rig government policy in their own favor and to undermine their smaller competitors.
Stacy Mitchell:
Today, we’re obviously at a very critical juncture in our country’s history, and fortunately, small business is beginning to be more at the forefront of public discourse. We have a growing anti-monopoly movement and many progressive leaders are beginning to see small business as a central part of how we create an equitable economy and a vibrant democracy where all people can thrive.
Stacy Mitchell:
Today, we have just an incredible lineup of speakers to explore these issues, and I’m just really excited about this conversation. Let me give you a quick overview of our run of show, and I’m going to briefly introduce our speakers and then we’ll get going. Our keynote today is Congresswoman Pramila Jayapal. She’s serving her third term in Congress, representing Washington’s Seventh District, which encompasses most of Seattle and its surrounding areas. She’s the first South Asian American woman elected to the US House. She’s a member of the House Judiciary Committee and she also serves as the vice-chair of its subcommittee on antitrust, where she’s done really terrific work as part of the big tech investigation, looking at the impact of big tech and concentrated power, particularly lifting up small businesses. After a conversation and remarks from the Congresswoman, we’ll then turn to Tim Wu, who is an official in the Biden White House with responsibility for technology and competition policy. Tim is a legal scholar at Columbia University and has authored several books, including a really terrific book called The Curse of Bigness.
Stacy Mitchell:
Let’s get started. I’d like to welcome Congresswoman Jayapal. It’s so nice to see you. Thank you so much for being here.
Pramila Jayapal:
Stacy, it’s so wonderful to be with you. I am grateful to ILSR for all of your fantastic work and for really elevating the issues of small business. Of course, my involvement with small business goes back to when we worked with Main Street Alliance around raising the minimum wage to 15 here in Seattle, we became the first major city to do that. I think small business was such an important part of that fight and really the framing of what it means to have healthy communities and the role that small businesses play in that landscape.
Stacy Mitchell:
Well, that’s terrific. You have really been central. Small businesses are at this really precarious moment right now. I mean, we’ve not only seen this 40-year decline, where their role in the economy has been cut in half, but a very precarious moment, both with concentrated power, with the effects of the pandemic and the way that’s magnified concentrated power, and a really whole host of policy issues. You’ve been really instrumental on some of the work in Congress around trying to restore antitrust law. I was very aware of the important role that you played in COVID relief around small business.
Stacy Mitchell:
I’m wondering if you talk a little bit about why progressives should even care about small business, I don’t think small business generally has been on the progressive radar as a central part of what we need, and why should progressives even care?
Pramila Jayapal:
Well, I mean, very simply put, progressives care about local communities doing well, and the way that local communities do well is to have a thriving small business economy. I mean, that is so central to how we think about healthy and vibrant communities. Every community across the country has small businesses and people are very connected to their small businesses.
Pramila Jayapal:
One of the things that we found, going all the way back to 10 years ago on the minimum wage fight, is that our small businesses often are very high road employers, they are very connected with the people who work in those small businesses and they want to do right by them. A lot of progressive policies are at the forefront of the wishlist for many small businesses. I think we’ve come a long way in terms of really educating progressives about how small businesses are key ally in our fight for justice and equity, and that efforts to support small businesses aren’t just limited to progressives, they’re a concern for everyone on the political spectrum. I think that is why we see a lot of bipartisan support.
Pramila Jayapal:
For me, I told you about my background with really engaging with small businesses during the Fight for $15, but the two issues that I have been very actively involved in around COVID relief and antitrust, as the vice chair of the antitrust subcommittee, really have that thread, again, in the middle of small business. My district, the 7th District of Washington, which is the Seattle and surrounding areas, as you said, was hit first and very hard by the pandemic. I think people around the world know Seattle as the home of big corporations, like Starbucks and Microsoft and Amazon, but it is so much more. It is the smaller, independent coffee shops, the restaurants, the bookstores. In fact, we have one of the highest concentrations of independent book sellers in the country. We found out very quickly what the effects of COVID were on our local community and our small businesses, and it pushed me into finding how other countries in the world dealt with this kind of crisis situation.
Pramila Jayapal:
In my research, I found that countries like Germany, after the last recession, put in place a program that allowed small businesses, medium-sized businesses, to get assistance in circumstances where you reach certain thresholds, economic distress, unemployment, health crises, those kinds of things. There were automatic stabilizers that kicked in. Instead of doing the assistance through a big bank that could leave people out, the model was for those businesses to go directly to the government.
Pramila Jayapal:
I worked with Nobel prize winning economist, Joseph Stiglitz, I worked with Mark Zandi from Moody’s, I worked with economists all over the spectrum and with small businesses and coalitions, to put together a bill called the Paycheck Recovery Act, which would have allowed all small businesses to not have to go through a third party of a big bank, which was how the Paycheck Protection Act was initially structured, and be able to go directly to the IRS with their tax filings and be able to get assistance that is proportional to their loss of income, their loss of sales or activity, and that that activity would determine how long the assistance would go for and it would go to fund things like rent and electricity charges and all the things that had to keep continuing even as a small business had to shut down during COVID.
Pramila Jayapal:
That, I think, would’ve been a far more effective way. It also would not have kicked people off of healthcare. It would’ve allowed small businesses to keep employees on their payroll and not deal with the problems of not having the workforce that we needed. Frankly, it would’ve been far more efficient at delivering relief to our small businesses and much, much quicker.
Pramila Jayapal:
That was one piece that I am still working on actually, I’m going to reintroduce it. Now that we’ve seen some of the problems with the delivery mechanisms for getting loans out to small businesses, I think we have a chance to make the legislation even stronger and people are realizing, yeah, this is what we should have done, because it would’ve scaled the assistance. If you have a wave of COVID, you could have had more assistance when the wave is particularly bad or the surge and the virus is bad, and then as it goes down, you would have had less assistance, but you would’ve stayed in business the whole time. That’s what I heard from small businesses over and over again. I think we have to do better to grant federal relief to small businesses who are devastated by the pandemic.
Pramila Jayapal:
On antitrust, if I can just say for a minute there, I think when I came into the judiciary committee and the antitrust subcommittee, and when we started our investigation a couple of years ago, which was a 16-month investigation into market concentration and monopoly power of the four big tech firms, I don’t know that I knew that much about exactly how that worked, but over 16 months, we heard from so many small businesses, some in great confidence because they were very afraid of what would happen to them if they spoke out and how they could have the power that big tech firms wield over them demote them to maybe not being on the first page when you do a search engine, or if you’re on Amazon, not getting the preferred customer slot.
Pramila Jayapal:
Some of was not public, some of it was done confidentially, but we had over 120,000 documents that we got. We had dozens of hearings and briefings and interviews with small businesses, and some medium-sized businesses and even some big businesses, about the practices of big tech and the ways in which market concentration and monopoly power have really contributed to driving small businesses out or setting the rules in such a way that you simply cannot compete, you can never compete.
Pramila Jayapal:
That led to a package of bills that we introduced in the judiciary committee, a bipartisan antitrust package, that addresses these anti-competitive habits. There are five bills that are focused on unique issues presented by these big tech companies. My bill is HR 3825, the Ending Platform Monopolies Act, which essentially protects the interests of small businesses that sell their products on digital platforms by eliminating the ability of those dominant platforms to leverage their control over multiple lines of business and self-preference their own business lines. This is something we heard over and over again about from small business owners, who saw companies like Amazon suppress their listings by placing them at the bottom of the seller queue and simultaneously elevating their own competing products. My bill addresses that conduct and it prohibits digital platforms from selling their own products on their websites.
Pramila Jayapal:
All of these bills, including mine, have bipartisan support, not just in Congress, but from small business owners from all backgrounds. I think these bills really transcend politics and they hit at the heart of what ILSR is about, what America is about, and that’s free markets, small business ability to grow, and most importantly, better choices for Americans.
Stacy Mitchell:
It’s been great to see the movement on monopoly power and the big tech bills. There was an important vote in the Senate on one of those bills just last week, we’ve been thrilled to see your breakup bill, which really gets the structural, the inherent conflicts of interest that you just outlined that are deeply problematic. We hear from many of the small business owners we talk to that that bill is really an essential piece of solving this problem.
Stacy Mitchell:
For a long time, the big business lobby and the Chamber of Commerce has gotten to own what small business needs and also own our political process to drive their agenda. Will you talk a little bit about how you see addressing small business issues and engaging with small business as a base and as part of this anti-monopoly agenda, how that might be helpful in terms of reducing corporate power not only in the economy, but in our political system.
Pramila Jayapal:
Yeah. It’s a really, really important piece of the work we have to do, and frankly, it’s going to be a very important piece of whether we’re successful or not. That is really my call to action, if you will, to small businesses that are on this call, because you’ve already seen the amount of money that’s being poured into lobbying Congress, but also lobbying the public, the multi-minute ads on mainstream television, on every cable station, about these big tech companies and why our package of bills is not going to be helpful, a lot of framing of the conversation as if the big tech companies are the savior for small businesses, when in fact, we know that our experience shows that they self-preference themselves and they act competitively and actually drive a lot of small business out. They have so much concentration of power, market power, that they can set … I said during the hearing that it’s sort of like being the referee of a game, making all the rules, calling all the plays and playing on the team, it’s like that. It’s just a very unfair set of advantages.
Pramila Jayapal:
What we really need, I think, if we’re going to change the political landscape, is to have a real alliance with small businesses to help tell the stories of what small businesses are experiencing and to have small businesses be the ones reaching out to members of Congress to say, “I support this package of bills. I support the ability for small businesses to have a competitive landscape to operate our small businesses.” I think that is very, very important, and I think Democrats have increasingly been concerned about the pervasiveness of corporate power.
Pramila Jayapal:
It’s a message that resonates across party lines and can really help Democrats build support. When we looked at the political map on this issue, it very much in favor of exactly what we’re talking about, taking on big monopolies and breaking them up and allowing small businesses to compete, and also recognizing the monopsony power that is created with concentration of market power. What happens to workers when they don’t have choices about where to go? Wages go down, benefits go down, it has multiple effects across the economy.
Pramila Jayapal:
I know you’re going to have Tim Wu on after me. The president has been really very strong on lifting up competition and the role of monopolies in income inequity, racial equity, a number of different pieces in all parts of our country, in rural America with meat packing and agriculture and the food supply, but also across the board. I think that’s a very good thing. He’s got a lot of experts, like Tim Wu and Lina Khan at the FTC and others, Bharat Ramamurti is also in the White House. I think they really understand this issue of concentration of corporate power.
Pramila Jayapal:
I think we can improve our support, as Democrats, for small businesses, by understanding how these issues also intersect with dozens of other legislative priorities. As the political makeup of small business advocates has grown, I hope that we will be able to engage directly with you to tell your stories and to also get your help in moving these sensible bipartisan measures, like this bipartisan antitrust package.
Pramila Jayapal:
But also, there’s other issues that I hear from my small businesses all the time about. One of the big ones is healthcare. I’m just going to put in a plug for my bill, HR 1976, the Medicare for All Act of 2021, which would add benefits to Medicare and expand Medicare and guarantee coverage to all Americans. Just think about how important health coverage is if a small business wants to be able to provide their employees with health insurance and doesn’t want to have to try and navigate it on their own. That’s why we’ve seen so much support from small businesses across the country to support something like Medicare for All, because it gives employers a lot more freedom to keep wages in line with rising costs and just frees them up to devote their energy to innovation and production instead of endless paperwork and phone calls with insurers. Even if they have insurance, so many small business employers have told me about how they still have to fund GoFundMe campaigns for their employees because their employees are simply not getting the kind of healthcare that they need.
Pramila Jayapal:
I think we have a real opportunity to use the bipartisan momentum to prevent dominant companies from maintaining market power and using their extensive resources to stifle independent and small competitors from entering the market, and also to think about our communities in a holistic way. I think that’s what small businesses do particularly well.
Stacy Mitchell:
That’s great. I’ve been so heartened to see the focus, as I said, on concentrated power and the ways in which, not only in tech, but across the economy, I mean, even Visa and MasterCard’s ability to leverage these huge fees on local businesses. It seems so important, I think partly because what I heard a lot from small business owners, who say, “Yes, we want to pay more, we want to be good stewards of our communities. We support these kinds of higher standards, but it can sometimes be really tough when we’re asked to do that, and meanwhile, we’ve got corporate landlords and big banks who are hiking fees. We’ve got other monopolists who are blocking, that we progressives to fight for us in order to be able to be the kinds of community stewards that we’re capable of being.”
Stacy Mitchell:
I know we just have a couple minutes left with you, but I do want to get to one important final question, which is, small business has a particular significance in communities of color and immigrant communities, and I’m just interested to hear your reflections on that and how you think policy makers can be thinking about small business development as a strategy for building both economic and political power in Black and Brown communities.
Pramila Jayapal:
Yeah, this is so important because I think we see how small and minority and women-owned businesses are still suffering, and when businesses fail, communities fail. I think you saw this in the first iteration of the PPP, the Paycheck Protection Act, which used big banks to deliver relief. What happened? If you didn’t have a relationship with a big bank, and a lot of small businesses didn’t, and they don’t have armies of lawyers and accountants to process applications and things like that, the money was gone. The first tranche of money was gone before it ever reached small businesses. It was really taken up by larger businesses that had relationships with those big banks. My view is that we shouldn’t rely on big banks to get money out to small businesses and minority communities, big banks have never really been good at doing that and we should have learned that lesson. I think that is what we saw with our minority-owned businesses, they just didn’t get the assistance they needed.
Pramila Jayapal:
Now, later, we made some changes thanks to Nidia Velazquez, the chairwoman of the Small Business Committee did make some changes that allowed for credit unions and local community development banks to be able to be the stewards of some of those funds, but the reality is, I just talked to my local coffee shop that I go to every Sunday when I’m here at home and she said, “You know what, Congresswoman? I didn’t even apply, it was just too much.” This is a thriving small business right near my home. I said, “Listen, you’ve got to call me next time because we will walk you through it.” But she basically said, “It’s just too much, it’s too hard.” When I told her about the Paycheck Recovery Act and how you would essentially use your same tax forms that you submit and just do an attestation of what’s happened and then the money would flow and it could always be adjusted at the end of the year with your next set of taxes if your revenue were to go up, she was like, “Why can’t we have something like that?”
Pramila Jayapal:
That’s what we need for minority businesses and women-owned businesses, to be able to prioritize those procedural pieces that prevent small businesses and minority-owned businesses from getting their fair share. I think we also have to be much more intentional about how we target minority businesses in particular and we need to use trusted advocates and messengers to connect with those communities and just ultimately prioritize economic dignity for everyone.
Pramila Jayapal:
I think those are some of the things we’ve learned, I just fear that it takes us a long time to change the way things are done. That’s why we need your advocacy and the progressive caucus, our hundred members, are very, very committed to doing everything we can to strengthen our small businesses across the country.
Stacy Mitchell:
Thank you so much, Congresswoman Jayapal. It’s just lovely to have you here, I really appreciate your time today.
Pramila Jayapal:
Thank you so much for having me, and thanks for all the work that you are doing, really appreciate that.
Stacy Mitchell:
Great, take care.
Jess Del Fiacco:
We’ll continue on with this episode after a very short break. Thank you for listening to our show. If you’re enjoying this episode, I hope we’ll consider heading over to archive.ilsr.org to help support our work. Your support not only makes this show possible, it allows us to develop the innovative research and resource that are helping to level the playing field for small businesses across the country. You can head over to archive.ilsr.org/donate to make a contribution today, any amount is sincerely appreciated. Thanks, and now back to the show.
Stacy Mitchell:
And let’s now transition to our second segment, our second keynote speaker, Tim Wu. So nice to see you.
Tim Wu:
Likewise, likewise. Thank you for having me.
Stacy Mitchell:
Just to briefly reintroduce You, Tim is a White House advisor focused on competition policy issues. I guess I want to just start by just going back to something I raised at the beginning of this, which is that we’ve seen this really pretty sharp decline across most sectors of the economy over the last 40 years in small businesses. I’m wondering if you could talk a little bit about why America has become so much less hospitable to local businesses and what’s at stake if we continue down this path.
Tim Wu:
Yeah, sure. Thank you, and thanks everyone, I really appreciate chance to address this audience. I feel like I have small business in my blood. I started a hot dog business as a teenager, my brother ran a software business. I’ve always just had this admiration for the courage, the resiliency, the kind of virtues that lead people to take the risk on running their own business or inheriting or just deciding to take this route in life, so I’ll start with that.
Tim Wu:
Actually, it’s been said before, worth saying again, when you go to the founding, the United States was always built on the back of regional economies, small business. I want to emphasize that has been a key, and we really believe this, to the nation’s democratic soul, the strength of its character. You’ll sometimes hear about Louis Brandeis, famous as a Supreme Court Justice, but he was also an anti-monopoly crusader, also came from a long line of small business men, small business men back then. He would always speak about the link between a nation of small producers and the kind of virtue and character of the country, that’s virtues like risk taking, resilience, responsibility, innovation. You have to have these to start a small business and to keep running it. I think it’s a big part of what has made this country, historically, the land of opportunity.
Tim Wu:
The question is, what’s happened and where are we? I think right now, we’re really going through an experience where we can see very vividly how fragile this concentrated economic system we built has been and how poorly it is working for the whole country. Our country has become too centralized, it’s too national in its character in terms of where businesses are located, too centered on consumption as opposed to production, too many of the returns go to too few people who often live very far away from the communities they serve.
Tim Wu:
I think what’s happening right now is we’re relearning the virtues and the merits of a mixed economy that is the truer American tradition of small and medium businesses, market structures where they can all survive and prosper, what the president often calls an economy that works for everyone. You only have to look around and see how much we’re struggling with the fragility of our supply chains and the extraction of rents by some of the entities we already mentioned, whether it was credit card companies, whether it was healthcare, to see that there’s something pervasively wrong here.
Tim Wu:
The question is, what’s changed and how can we turn the ship? The main problem is about 40 years ago we began to subscribe to a set of microeconomic principles that were fundamentally focused on prices and profits. We’re not interested in the health of the economy from a more macro perspective, we’re not interested in ensuring a healthy mixture of businesses, small, medium, large, but as I said, we’re very focused on narrow economic metrics. That’s led to at least three problems that I want to highlight.
Tim Wu:
One is very well known, I think. We’ve all seen so many industries consolidate into just a big three or big four, Visa, MasterCard, mobile plans, airlines, parts of the insurance industry. That’s a traditional problem that I think extracts a lot from the economy, market power, power among sellers.
Tim Wu:
But I also want to highlight a problem that maybe many of the people have experienced firsthand, which is what we call the rise of a middleman economy, which has really accelerated over the last decade. That’s where so many industries have seen the rise of a highly concentrated middle layer, whether that’s an online selling platform or just a few online selling platforms, whether that’s meat processing where you have just a few companies that process almost all the beef in the United States, whether that’s the credit card situation, whatever it is, also banking, you just have a middle layer that’s extracting a great amount of the revenue for itself. It leads to a different problem than you might be familiar with when you think about monopoly, which is just high prices, it leads to this problem where the middle layer, the middlemen, have power over their suppliers and are able to squeeze their suppliers and also often able to squeeze their employees. It’s a problem that I think is a new problem for the economy and one that we need to face directly.
Tim Wu:
Third thing I want to say, and I’m sorry for going on at such length, but there is a real sense that whatever it is, the sense of opportunity that has been the American brand, has diminished. There’s statistics, a little depressing, that confirm this. In over 75% of US industries, large companies control more of business than they did 20 years ago. Since the mid-80s, the number of annual mergers has skyrocketed. In ’85 it was about 2,000 a year, now it’s more than 15,000 a year, and I think this year it’ll be historic levels. That’s the process of consolidation, large companies buying up smaller ones. Finally, over the last 20 years, the share of total business going to small firms has fallen by nearly a fifth.
Tim Wu:
These are real challenges that I just want to assure you that the administration, the White House, is very focused on. We see it not just in terms of the economy, but in terms of the democratic soul of this nation. Freedom and opportunity are not trivial things when it comes to describing what a democracy’s all about, and we need to fight to restore that, to restore the sense that this is a country where you do have the freedom to take your shot, where you do have the economic opportunity to strike out on your own and really try and make something. I think that is what we see as a real key to restoring the character of this nation that we love.
Stacy Mitchell:
Back in July, I think it was, President Biden issued this executive order that is designed to focus on competition and restoring competition. It is a big, sprawling document with a lot of provisions. Can you give us an overview of what it does, can this have real impact, and maybe some of the components that are most relevant to independent businesses.
Tim Wu:
I think just to answer that straight up, I think it already has had real impact and will continue to have a lot more. Just today, for example, the director of the CFPB, which regulates financial institutions, Rohit Chopra, announced a new war on junk fees being charged by banks. He wants to save bank consumers. I think his target is $36 billion. He announced that at the competition council, which I’ll describe in a minute. That’s just an example of the kind of things that I think the executive order is trying to do.
Tim Wu:
Let me back up and describe what it was. On July 9th, the president signed an executive order on competition. It is something of a sprawling document, it has 72 directives, but it’s goals should be understood in light of what I was saying earlier. It’s a historic effort to try to turn this giant steamship called economic policy and point it in a different direction. In his speech launching it, the president spoke about the Roosevelts, both Theodore and FDR Roosevelt, and their vision of an economy that was democratic in nature and fundamentally geared towards opportunity and deconcentration and a fair economy for small and medium-sized business. That’s where we want to turn back to.
Tim Wu:
The executive order created the Competition Council, which is the heads of 17 agencies who are tasked with, both in civic and general ways, trying to improve competition in the economy, promote competition in the economy. Let me talk about some of what they’re doing and some of what they will do. At one level, this is a reinvigoration of antitrust enforcement. You’ve seen the president has appointed two strong enforcers, Lina Khan and Jonathan Kanter, to be at the front line of enforcement. We try not talk about current cases, but there’s a number of challenges out there to mergers that are anti-competitive in their views. They’ve also already managed to block a few mergers, a big one was the Justice Department early this year blocked a merger between two of the three largest insurance brokers, which if it had gone through would’ve raised insurance rates for businesses and further increased cost for everyone, so I think that was a big success.
Tim Wu:
Some of the other things, I’ll spare you all the details, 72 directives is a lot, but take another example, the order has committed to the administration and its agencies to protecting the right to repair. I know for a lot of businesses, a lot of individuals, paying dealer prices is a very expensive proposition. We’re doing everything we can to try to fight against repair monopolies and make it so either you can fix your own stuff or you can go to independent repair shops. We’ve had some success with companies, including Apple and Microsoft, announcing they’re going to change their policies and make it easy to repair stuff and we think that ha has a lot of legs.
Tim Wu:
I can go on at some detail, but I don’t want to get caught in the detail. I just want to give a sense that the whole of government, and not just the antitrust agencies, although they’re a big part of it, is trying and directed by the president to find ways to try and improve competition. I want to also say, the president is into this. He came to the meaning of the Competition Council on Monday, he’s repeatedly spoken about turning the economy around, make it work for all Americans, and spoken of competition as a third pillar.There’s a lot in there, and I look forward to talking about that at greater length.
Stacy Mitchell:
That’s great. Well, I feel like we could spend the next half hour continuing to talk about this, but unfortunately we’re out of time and need to move on to the next panel, but that was a really terrific overview and glad to hear that this work is going on. We have a rundown of some of the things that are in the executive order on our website that are particular, I think, highlights for some of the concerns that small businesses have. I’m and excited to see that work go forward and hopefully really have an impact on policy. Tim, thank you so much are being with us today. I really appreciate it.
Tim Wu:
Pleasure, it was great. Yeah, there’s a lot in there. If I can just say in closing, just one thing I’ll stress, is the defense department had a number of things, probably should have gotten to them, but the defense department, for example, is revamping its small business procurement program. There’s just one example of something else that the executive order has directed the agencies to do. Thank you so much for having me on and appreciate hearing what comes next.
Stacy Mitchell:
That’s great, thank you.
Jess Del Fiacco:
Thank you for tuning into this episode of the Building Local Power podcast from the Institute for Local Self-Reliance. You can find links to everything discussed today by going to archive.ilsr.org and clicking on the show page for this episode, that’s archive.ilsr.org. While you’re there, you can sign up from one of our many newsletters and connect with us on social media. We hope you’ll also take the opportunity to help us out with a gift that helps produce this very podcast and supports the research we make available for free on our website. Finally, we ask that you let us know what we’re doing with a rating or a review on Apple Podcasts or wherever you find your podcasts.
Jess Del Fiacco:
The show is produced by me, Jess Del Fiacco, and edited by Drew Birschbach. Our theme music is Funk Interlude by DysFunktional. For the Institute for Local Self-Reliance, I’m Jess Del Fiacco, and I hope you’ll join us again in two weeks for the next episode of Building Local Power.

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37 min
March 10, 2022How Monopoly Energy Utilities Impede Innovation
On this episode of the Building Local Power Podcast, host Jess Del Fiacco is joined by her colleague John Farrell, director of ILSR’s Energy Democracy Initiative, and guest Ari Peskoe, who is the director of the Energy Law Initiative at Harvard Law School. They discuss the attempts Congress has made to increase competition in electric utilities, the four orders the Federal Energy Regulatory Commission (FERC) ruled between 1996 and 2011, and the how the lack of competitive processes negatively impacts consumers.
Highlights include:
The reasons why Congress passed the Public Utility Act and its impacts on the concentration of economic and political power.
The FERC recognizing that the single greatest impediment to competition is Investor Owned Utilities.
How the conviction “bigger is better” impacted the electric utility sector for nearly a hundred years.
Whether Peskoe’s recommendations to the FERC; independent planning, information transparency, and burden of proof on the utility to show that costs are reasonable will be considered moving forward.
“I worry about innovation in this space. It is a hallmark of the capitalist system that competition brings innovation. When we have an industry like the transmission sector here that is dominated by the century old incumbents who for decades have been planning among themselves without any competitive pressure I wonder if that is a system that can yield the benefits that I think we get from innovation.” – Ari Peskoe
“The transmission system is so novel in a way of being so balkanized and so controlled by the incumbents.” – John Farrell
Related Resources
Transcript
Jess Del Fiacco:
Hello, and welcome to Building Local Power, a podcast dedicated to thought provoking conversations about how we can challenge corporate monopolies and expand the power of people to shape their own future. I’m Jess Del Fiacco, the host of Building Local Power and communications manager here at the Institute for Local Self-Reliance. For more than 45 years, ILSR has worked to build driving equitable communities where power, wealth, and accountability are made in local hands.
Jess Del Fiacco:
Welcome to today’s episode. I’m actually going to hand over hosting duties to ILSR’s John Farrell today. John is a co-director of ILSR and he directs our energy democracy work. John is joined by his guest, Ari Peskoe, who is the Director of the Electricity Law Initiative at Harvard Law School. They’re going to talk about how utilities have gained outside market power by owning energy infrastructure and how federal regulators could reintroduce competition through targeted regulation. With that, I’m going to hand things over to John.
John Farrell:
If you’ve heard of transmission lines in the context of clean energy, it’s probably a complaint about not in my backyard, or NIMBY, opposition to the large steel towers and wires that carry electricity long distances. However, utilities themselves have as much to do with the barriers to expanding the electricity grid. Like with rooftop solar, the exercise of monopoly power has much to do with the problem. Ari Peskoe is the Director of the Electricity Law Initiative at the Harvard Law School Environmental and Energy Law Program, and author of a new paper, Is the Utility Transmission Syndicate Forever?
John Farrell:
He joined me in December, 2021 to talk about the battle to overcome monopoly, utility opposition, to making transmission line planning and construction more competitive and more cost effective. I’m John Farrell, Director of the Energy Democracy Initiative at the Institute for Local Self-Reliance. Ari, thank you so much for joining me on Building Local Power.
Ari Peskoe:
Thanks for having me.
John Farrell:
I feel like this is a really timely conversation with the passage of the federal infrastructure bill, which does include money for high voltage electricity transmission lines. There might be other ordinary folks who would be curious since John Oliver, on his show last week tonight, recently did a segment on the power grid, and he argued that we need long distance transmission to connect some of the best renewable energy sources, wind and solar, to all parts of the country.
John Farrell:
I was hoping to just start with, when we talk about electricity transmission, are we talking about … I can look out my back window. I can see some poles and wires in the alley. If we’re talking about transmission, is that what we mean? Or what is it that we mean when we talk about electricity transmission?
Ari Peskoe:
The electric power lines that connect to your house are distribution lines. Those deliver power that’s appropriate for household consumption. Transmission lines are interstate in nature. They are, just as a physical matter, much taller. They’re typically held up by large steel structures. There’s often rights of way on either side. Can be 50 feet, even several hundred feet for safety reasons. And the fundamental purpose is to connect large scale power plants, whether generating power with coal, or wind, or gas, or anything else, which is where almost all of our electricity comes from, to connect those large scale power plants to our local utility distribution system. That’s what we mean when we talk about transmission. It’s the interstate system that moves large amounts of power around the country.
John Farrell:
You recently drafted a journal article that provides really extensive documentation about what I’m calling a monopoly problem in the transmission sector with these high powered high voltage edge transmission lines. The title is great, Is the Utility Transmission Syndicate Forever? I found it fascinating, perhaps most of all, because in 15 years of working in the energy sector, I had always heard that the biggest barrier to expanding electricity transmission were so called NIMBYs, not in my backyard folks who were like, “We don’t like how it affects our view. We don’t like that it’s going to take up our land.”
John Farrell:
But you really highlight a very different problem, which is the power of the utility companies who own the transmission lines over the planning process to do high voltage transmission lines. I was hoping maybe you could start with a little bit of history here. Before 1935, so we’re jumping back a hundred years, utilities really had complete power over their power lines. So, it allowed them to prevent competition from other power producers or access from other utilities such as municipal and cooperative utilities.
John Farrell:
But in response to some of the monopoly abuses of the industry back then, Congress took some action. Can you talk a little bit about what Congress tried to do a hundred years ago with the first regulations, I guess, or laws about power lines, and were they successful?
Ari Peskoe:
Prior to 1935, privately owned utilities, which we call investor own utilities, or IOUs, were regulated by state commissions, and there was no federal authority to regulate those companies. Congress, in 1935, passed the Public Utility Act. There were basically two reasons for it and sort of two major regulatory agencies in DC were involved in implementing it. The first issue was the industry at the time was largely controlled by these corporate structures called holding companies.
Ari Peskoe:
At the time, before the stock market crash of 1929, there were just three holding companies that controlled about half of all power regeneration in the country. So, enormous concentration of economic and political power in these holding companies, and they failed spectacularly amidst the depression. One thing that Congress wanted to do was address these corporate structures, and what it did was it put the SEC, the Securities and Exchange Commission, in charge of regulating utility corporate structures, and it effectively outlawed non-contiguous utilities.
Ari Peskoe:
One company was not allowed to own, say utility companies in different states. That was one part of this act. The second part of the act was to put the interstate service and transactions of these IOUs under federal regulation. The Congress gave the, what was then called the Federal Power Commission, now it’s called the Federal Energy Regulatory Commission, or FERC, authority to regulate all wholesale sales. That is a one utility selling to another utility. And also, regulating transmission service. So, a utility providing transmission service to another utility.
Ari Peskoe:
The sort of language that Congress used, which was common to regulatory statues at the time, was that all the regulator had to ensure that rates, terms, and conditions are just in reasonable and not unduly discriminatory. These are terms of art that clearly give the regulator a wide range of discretion to figure that out. At the time, investor owned utilities essentially were the electricity industry. That was it in 1935. For decades, the federal regulator, we’ll call it FERC, even though as I said, it was called the Power Commission for a while, sort of took that industry structure as given.
Ari Peskoe:
Its task was just to regulate transactions between these utility companies. And Congress required FERC to actually encourage voluntary coordination of IOUs because it was believed at the time, and it still is, that essentially bigger is better in the electricity space. If we can encourage utilities to coordinate with each other, that will ultimately be beneficial to consumers. FERC certainly did that. The way it did that was basically by approving, as just in reasonable, ad hoc agreements among utilities for various types of coordination. For example, utilities might coordinate how they plan system expansion.
Ari Peskoe:
They might coordinate how they share power when one utility has an emergency situation. They might, for example, coordinate how they dispatch their power plants on a regular basis to ensure that the total costs across their systems are reduced. But I think the … All these things can indeed have consumer benefits, but keep in mind that these IOUs are private companies ultimately with shareholders. So, these agreements, ultimately were designed for the benefit of the utilities.
Ari Peskoe:
Another thing that FERC was handling throughout this time period was fielding complaints from smaller utilities, in particular, the nonprofit public power utilities and the cooperative utilities, who would complain about what they characterize as anti-competitive utility conduct. The sort of the typical fact pattern was that you would have a small municipal utility that was essentially captive to its local investor owned utility.
Ari Peskoe:
And that the small public power entity may not have had the financial resources to generate power itself, and it actually had to buy power at wholesale from its local IOU. And it was complaining about the terms and conditions of those sales. The other part of what FERC had to do was on the one hand, encourage voluntary coordination. On the other hand, ensured that coordination was not sort of burdening these smaller utilities. That’s basically how the industry operated for several decades.
Ari Peskoe:
Just to get to the last part of your question really quickly, was this successful? I think, in a lot of ways, the power industry was successful in that the equipment kept getting better, efficiencies kept going up. And for many decades, really through the 1960s, in many parts of the country, consumer prices kept going down. In that sense, the industry was working.
John Farrell:
I think I want to call attention to a couple of things that you said that folks who don’t live in this space might not appreciate. One, I thought it was really interesting to talk about that 1935 law and how it outlawed non-contiguous utilities. As you said, like a utility had to … Couldn’t have a utility in Florida teamed up with a utility in Michigan. As I understand it, that’s been reversed, since reversed, right? That idea that utilities ought to be contiguous has been cast out.
John Farrell:
The other thing I wanted to highlight, I thought was really interesting, is you brought up this issue about shareholders in regard to these coordination agreements between utilities. This is an ongoing tension in the entire industry, right? You have these investor-owned utilities that have shareholders. Like any corporation, they’re responsible to those shareholders. They want to make money for those shareholders, but there can often be a tension between the public interest in how these utilities serve them and that private interest.
John Farrell:
And of course, the big difference between these utilities and most other companies in our economy is that these utilities have monopolies, which is they don’t have competition to discipline them in the same way that we might have in other spaces.
Ari Peskoe:
Yeah. Back in the time period we were talking about, the only competition of these investor own utilities came from these public power and cooperative entities. There really was no other private investment in the industry. It just wasn’t feasible for anyone really to compete with the utility because the utility had the benefit of both the local distribution monopoly. It was the only entity allowed to sell power directly to consumers within its state granted territory. So, it had that monopoly.
Ari Peskoe:
Then, at the same time, it also had the advantage of state regulated rates, which means that for any dollar of investment the utility made, it could then go to the state regulator and recoup its investment costs through the rates paid by those captive rate payers who have nowhere else to turn to for electricity. It made competing investment from the private sector, really just a non-starter back in this time period.
John Farrell:
You’ve outlined, and I think it’s important for people to understand that, despite this market structure that generally speaking, we don’t like in the United States, which is to say monopoly power, it did have big advantages in terms of, we got electric service to most places, especially with the help of the Federal government in getting, grow electric cooperatives to expand service, and it kept getting cheaper that utilities captured economies of scale. They built bigger power plants.
John Farrell:
I always think it’s important to have a little caveat here when I talk about this. From an overall electricity service standpoint, yes, things were better. If you were maybe a minority, and you had to live next to a power plant, if you were concerned about the environment, we didn’t do a good job on those kinds of things considering the impacts of power generation, but the view was, at the time, we were being very successful.
John Farrell:
Let’s turn the clock forward now from the ’30s into like the 1970s. Congress started to intervene again in the electricity business around this idea of competitive access specifically for non-utility power providers. This is the Public Utilities Regulatory Policy Act, or PURPA. I don’t know that we need to talk too much about that, but the transmission planning process, which is to say, I think you called it system expansion. This idea of, how do we build the power lines to allow us to accommodate additional growth in electricity use? Or tapping new energy sources remained in the hands of investor owned utilities under the presumption that, as you mentioned, this idea of utility coordination was enough economic efficiency that outweighed the anti-competitive behavior that you might have from that.
John Farrell:
Even if you had a plan for a transmission line that could reduce cost or provide access to clean energy, the path to approval is still going through investor owned utilities as of the 1970s and 1980s. Is that right?
Ari Peskoe:
Yeah, but I think a couple of things I think are important to clarify about this story, which is one, you have to plan transmission expansion because the system has to work, right? Electricity moves pursuant to the laws of physics. And if you’re going to add either a power plant or a new transmission line, you just have to do it through a process, just a planning process that ensures the system is going to stay operating within the physical parameters that it needs to. The second thing I would say is that, again, even with that change in law that required utilities to buy power from certain types of competing power plants, it was still an industry dominated, continued to be dominated by these IOUs.
Ari Peskoe:
Again, there was really no thought that anybody would just come along and want to just build a transmission line. You would build a transmission line to connect to a new power plant. That was really what transmission planning was, is that it followed generation expansion. That’s where all the money was, and it continues to be in the industry as in the power plants. So, transmission just sort of followed from that.
Ari Peskoe:
To a lesser extent, the industry was building transmission just to enhance the reliability of the system. There had been some major blackout in the 1960s and IOUs had coalesced around a voluntary approach to sort of reliability standards that they had all sort of agreed to. So, there was some limited transmission development, just to ensure that the system was meeting those reliability standards, but for the most part, building transmission followed the development of new generation.
John Farrell:
I’m so glad you mentioned, sort of the technical challenge here. In a class I had in graduate school on the energy system, we had a guest speaker who described the electricity system as like a fleet of bicycles connected by bungee cords that all have to remain in coordination with one another. If one of the bikes starts to veer to the right, it starts to pull on the other one, the bikes being the power plants and the, I guess the bungee cords being the transmission lines.
John Farrell:
But I’ve always enjoyed that because it gives a sense of the complexity of trying to coordinate a bunch of independent components of the system in a way that all have to work together. And if they don’t, you stretch it too far, and all of a sudden, things go wrong. Obviously planning is really important. Let’s get ourselves up to speed here a little bit then. As you’ve said, the investor owned utilities had continued to dominate the system.
John Farrell:
They were the ones who built the power plants. They built the transmission lines to follow that for the most part. The federal energy regulatory commission had continued to say, “Okay, well, we know that they’re fairly dominant in marketplace, but because the coordination that they exercise is helpful to consumers, or at least not harmful to consumers, it’s fine to go ahead and let that continue.” But something kind of changed in the 1990s. In your article, the article on the transmission syndicate, you write that the Federal Energy Regulatory Commission finally recognized that “The single greatest impediment to competition is investor owned utilities.”
John Farrell:
And following this, “That it’s their market power through the control of transmission.” So that the issue was no longer just in the transmission business, but that because the utilities had market power over the transmission system, they were impeding competition for new power plants. I think you already talked about that. I’m going to try to ask you to get in the weeds without getting too much in the weeds here, I guess, but there were four major orders from the federal energy regulatory commission that you describe in your piece, starting in the late 1990s. What were those federal regulators trying to accomplish to address this issue around competition?
Ari Peskoe:
Yeah. There were four orders issued from 1996 to 2011. As you said, FERC wanted to bring competition first, to the development of new power plants, and then to the development of new transmission lines. Transmission is so much more than just the wires that connect power plants to utility distribution systems. Control over transmission is strategic control over the industry. I say that because the fundamental job, I really like your bike analogy, and the fundamental job of the transmission operator is to ensure that supply and demand remain in balance.
Ari Peskoe:
So that the amount of power being generated at these power plants roughly equals the amount of power that consumers are demanding at that moment in time. Therefore, the job of the transmission operator is to determine, which power plant should be producing power at this moment and how much power they should be producing. Think about the competitive implications of that. If you are the transmission operator, you get to tell which power plants get to turn on. So, if you own the transmission and you own the power plants, well, you’re going to have a natural inclination to prefer your own power plants over power plants owned by your competitors.
Ari Peskoe:
The first set of things that FERC tried to do was ensure that the transmission owners provided comparable service to every power plant owner, so to prevent the sort of undue discrimination that utilities would prefer their own power plants and disadvantage competing sources of supply. That’s transmission operations, and that’s sort of step one to ensuring that competition is even feasible at all. The second step has to do with transmission expansion. Because there, you get to determine, sort of, if you control all transmission expansion, you get to potentially determine where the next set of power plants are going to be, because ultimately, they’re going need to connect to the system.
Ari Peskoe:
If you are a transmission owner that also owns a power plant, why would you want to build transmission that’s going to enable your competitors to connect to the system? What FERC tried to do with its transmission planning rules was really first just to bring some transparency to the planning process. This was historically, as we said, sort of just controlled by utilities, as to where the new transmission lines would be built. So, the idea was to try to bring more voices into that process. I think you unfortunately only get so far with transparency.
Ari Peskoe:
So, the next step that FERC took was actually requiring that certain transmission projects be developed through competitive processes, basically eliminating what was called the right of first refusal for the utility to build any new project that happened to overlap with its traditional retail service territory. So, those are the two main areas, was transmission operations and transmission planning with the goal of bringing competition into the industry.
John Farrell:
I think it’s so interesting too, that right of first refusal, Chris Villarreal, who I’ve also interviewed for the podcast mentioned this as well. I just think we’re spending a second on it to describe it a little bit, that the idea there was that, if there was an identified need for a new transmission line to be built, and it went through the service territory of ABC utility in Illinois, ABC utility could say, “Well, we get the first choice about who is going to own that power line. If we want to own it, we get to do that. Whoever propose the power line is sort of out of luck because I have that power.”
John Farrell:
FERC comes in and says, “Okay. No, actually, it’s pretty much impossible to have meaningful competition if utilities always get the first choice about whether or not they want to own a power line and that we need to at least start to open up this system in a way that allows for third parties to come in and propose transmission lines that they could ultimately then own and profit from, not just the utilities.”
Ari Peskoe:
Yeah. We might want to distinguish, and this just going to add another layer of complexity, but I do think it’s worth trying to get there, which is, as part of these four orders that we just talked about, FERC encouraged utilities to give up operational control of their transmission lines to a third party. The third party is called a Regional Transmission Organization. The idea here was that look, despite the rules that FERC put in place to try to require utilities to provide the same service to every power plant, regardless of its owner, it was tough to police those rules, and utilities still had subtle ways of preferring their own power plants over their competitors’ power plants.
Ari Peskoe:
FERC realized that sort of one remedy to this problem is to have a sort of neutral entity, at least with respect to these power plant ownership issues, a third-party to actually be in charge of these short-term operational issues, and have a third party, this regional transmission organization determine which power plans get to operate. There are many parts of the country where we have these organizations and some parts where we don’t.
Ari Peskoe:
These regional transmission organizations also run planning processes. So, where you have this organization running the planning process, you could imagine at least that, well, we could have some competitive process to figure out who’s going to build this next line identified by this sort of, let’s imagine an independent and neutral entity. In the parts of the country where the utility still controls, explicitly controls the planning process, it’s a lot harder to imagine how, why the utility would allow any sort of competitor into the transmission development process, and even how to make that feasible.
Ari Peskoe:
So, where there was this independent administration, there was an agreement between the utilities and this independent entity that the utilities would have this right of first refusal. That’s where FERC stepped in 10 years ago and said, “No, you have to these rights of first refusal that had been put in place when these organizations were formed.”
John Farrell:
It’s really interesting. People often describe this kind of process as two steps forward, one step back. And it seems like that really does define, FERC takes a step forward and sort of saying, here’s how we want more transparent competition and this right of first refusal. Utilities are like, “Okay, well, we’ll give up operational control, but we’re not going to give up our ability to own the transmission that gets built.” Even though the planning is supposedly going to be more independent. Forecast to act again, to change that.
John Farrell:
Then we’ll get more in the weeds here, but as your article describes, there are still other ways that utilities continue to exert that market power. I think it’s also really interesting. I just want to take a moment for people who are still with us, who are not in the transmission and energy field, but to explain how different this is from some of our other public infrastructure. I mean, imagine the interstate highway system being built originally, or being managed by a bunch of different delivery companies like UPS and FedEx and the Postal Service in this like balkanized matter.
John Farrell:
And if you wanted to have a delivery, your own delivery company, and you wanted to get into this space, like maybe Amazon, right? They’re doing a bunch of delivery now, you would have no way to get into this system. You would’ve had discriminatory rates to use it. It would’ve been hard to even get your trucks onto the existing roads. If you wanted roads built to your new distribution centers, DHL or UPS could be like, “No, we’re not going to build that road because we know that it would give you access to the system in order to compete with us.”
John Farrell:
I think sometimes we’re so much in the weeds of how this system them developed. It’s hard to appreciate that with other kinds of infrastructure, it’s operated so differently with open access and public control. The transmission system really is very novel in a way in being so balkanized and so controlled by the incumbents.
Ari Peskoe:
Yeah. Then there’s this issue of vertical market power, where you have the owners of this essential delivery infrastructure also, in many parts of the country, producing the power, and so have this incentive to keep competition out. It’s not just that utilities want the exclusive ability to build new transmission because they get paid and can profit from building that transmission. It comes back to this issue of strategic control, where figuring out where the system’s going to expand to in the future is a way of sort of influencing the future resource mix and influencing who’s going to own those resources.
Jess Del Fiacco:
I’m so sorry to interrupt. We’re going to be back to this conversation after a very short break. Thanks for listening to our show. If you’re enjoying this episode, I hope you consider heading over to archive.ilsr.org/donate to help support our work. And if you want to learn even more about our energy work, you should check out another ILSR podcast, Local Energy Rules. On that show, you can hear John Farrell every other week with guests around the country who share stories of successful local renewable energy projects. Once again, please consider heading over to archive.ilsr.org and making a donation today. Any amount is sincerely appreciated. Now, let’s return to our conversation between ILSR’s John Farrell, and Ari Peskoe of the Electricity Law Initiative at Harvard Law School.
John Farrell:
Let’s get back to your piece on the transmission syndicates. You wrote that FERC, the Federal Energy Regulatory Commission, concluded that investor-owned utility control over transmission allowed them to exclude potential competitors and charge on competitive prices, which are two hallmarks of the exercise of market power. I just think it’s so interesting to note that the regulators recognize this broader problem themselves, but as you say, the planning rules for transmission that the federal regulators have adopted don’t really address the issue of market power.
John Farrell:
Can you explain a few ways, few other ways that utilities can, despite the new rules for transparency, for independent operation, still can prevent competitive access to transmission expansion through their influence, either with the regional planning process or the operational agencies, or with like loopholes in the rules?
Ari Peskoe:
Yeah. Remember, the Federal law here requires that rates be just in reasonable and not unduly discriminatory. When FERC started down this reform path in the late ’90s, it decided that those broad standards allowed it to counteract utility market power. Market power is a term used by economists and two of the hallmarks you just mentioned, the ability to exclude competition or to charge prices that are not competitive. That’s really what DERC was addressing initially, but it’s taken its role a little bit farther in that what it’s trying to do is counteract the incentives and abilities of utilities to act anti-competitively.
Ari Peskoe:
When it entered into this area of regulating planning, the sort of status quo situation where the utilities were in charge of the planning process and could determine where new lines would go without any transparency, and could do so for their own benefit, didn’t quite meet the sort of economic standards for market power. But FERC, nevertheless, recognized there was a lot of anti-competitive conduct going on, and so it decided it had to take action.
Ari Peskoe:
One of the problems here is that, as I said, we sort of have two systems across the country. In some parts of the country, utilities have decided to join these independent Regional Transmission Organizations. And in other parts of the country, they have not, and so they have more explicitly in control of both short-term operations and long-term planning. The issue here is that utilities can sort of toggle between these two situations. Now, there’s some regulatory hurdles, but for the most part, if they decide they don’t like the situation where there’s an independent entity in control, they can simply decide they want to leave.
Ari Peskoe:
So, that gives them a measure of leverage over the management of these organizations, where the independent entity may have all the tools it needs to plan system expansion that’s going to, for example, bring a whole lot of new cheap wind and solar, allow those resources to connect to the network. But if those new resources undermine the generation of the utility, well, the utility may have some subtle means through the various planning processes to push back against the development of that infrastructure.
Ari Peskoe:
That’s certainly a factor at play in these planning processes. The other issue is that the FERC only required competition for a limited set of regional lines. And regional lines are typically lines that span multiple utility service territories. The utilities continues to be able to build smaller scale projects within in its state granted service territory without any competition and with very little oversight. That gives it an incentive to prefer those small scale projects over larger projects that may be subject to competition.
John Farrell:
I think there’s a couple of interesting examples of this. One was not in your paper, but I came across independently was that Entergy, the utility serving New Orleans and much of Louisiana, which recently had a fairly significant outage due to a hurricane is part of a Regional Transmission Organization. But as I understand it, deliberately joined one with which it has minimum connection, the Midwest Independent System Operator. I think, if I understood this correctly, there’s about one or two transmission lines that connect them to that broader system.
John Farrell:
Whereas, if they had joined either ERCOT or the Southern Power Pool, another regional operator, there might have been as many as 14 different interconnections so that they … What it sounded like is that they sort of strategic chose, let’s get ourselves into a Regional Organization, but let’s do it with one that won’t have a significant operational control over the kinds of stuff that we do because we know that they have a minimal connection.
Ari Peskoe:
Yeah. The background to the Entergy story is that, before they joined a MISO, they were under investigation by the US Department of Justice for possible antitrust violations to the anti-competitive way they operated their transmission system. They were using various, allegedly using various subtle means of locking competition, or the extent there was competition, basically neutralizing it by the way they ran the transmissions system.
Ari Peskoe:
So, they were basically faced a choice between MISO and the Southwest Power Pool, or SPP. And the allegation is that they joined MISO because they would essentially be an island within MISO, and so technically would be a member, and they did that to get DOJ off their backs, and it worked, but they’re not really fully integrated into the interstate market the way most utilities are, and I would add that obviously they’d dispute many aspects of the story we’ve just said.
John Farrell:
Fair enough. The other example I thought might be interesting to surface was from your article, just to the issue about utilities, being able to build the smaller local transmission lines without FERC oversight it, and then therefore the resulting rules about competition. I think it was in the Northeast that you talked about that there was an exception, or maybe in the Mid-Atlantic, there was an exception for power lines that were sort of urgently needed for reliability. And that, all of a sudden, there’s been this big spike in the need to build reliability related smaller scale transmission because of that being a loophole.
Ari Peskoe:
Yeah. One example of this playing out is in the New England region, where once this FERC rule went into effect requiring competition, one of the carve outs was for projects that the system administrator, the system operator decided were needed quickly, and all 31 projects developed in the timeframe, I think from 2014 to 2019, were these immediate needs projects, which tells you one of two things. Either the utilities are withholding information in a way in order to effectively create these emergencies that then have to be solved without competition or the planning process is just broken.
Ari Peskoe:
Because the hallmark of an effective planning process should be you’re avoiding emergencies, not constantly running into them. And then finally, in 2020, they held their … The New England Transmission Operator held its first competitive process finally.
John Farrell:
We’ve kind of talked about this already, but maybe can get a little bit more better understanding of the impact. FREC’s efforts, as we just talked about in these two examples, have faltered somewhat, with utilities being able to evade competitive processes. What do you see as the cost to consumers of this failure? For example, how might it have impacted, whether it’s economic cost, the cost on our power bills, or how might it have impacted the opportunity to expand clean energy like wind and solar?
Ari Peskoe:
Yeah. I mean, I would say one metric that shows that FERC’s efforts have faltered is you look at how much investment has happened in regional projects that are sort of large scale projects designed to bring benefits across the region versus these small scale projects that are really designed to just benefit a single utility. The numbers are pretty astonishing in two of the largest of these transmission regions of the country, one of them being MISO and the other one being PJM.
Ari Peskoe:
MISO, since these competitive rules went into effect, there’s been essentially no regional investment. That’s spanning about seven years or so now. Meanwhile, it’s billions of dollars a year of these local projects. The theory is, again, this goes back to the industry’s earliest days, bigger is better. Bigger projects are in general, thought to be more efficient than just adding up a bunch of smaller scale projects.
Ari Peskoe:
The other thing that I think we’re missing is new entry into the industry. That’s particularly relevant to clean energy resources, where we know that in some parts of the country, there’s economic wind and solar there that can be harvested, but we know there’s just no transmission capacity to get that energy onto the system. One example here is actually in the Western part of the MISO region, where there’s tremendous interest from wind and solar developers to build projects there. There’s a lot land, a lot of good resources, but the system just can’t handle it without significant transmission expansion.
Ari Peskoe:
By not having regional projects, we’re missing out on that potential for economic new wind and solar resources. Then the thing that I worry about is also just innovation in this space. It’s sort of a hallmark of the capitalist system that competition brings innovation. When we have an industry like the transmission sector here that’s dominated by these century old incumbents, who for decades have just been planning among themselves without any competitive pressure, I wonder if that’s a system that can yield the sort of benefits that we think we get from innovation.
Ari Peskoe:
I think innovation is particularly important these days because we have a whole new set of technologies that are capable of generating power, like wind and solar. We also have storage. There’s all sorts of other software technologies that can help make the system more efficient, sensors in the system that can help bring efficiencies as well. So, there’s enormous potential to incorporate new technologies, to build the system differently because we have new sets of resources that can provide power. But to the extent we’re just leaving it up to the same companies to do it, I’m concerned that we might be missing out on the sector’s innovative potential.
John Farrell:
One of the things that’s been sort of disappointing in reading your piece, and I know you didn’t set out to disappoint people, but really, to just give people a sense of the situation was that, so the Federal Energy Regulatory Commission has really taken a lot of action in the past 20 years to try to encourage more competition through regionalization, through third party control of the system. On the other hand, most utilities are regulated at the state level, and it turns out that states have unfortunately been rather complicit in helping investor owned utilities avoid competition despite the Federal authority over transmission. Can you explain some of the way the states are continuing to shield utilities from transmission competition, even when FERC is encouraging the market to go the other way?
Ari Peskoe:
In general, states have authority to siting transmission lines, right? The states have to provide permitting authority to the transmission developer. That gives the states some measure of control over who can build transmission within their boundaries. When FERC, 10 years ago, eliminated these rights of first refusal from the rules that it regulates, a number of states actually granted utilities rights of first refusal through state laws. For example, in Minnesota, in 2012, I think it was, the legislature passed a law that said, any new trans mission line that’s planned by MISO in Minnesota will be built essentially by the utility that owns the connecting infrastructure to that new line.
Ari Peskoe:
That’s a right of first refusal provided by the state. A number of other states have followed suit, effectively overturning FERC’s mandate for competition. That’s one set of things that a number of states have done. In fact, Michigan just passed a law the other day, right of first refusal law. The other thing that they’ve done is, so there’s another type of transmission development we haven’t really mentioned, which is called merchant transmission development. That is where just a project development company comes in and decides it’s going to raise the money on its own to build some new transmission project.
Ari Peskoe:
There have been a number of these proposals over the years, specifically designed to move renewable energy across state lines. A couple of states have actually passed laws making it either more difficult, or in fact impossible for these sorts of transmission developers to build within their states. Effectively saying, “Well, we actually like the utility monopoly model for building transmission and that’s the only entity that’s going to be able to build transmission in our state.” Then I would say the last piece of it is that again, since they control the siting process, even without these sort of special new laws, the state regulators that make these siting decisions can prefer utility projects.
Ari Peskoe:
Sometimes this can be not necessarily … Regulators don’t necessarily have anti-competitive motivations. They just might be used to reviewing a particular type of project proposed by a utility. And when some new entity comes in and proposes a project, it may just sort of be difficult for the regulator to analyze this new type of project based on the precedent that, that regulator uses to evaluate these siting applications. Really, I think the utility has a lot of both explicit and implicit advantages sometimes in some state siting processes.
John Farrell:
I think it’s worth pointing out too, that research from the Energy and Policy Institute and others, and stuff, that’s certainly something the Institute for Local Self-Reliance has paid attention to, is that utilities exercise a lot of political power within states. Utilities are often the largest contributor to legislative campaigns of any entity at the state level. They’ve got a lot of lobbyists, a lot of technical expertise. It’s hard. There’s sort of an asymmetry of information when it comes to how the grid works.
John Farrell:
The utilities can often talk about reliability in a way a legislator simply won’t understand, or even a utility commissioner, as we’ve found so often is the case, that utility commissioners might come out of some part of the industry or background, but not really understand some of the technical nature. So, it’s really a challenging problem when utilities are able to exercise that power at the state level and in a way that can circumvent the regulations at the federal level.
John Farrell:
In your piece on the utility transmission syndicate, you offer three ways. I tried to summarize it as three ways. Maybe I didn’t count them accurately here, because you cover a lot of ground, but three ways that you see that the Federal Energy Regulatory Commission could change transmission planning rules to ensure more competition that could lower costs. I’m going to do my best to cover them. If I do a bad job, you feel free to correct me. One is this issue of independent planning, but making sure that it’s entities other than utilities are ones controlled by utilities that are doing the planning.
John Farrell:
Maybe it’s not these regional transmission authorities over which the utilities can still exert so much influence. Maybe it’s a third party entirely. The independent planning was one. Information transparency was the second one you mentioned, that utilities really need to share all the planning information. We touched on this a little bit when we mentioned, that was reliability projects in New England, that everything seems to be urgent and a reliability concern, and that maybe utilities aren’t being fully transparent to inform the planning process so that not everything has to be done urgently.
John Farrell:
Then the third thing you mentioned was that presuming that any expense for transmission that is not done in a competitive process, and to use this technical term, would be imprudent. So that, in other words, we’d put the burden of proof on the utility to show that costs are reasonable for these non-competitive transmission lines instead of presuming that they are reasonable as is done today. You note that FERC, they have this monopoly power analysis to support these actions. They have, with the recent appointment, the full five member commission ready to go. Maybe this is the continuation of what some nerds on energy Twitter were talking about as the hot FERC summer. Maybe it’s the hot FERC winter. is FERC likely to do this? Do you think they’ll take your recommendations?
Ari Peskoe:
I mentioned there’s several transmission related proceedings, investigations, rule making proceedings open at FERC right now. And all three of these proposals are on the table and supported by a number of entities. I should start on these … So, these regional transmission organizations, they are imperfect for the reasons we’ve already discussed, and that utilities can exert a lot of influence over them. But the fact that these entities exist, that it’s no longer exclude exclusively utilities that make decisions at the interstate bulk power level is probably the most important thing, the most important development in the electricity industry, maybe in a hundred years, and just sort of how the system is regulated and how it operates.
Ari Peskoe:
I think it would be great if these independent regional transmission organizations were both actually truly independent of their members and also cover the entire country. FERC tried to expand their reach in 2002, but it faced such political pushback that it had to kill its own initiative. So, maybe it could try again. I think that would be sort of the optimal solution is require utilities to join these organizations. That might give the organization itself a measure of distance from the utility if the utility sort of had to be at the table there. I don’t know if there’s any political will to take that on, but we’ll see.
Ari Peskoe:
Transparency is important. I think that only gets you so far. Then there’s the third piece is let’s scrutinize certain types of transmission investments in a way that might disincentivize those investments, or at least encourage utilities to make alternative investments. What folks have proposed right now before FERC is that FERC should scrutinize transmission investments that are planned by the utility itself. Those are those small scale local projects the utilities are planning and building with very little oversight.
Ari Peskoe:
Let’s try to bring more scrutiny to those projects. That additional scrutiny might encourage utilities to basically look again at these larger scale regional projects that they have shied away from over the past decade or so. I don’t know where FERC is going to go with this. There’s a lot of issues on the table, including one we haven’t mentioned at all, which there are specifics set of rules to connect new resources to the utility owned system. Those are interconnection rules, which are also really important for getting new clean resources online. A lot of balls in the air. I’m not sure how this is going to play out. This is a multi-year process at FERC right now.
John Farrell:
Ari, my conclusion from reading your piece is that distributed energy advocates and utility scale clean energy advocates, which have sometimes been at odds, as you acknowledge, actually have a common enemy in utility market power, that in the same way that you see this save solar campaign playing out in California right now, and I guess now in Florida as well. A fight over compensation for rooftop solar, we also have this problem with utility market power at the transmission level, that if we want to get clean energy to market, if we want to get that South Dakota wind power to Chicago, if we want to get those resources to the places we need them, that utility market power is a problem.
John Farrell:
Do you think that’s a fair statement? This is my conclusion reading your piece. I was wondering if that orientation around utility market power, if it was recognized by both sets of advocates, would help us lower the costs and get more of the economic benefits in terms of the move toward clean energy.
Ari Peskoe:
I agree. I think the problem is utility control and utility interest in maintaining the status quo. Utilities are, I don’t think for the most part, are inherently against clean energy, but they want to deploy it at the pace and scale that will benefit them. So, at the distribution level, when we talk about distributed energy resources, the utility clearly owns and controls its local distribution system, subject to state regulation.
Ari Peskoe:
At the bulk power system, the utility continues to own, for the most part, the transmission system. And there are various FERC rules in place that are designed to attempt to bring competition to that space, but I think we’ve had some mixed success there. I do think that it’s important to keep the focus on utility control. I think, if there were political will and political courage to take on that issue head on, I think we could really make significant progress on clean energy, because as long as utilities can still tilt things in their favor, they will continue to do so.
John Farrell:
I wonder, and to just ask you this as a wrap up, and maybe it’s me trying to get too expansive here, if there is a connection between the kind of market power thinking that you’ve been bringing into the utility transmission space and some of the politic … To answer this political will question, some of the action that Congress has been taking around the power of tech platforms. You’ve seen them with this bill to break up Amazon that passed the House. There are some bills being elevated in the Senate. If there were recognition, if folks realize that there is this market power that’s being exercised in industry that is not 10 or 20 years old, but that is a hundred years old, is there enough of a connection of a legal footing for people to wrap their head around that the two kind of concepts could be rolled together?
Ari Peskoe:
Congress would have to address the electricity industry, I think, separately from these tech platform issues. I think there may very well be some analogies in that the distribution and transmission infrastructure is akin to a platform because it’s the fundamental infrastructure that allows various devices to connect to, and those devices can be provided by third parties, and can provide all sorts of energy and services, but they have to be able to compete on a level playing field.
Ari Peskoe:
I would say just one important distinction though, and again, I sort of brought this up mockingly before, but reliability is a serious issue. Part of this issue of utilities wanting to maintain the status quo is rooted in the importance of reliability. There’s almost a healthy push and pull here between wanting radical innovation on the one hand, and on the other hand, wanting conservative approaches to ensure that the system still does work because society really does fundamentally rely on electricity working.
John Farrell:
I think that’s a very astute way to put it. Ari, thank you so much for taking the time to educate me both with your original article, which was an incredible read for someone who has not been as much focused on the transmission space, but also for joining me today to explain it more fully, and the connections to our advocacy work to advance clean energy.
Ari Peskoe:
Well, thank you so much for having me, and I appreciate your interest in the article.
Jess Del Fiacco:
Thank for tuning in to this episode of the Building Local Power Podcast from the Institute for Local Self-Reliance. You can find links to everything discussed today by going to archive.ilsr.org and click on the show page for this episode. That’s islr.org. While you’re there, you can sign up for one of our many newsletters and connect with us on social media. And hope you’ll also take the opportunity to help us out with a gift that helps produce this very podcast and supports the research and resources we make available for free on our website.
Jess Del Fiacco:
Finally, at least let us know how we’re doing with a rating, or review on Apple Podcasts, or wherever you listen to your podcasts. This show was produced by me, Jess Del Fiacco, and edited by Drew [Boshbach 00:51:14]. Our theme music is Funky Delude by [Dysfunctionale 00:51:17]. For the Institute for Local Self-Reliance, I’m Jess Del Fiacco, and I hope you’ll join us again in two weeks for the next episode of Building Local Power.

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Audio Credit: Funk Interlude by Dysfunction_AL Ft: Fourstones – Scomber (Bonus Track). Copyright 2016 Licensed under a Creative Commons Attribution Noncommercial (3.0) license.
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52 min
March 03, 2022 Building Local Power Highlight: Democratizing Antitrust with Harry First
Harry First, law professor and co-director of New York University’s Competition, Innovation, and Information Law Program discusses moving antitrust away from a technocratic approach, the politicization of law enforcement, and how to reinvigorate strong antitrust legislation. … Read More
5 min
February 24, 2022Cities’ Exclusive Agreements With Trash Collectors Are Holding Back Community Composters
On this episode of the Building Local Power Podcast, host Jess Del Fiacco is joined by her colleague Brenda Platt who leads ILSR’s Community Composting Initiative and guests Sarah Boltwala-Mesina, Monique Figueiredo, and Kourtnii Brown. Sarah is the Executive Director of Inika Small Earth Inc., which operates Food2Soil, a community composting collective in San Diego; Monique is the founder of Compostable LA, a food scrap collector in Los Angeles; and Kourtnii Brown is the co-founder and CEO of the California Alliance for Community Composting and runs Common Compost, a community composting operation in Oakland. They discuss solid waste franchise districts, which are waste collection zones that a municipality or county has assigned to one or more contractors on an exclusive basis to provide collection services for trash and recycling. As the system typically only allows large companies to compete to win a zone, smaller competitors are kept out of the playing field.
Highlights include:
How franchise districts have impacted community composters’ operations, and the creative ways some have navigated the agreements in order to build successful businesses.
The difference between a non-exclusive franchise and an exclusive franchise and how they impact communities.
How local leaders have responded to the issues facing small-sized composters.
How cities could change contracts to better support small-sized composting and recycling operations (such as through carve outs) and help them grow.
“It’s not an us or them. It is an us and them. The more we can have our human based systems mimic our ecosystems, the more no one is left behind. ” – Monique Figueiredo
“As community composters who want to focus on turning these scraps into soil that rejuvenates our landscape, we have to deal with regulations, attorneys… We are not made for that. We don’t have the deep pockets for that.” – Sarah Boltwala-Mesina
“A lot of the attraction to an exclusive franchise agreement is because these cities have put a lot of work into establishing their zero-waste goals and their diversion targets. It is very attractive for cities to look for large scale service providers and that are capable of implementing large scale collection programs.” – Kourtnii Brown

Related Resources
Mallory Szczepanski, Waste360, Commercial Franchise Zones Explained, January 25, 2017.
New York City Department of Sanitation, Commercial Waste Zones: A Plan to Reform, Reroute, and Revitalize Private Carting in New York City, 2018.
LA County Residential Franchise System
Greggory Moore, Random Lengths News, Hauling Green Waste for Compost Is a Legal Gray Area in Long Beach, October 10, 2020
Palm Springs Sustainability Commission’s Standing Subcommittee on Waste Reduction Meeting, July 1, 2021
The Sustainable Economies Law Center’s Soil Policy Party Curriculum and Legal Guide to Community Composting (with examples from Alameda County)
CalRecycle’s Model Franchise Agreement and Webinar (Scope of Contract terms starting at min 34)
ILSR’s Hierarchy to Reduce Food Waste & Grow Community
Food2Soil’s Model Franchise Agreement and Model Solid Waste Ordinance enhanced for community composting.
Food2Soil’s story of Temecula, California’s first community compost pile.
Food2Soil’s The Supermaze of Regulations Preventing Community Composting.
Transcript
Jess:
Hello, and welcome to Building Local Power, a podcast dedicated to thought-provoking conversations about how we can challenge corporate monopolies, and expand the power of people to shape their own future. I’m Jess Del Fiacco, the host of Building Local Power, and communications manager here at the Institute for Local Self-Reliance. For more than 45 years, ILSR has worked to build thriving, equitable communities, where power, wealth, and accountability remain in local hands. Hello, everybody. Today, we’re going to be discussing the challenges solid waste franchise agreements pose to community composters. I am joined by the director of ILSR’s composting work, my colleague, Brenda Platt, as well as three community composters in California. Welcome, everybody. I’m actually going to let each of you introduce yourselves real quick.
Sarah:
Hi, Jess. I’m so happy to be here. My name is Sarah Boltwala-Mesina and I’m with Food2Soil, a community composting collective in San Diego, California.
Monique:
Hey, my name is Monique Figueiredo, I’m the founder, co-owner, and CEO of Compostable LA, which is a composting company in Los Angeles, California.
Kourtnii:
Hi, my name is Kourtnii Brown. Thanks for having me. I am the founder of Common Compost in Oakland, California, focusing on composting with worms.
Jess:
Great, thank you guys so much, and again, we’re so happy to have you here. I am going to hand things over to Brenda to give us a little background on what exactly a solid waste franchise district is.
Brenda:
All right, thanks. We’re so glad you all are joining us today. Thanks, Jess. So a solid waste franchise district is basically a commercial residential waste collection zone, or a specific area, that a city or county has assigned to one or more contractors on an exclusive basis, so to provide collection services for trash, recycling. They’re very common on the West Coast, but they’re growing in other cities, as well. And the system typically only allows large companies to compete to win a zone. That is what has happened in the West Coast, and in California, particularly. And as a result, cities and counties have systematically kept micro haulers, or micro recyclers and composters, like the three operations we are joined with today, they’ve kept them out of the playing field.
Brenda:
And the industry is somewhat split on whether to support the concept or not. Here at the Institute for Local Self-Reliance, we don’t have a formal position on solid waste franchise districts, but we are clearly opposed to cities and counties using their contract authority to foster monopoly control by just a handful of large companies. And if you take … we’ll get into it, in Los Angeles, but Los Angeles, not too long ago, divided their city into something like 11 solid waste zones to seven companies.
Brenda:
And it was worth three and a half billion dollars. So three and a half billion dollars was given to just seven companies. That’s an average of 500 million dollars each. That’s just nuts. And so, what happens when you are just giving all that money and control to just a handful of large companies, you’re really shutting out social enterprises, other community benefit operations, and what we’re finding is that community composers like Food2Soil, Compostable LA, and Common Compost, is one of the fastest growing parts of the circular economy, these small-scale businesses, whether you’re collecting food scraps or doing reuse, repair, recycling, that community benefit operations are really growing and can be fostered, but these solid waste franchise districts can be an obstacle.
Brenda:
So when I say that the industry is split on whether to support the concept or not, I don’t think we have too much of a split with our guests today. So I want to hear … maybe we should start by telling us, before we get into the problems with solid waste districts, let’s hear a little bit about more what each of you do. So Sarah, let’s start with you. Tell us about Food2Soil, and what you’re doing in San Diego. And then we can get into how these solid waste districts are impacting your ability to thrive.
Sarah:
Yeah, yeah. So Food2Soil started in 2015. For the first two years, we were operating in what’s called, gray zone, or gray area. We were a loophole in the city’s municipal solid waste ordinance, and there were revisions that were eventually made to the solid waste ordinance. We paid an active part in crafting those revisions. And today, Food2Soil is a collective of residents, restaurants, community gardens, urban farms, that has established this robust network of drop-off hubs all over the county. Mostly in the city of San Diego, but all over the county, where we have residents drop off their scraps with us, and then we compost it for them. They pay us a fee for the composting service.
Sarah:
And in this process, we have this decentralized network that has made composting accessible for many residents and small businesses who otherwise would not have access to this service. And we’ve also created an income opportunity for the composters who are part of the Food2Soil team. So the soil farmers, as we call them, are people who operate compost hubs for their neighborhoods, sometimes out of as small of a space as their backyard, and it’s as large as community gardens or urban farms. But all these soil farmers are earning an income from the composting fee that their neighbors are paying them for this service in their neighborhood. So that’s Food2Soil.
Brenda:
Monique, Compostable LA, tell us what you’re doing.
Monique:
Yeah, so Compostable LA focuses on food scrap collection. So we are going door to door, business to business, to collect food scraps, and then bringing them to one of our 11 partner farms within the city of LA, to be turned into soil. So we’ve played around with some composting internally, but we really love this network of community composters that we’re fostering. So Compostable LA has partnerships with LA Compost and [inaudible 00:06:50] compost and LA Community Garden Council. And they’re all getting material from our members in this decentralized network. And while drop-off sites are really, really, really awesome, and I love them, they don’t work for some people, and some people need you to come to their door. And that is what we’re focusing on. LA Compost does an amazing job at managing drop-off sites throughout the city, and we’re filling that other niche for people who just can’t get access to those.
Brenda:
Kourtnii, I know you not only run Common Compost in Oakland, but you’re the co-founder and CEO of the California Alliance for Community Composting. So tell us about Common Compost, and then I want to hear a little bit about the Alliance, too, since you represent so many other community composters in your state.
Kourtnii:
Yeah, absolutely. Common Compost right now is just focused on manufacturing community-scale flow-through worm-composting bins. So we started out with our first prototype in 2016. We’re based out of Oakland, and we mainly focus on local projects here in Alameda County, but we’ve also launched systems in San Francisco, Santa Barbara, and greater Los Angeles County as well. And we provide onsite composting solutions for food banks, community centers, schools, gardens, and community farms.
Kourtnii:
So it helps them turn any of their leftover food material, whether that be during crop production or post-consumer, and turn it into a valuable product, vermicompost, to help regenerate the soils and sustain local food production. So it’s been very fun, the projects we’ve been able to build and install. And as you mentioned, I also helped to co-found the California Alliance for Community Composting with [inaudible 00:08:35] from both the Sustainable Economies Law Center, and you, the Institute for Local Self-Reliance. And Sarah was actually very integral in beginning stages of this organization, as well.
Kourtnii:
And what we’re doing is working to ensure the viability of community composting in general, across the state of California. So we’re comprised of a group of community- based organizations, each of which has grappled with some various facets of compost law and policy at both the state and the local level. So we come together and we conduct collective policy advocacy that helps strengthen, protect, and allows us to develop these small- and medium-scale community composting projects. And we also work to empower the composters alongside the communities they serve by offering them training in policy advocacy, in providing one pagers that can help with them going to city councils and negotiating carve outs for their specific operations. So it’s been a very exciting space to operate in as a collective. Makes you feel like you’re not alone.
Jess:
Thank you all for sharing. Let’s dive into the other side of things here. Could you each talk about how the franchise zone system in your county affects your operations, and the services you can offer?
Sarah:
San Diego County is comprised of 18 jurisdictions, the two largest of them being the county of San Diego, and the city of San Diego. All of these jurisdictions have some flavor of exclusivity in the way they invite or contract out the hauling services. The city of San Diego and the county of San Diego have what’s called a non- exclusive franchise, meaning that there is a list of approved franchise haulers [that] can provide service in that zone, or within the boundaries of the city of San Diego, or the unincorporated county areas.
Sarah:
And this list of franchise haulers is basically, like Brenda said earlier on in the introduction of this podcast, these are large haulers. You have to have very deep pockets to be able to really get on this list of a franchise hauler. But once you’re on there, you can offer your services within the city boundaries, and within the unincorporated areas. The rest of the jurisdictions have what’s called an exclusive franchise contract, meaning that they have an agreement with just one hauler.
Sarah:
They put it out to bid, and then they select a winning bid, and that winning bid just goes to one hauler, who, for whatever period of time, 10 years, 15 years, it usually has periods of extension that you can tack on after the initial period, the hauling services, the fee-based hauling services … and I stress on this word, fee-based, because that’s really the crucial point. The point is, can you charge fees for collecting solid waste, food scraps, recyclables? And that right to charge for the service for collection is given to just one exclusive operation, and that’s called the exclusive franchise agreement. So that’s the way the San Diego county system looks like.
Jess:
Thanks, Sarah. Monique, did you want to share?
Monique:
Sure. When I was looking to launch Compostable, I was informed that it may not be legal. And I was like, oh, well, that’s fun. So I had to kind of work to find a loophole that would allow me to grow this business, because I knew my community needed it. There really wasn’t any kind of service operating in Los Angeles like this. And I’m from the East Coast originally, where there’s plentiful. And really, the past three years, as I’ve been building out this company, I would say the franchise agreements have most impacted me in terms of capacity building. It’s quite anxiety-provoking and scary to invest in a company that could be shut down. Even if you know it’s intrinsically valuable, if it’s not legally validated by your city, you are hesitant in how much time, money, effort you put into a company. That’s just something wise to do.
Monique:
And so, my entire business plan and the development of this company has been specifically built with franchise agreements in mind. And in some ways, it’s really stunted our growth. The growth is there. People are very excited about it. Not only do they want to compost, but they want to compost with a local, community-based organization, because there’s more trust and transparency there. And people are getting more and more interested in these small-scale community-based systems, and they want it for all aspects of their life, including their waste management services, even though a lot of us talk about how composting is not dealing with waste, but a resource. So I would say it’s really seeped into almost every aspect of my business as I think about how I’m growing it, what I’m saying, who I’m saying it to. It’s a very delicate landscape to navigate.
Jess:
Thank you. Kourtnii?
Kourtnii:
Yeah. Thanks, Jess. So I operate in the Bay Area, and as you know, they’ve been source separating organics up here for over a decade. So I just wanted to mention that a lot of the attraction to an exclusive franchise agreement is because these cities have put a lot of work into establishing their zero waste goals, and their diversion targets of usually 75% by 2020. So in Alameda County, they passed a mandatory recycling ordinance in 2012 with this target in mind. And it first started to extend to include diverting plant debris and organics in 2014. And what this did is, throughout the 17 cities in Alameda County, it required the jurisdiction to provide recycling and composting services for certain generators, like commercial businesses, institutions, and multifamily buildings. And it had to be sufficient enough to handle the amount of recyclables and organics that those generators were producing.
Kourtnii:
So it was very attractive for cities at this point to go and look for large-scale service providers, and that are capable of implementing large-scale residential collection programs. And in 2016, Oakland reached out to Waste Management of Alameda County and signed an exclusive franchise agreement with them for the collection of all solid waste in organics. They signed a separate contract with California Waste Solutions for recyclables. But what I found very interesting, and has been the biggest point for us, is that, not only is it the exclusive agreement to collect the material, but it’s also to deliver it to a certified and permitted municipal facility. So in this case, it’s deliver all of the material to the county’s permitted landfill and material [inaudible 00:15:57] facility located out at Livermore.
Kourtnii:
So for the hauling and the delivery of the materials, there were very few exemptions in this contract, when I started looking through it beginning to launch my business. And these were for things really just for bulk furniture, or homogeneous vegetative materials that were intended for things like animal feed. And if you wanted to self-haul it, you could only self-haul it to a permitted disposal facility. So this really put a wrench in our plan, which originally was slated to build and maintain flow-through worm-composting bins at one consolidated site. And then, I would ride around on bicycles and pick up the food materials from local residents and businesses. But I was told that none of the franchise agreement collection exemptions actually applied to this business model.
Kourtnii:
And I concluded on my own that onsite recovery operations would be the only way to scale our impact and get around this. So we just ditched the idea of hauling completely. It was too much to handle. And also, if we really get into it later, economically, it was very expensive to move material. So we began focusing just on programs that provide source reduction in these zero waste goals. So it’s still helping the city manage and achieve these targets, and specifically, working with generators that are just driving to implement true zero waste solutions, by just not creating the material that needs to be collected in the first place. So that’s kind of how we pivoted right at the beginning. So it was tough.
Brenda:
Sarah, let’s just go back to your story in San Diego, because I think you teed up very well what the county’s doing with their 18 jurisdictions, and the exclusive franchise agreement. Like Monique and Kourtnii’s stories, how did that impact what you ended up having to do, or alter what you were planning to do? I mean, all three of you talk about the circular economy, and keeping things local, and providing community benefits. And Kourtnii, your story about where the county’s contracting with waste management, and hauling it outside the community. It’s like the opposite of what you all are doing. And Sarah, what has that meant for you in San Diego?
Sarah:
Yeah, I mean, it has been a very long and arduous journey. And I really second what Monique said, you can’t really invest in a business when you don’t know whether it will be legally validated. So just to back up, like I mentioned, we were operating in a gray zone because we were not one of the franchise haulers. So we couldn’t really fit the bill, regardless of whether it was a non- exclusive zone or an exclusive zone. Since we were not a franchise hauler, we were kind of kept out of … the doors were shut on us, in terms of being able to operate. And by operate, I mean collect for a fee, as well as compost. Because even the ability to compost materials that were generated offsite, meaning not on the same property that you were composting, even that was just mired in regulations, and it was just very nebulous to interpret.
Sarah:
So this has really impacted … I mean, to this day, even after the revisions in the city of San Diego, which, unfortunately, the other cities and jurisdictions have not really taken a page from. We really thought that would kind of be the watershed moment for San Diego County. When the city of San Diego made those revisions favoring community composting, the other cities didn’t really do anything to move in that direction. And so, even today, they still shut the door on us, either under the argument that we would violate the franchise agreement that they have with their exclusive hauler, because that allows their exclusive hauler to do exclusive collection in their jurisdiction. And so by allowing a community composter like Food2Soil to offer composting services which their franchise hauler is not able to offer, even though they’re not offering that, they will still not open the doors to community composters like Food2Soil, because that would still be a violation of their agreement.
Sarah:
So it’s almost like the haulers are squatting on this space, saying, yeah, you have this agreement, and you have to hold this space and allow us to squat until we are ready to build the facilities and provide you with this service. And that could be three years, five years, 10 years down the road. Or, like waste management, we can take this material outside this county to Riverside County, and you’ll just have to allow that, as per the exclusive franchise agreement. With a non-exclusive franchise, and especially in the county of San Diego, there’s another piece of this, which is not really related to the franchise agreement, but it’s related to the county’s planning and development regs. And that’s about composting material that was not generated onsite. So what they do is, they’ll say you didn’t generate this material in this community garden or on this farm, you kind of trucked it from outside.
Sarah:
And so, even though it’s coming from the local neighborhood and from the local area, because it’s not generated onsite, you cannot compost it. So there’s just … what I’m trying to get at is that there’s all these, … it’s a maze of regulations. And as community composters, people who really want to focus on turning this material, turning these scraps into soil, that rejuvenates our open landscape, we have to deal with regulations, legalese, attorneys, cease and desists, which we’re not made for that. We don’t have the deep pockets for that. We don’t have the resources for that. We didn’t really make our business models to challenge the haulers. We are just here trying to fill in the gaps, like Monique said, and in some cases, provide the service that the main hauler is not … the franchise hauler is not able to, and doesn’t have any plans to.
Sarah:
So yeah, I mean, it has been very hard to navigate policy. It has been very hard to reason with local agencies that, here’s where we fit in, and really, we do fit in, and you don’t have to be worried the haulers will sue you. But we are small fish, and really, no one’s paying attention. And we are not really contributing to the [inaudible 00:22:44] fees of the city, either. So we are kind of in this press between the rock and the hard place.
Monique:
And I just want to add a quick comment to this. The analogy I like to use that I think helps it land for people where this is a new concept is: it’s like the cities are saying, you can only shop at your major grocery store. That’s it, that’s all you get. You do not get to choose a local farmers’ market, even if there’s one down the street, ready to roll. And then they’re asking the farmers to advocate for their own rights. And the farmer just wants to grow food and feed their community, and do something they love, and now they’re in this position of educating people on why local produce is important, and the benefits of that, as well as trying to run their farm day operations. And so I think the group of us here are saying, we’re not against major grocery stores, we’re against the level of preference they’ve been giving, funding, and we’d like to see more options so people can choose what works best for their lifestyle and their values.
Brenda:
That’s a great analogy, Monique. And I think there’s also equity issues, in terms of who you’re serving. I think Sarah, one of the examples you’ve shared with me in the past is that you were looking to provide service to multifamily dwellings that didn’t have any access to food scrap collection service. And the exclusive preferred hauler wasn’t providing that service, but the town, you were still prevented from doing that. So it’s an equity issue at many different levels here.
Jess:
We’ll continue on with this conversation after a very short break. Thank you for listening to our show today. If you’re enjoying my conversation with Brenda, Kourtnii, Sarah, and Monique, I hope you’ll consider heading over to archive.ilsr.org to make a donation. Your support not only makes this show possible, but it also supports all the resource and resources ILSR produces. Any amount is sincerely appreciated. That’s archive.ilsr.org. Now back to our conversation.
Brenda:
And I think, Kourtnii, what you mentioned in Palm Springs is moving towards exemptions for community composters, but even in addition to community composters, there’s, composting comes in all sizes, right? And so, there’s large waste haulers, and there’s community composters. Do you have any thoughts or position on, are we just advocating for exemptions for community composters, or do you believe that all of these solid waste district agreements and this whole system should be revamped completely, in order to open up to wider ranges of businesses and enterprises handling, reducing waste, and finding alternatives to landfill disposal and incineration?
Kourtnii:
Yes. Also, the California Alliance for Community Composting does not have a specific position on exclusive franchise agreements. But we have put a lot of effort into the research about what contracts look like, and what is inside of them, and therefore, can speak and help community composters who are grappling with these facets of waste-hauling law, to help better advocate for allowing their services to participate alongside, and sometimes in partnership, with these larger-scale companies.
Kourtnii:
But what we really encourage the cities to look at is everything in between backyard composting and a large-scale composting municipal system. So this can include everything we’ve been talking about in just our three businesses today, but specifically, the ecosystem of, who’s generating it? How is it being picked up? Where is it being moved to? And then, how is it being used? And showing cities this solution and this ecosystem that could be possible if they would allow and update municipal codes, and update and renegotiate contracts that may be already in place, so that these sorts of operations can exist.
Kourtnii:
When I was working with the Sustainable Economies Law Center, we hosted a year-long “soil policy party,” which was a group of community composters in Oakland, and we met once a month. And we fed them, we talked about stories, we’d research one facet of the municipal code in Oakland, and then we would put an action item together. One of the biggest action items that came out of the soil policy party in Oakland was a legal guide for community composting in Alameda County. And it looked at all 17 cities, who the exclusive waste haulers were, and what was in the contracts, which could support, or needed improvement in order to support community-based resource recovery work, especially focusing on collection, but also zoning and permitting for where the materials could be taken.
Kourtnii:
And that is happening at the local jurisdiction level. So we do get a lot of support through SB 1383 and through [inaudible 00:27:57] in the state, but essentially, these are conversations that need to happen at the local level. So I really am a big proponent for the soil policy party curriculum style, and it will be a resource that will be available on this podcast, that you can click, download, and try it out with your local community, and see where it goes. But first, you need to understand the law before you can really learn how to improve it effectively.
Sarah:
Yeah, I’d like to jump in here and share my perspective on this question. I don’t think that just doing away with solid waste exclusive franchise agreements is the solution. There are certain positives to it. It helps the cities manage their solid waste in a very structured way. So doing away with these exclusive franchise agreements and the franchise system is probably not really going to help community composters. I feel that the way forward, at least in the short run, is going to be to get ourselves a place at the table. And a very elegant way of getting that place at the table is to get exemptions, just get carve outs in the municipal ordinance. Something that a policymaker would be much more likely to consider than just completely doing away with the exclusive franchise system.
Sarah:
We are community composters. There are limits to what we can process, and how much we can process. And we have to be upfront about this. I’ve met community composters who want no thresholds. Well, if you don’t want any thresholds, then your aim and your vision and your goal is to become a large franchise hauler without any restrictions or requirements. And that’s not fair, either. So if we say that we need all approaches at hand, then let’s keep the exclusive franchise agreements, and just advocate for carve outs, so that we can also operate, we can fill in the gaps. We can live within thresholds. We can really prove that even community composters have the responsibility, have the accountability that these cities are looking from large haulers, and that we can provide a valuable service. And then maybe, 10, 15, 20 years down the road, this entire system of exclusive franchises may just be meaningless, and it’ll just crumble on its own.
Monique:
Yeah, I always say, it’s not an us or them, it’s an us and them, and that, human brains love simple answers to complex problems. But in nature, there are no simple answers to complex problems. There’s complexity. And so, I think that’s a really hard paradox to hold, especially when you’re working within regulations and code and mandates, but the more we can have our human-based systems mimic our ecosystems, then the more no one is left behind. And so, I couldn’t agree with Sarah more, that it’s, I’m not looking to push anybody out, I just want to be included in the conversation, and I want people to have the option to choose what’s best for their lifestyle.
Brenda:
And Monique, can you talk out what LA County Unincorporated is doing to help include micro haulers?
Monique:
Yeah, I was so excited when I heard this. I just was kind of just singing in the car after the meeting. I have met with some of the people at LA County, and they’re going to release an RFP for quote unquote, “micro haulers.” And I know we have lots of different names, resource recovery companies, small-scale community composters. But the fact of the matter is, they’re going to release an RFP that says micro haulers can operate in their area. They will have an exclusive franchise agreement, but they are giving space exemptions, like Sarah said, for micro haulers in the unincorporated area. And they literally called me to ask me my thoughts on what they should write in this RFP. And it was just so moving to be … I told them, I was like, this is the first time I’ve ever been called to be included in this conversation. And it really means a lot to me, because I can tell them what my limits are and what my strengths, and what I’m looking for and what I’m not looking for as a community composter.
Monique:
And they were like, oh, great. Awesome. Okay, so, yeah, we won’t even … I guess we don’t need that restriction in place. And I’m like, please don’t put that restriction in place. It’s going to really hinder me in all these kind of ways. And then they were like, we were thinking about this, and I was like, yeah, that seems fine. If that helps your large-scale haulers feel more secure as they’re getting used to these different models coming out, totally fine. That’s not going to impact me. So it was just a really … and it hasn’t come out yet. It probably won’t come out until August. But just to be called and asked for my opinion on the RFP released was … it was just so validating to the conversation I’ve been trying to have for years.
Brenda:
Congratulations, Monique.
Monique:
Thank you.
Brenda:
Carve outs, exemptions, encouraging these jurisdictions to create separate RFPs for micro haulers… New York City, which, as you can imagine, is a city that has been trying to eliminate corruption and the influence of organized crime in its trash-hauling businesses for years. I think it was back in 2018, they created zoning that allows micro haulers, micro hauling, and food rescue in their zoning. And not only do they have these exemptions and clear guidelines, but one of the other things they did is, they carved up the city into 20 zones. But instead of giving an exclusive contract to one hauler, they allowed three to five to compete within a zone. So they just narrowed the number of businesses that can work in a zone. So that may be also something to look at, and we’ll put the link to the New York City plan in our show notes, as well.
Sarah:
So in addition to carve outs and exemptions, SB 1383 also requires that local agencies consider their community capacity for composting in their capacity planning exercises. So every local agency, when they are submitting their capacity planning for organics report to CalRecycle, they are supposed to consider their capacity for community composting. And while this may seem like nothing, it may just seem like it’s just a line item, most cities are going to just record zeros, this is the time when, as community composters, we have to come forward and say, hey, we have this capacity. The fact that you’ve not let us operate, and you’ve shut the door on us, does not mean that this capacity has disappeared or gone away. You’ve closed the door on us. You’ve kept us outside, and you’ve just turned around and said, hey, we don’t have any community composters. Well, no, they’re there, they’re just behind the door.
Sarah:
So this fact, we have to go back to our local agencies. Anyone who has the ability to compost in their backyard, in their community garden, in their urban farms, in their school gardens, has to go back to their local agency and say, hey, I have this capacity, and I would like you to report that in your capacity planning report to CalRecycle. Because this is there, and the only reason it’s not augmented is because you have some archaic regulations, either on the solid waste side, or on the zoning side, that need to be revised. And there are a whole bunch of elegant ways in which you can revise that. Look at San Diego, look at LA, and those are just revisions, changes in verbiage, that need to be done in your policy.
Brenda:
And Sarah, I do like the suggestion to require the local jurisdiction planning to incorporate, whether it’s whole composting or community composting, or on farm composting, elsewhere. And prevention, in determining what capacity you need, how much waste can you avoid in the first place? And at the Institute for Local Self-Reliance, we have a hierarchy on reducing food waste and building community, and we’ll put a link to that, but we would love that to be integrated into what’s required of local jurisdictions, that they have to consider these other options.
Kourtnii:
Exactly, Brenda. We go by the value that waste is not waste until you waste it. And a lot of these contracts would interpret the material that needs to be collected as material that’s discarded or useless or unwanted or undesirable. And we’re clearly not working with material that has been discarded. It’s things that generators care very deeply for, and they want to see the best and highest use in its next life. Just on that, I think we’re outside the scope of these contracts, in general.
Brenda:
Yep. And local government should not be using the authority and power they have to privilege just large-scale businesses. So one thing they have to do, they cannot be sending Sarah at Food2Soil to the lawyer for the hauler to answer the questions. I mean, it’s just so insane. So that’s just something that I think is clear that we are all in agreement of, that we need to educate local government, and do some more advocacy. Start your soil policy party soon, folks.
Jess:
Thank you, Brenda, and thanks to all of you. You’re all doing just such amazing work, and it’s great to hear about your experiences in California. I wanted to ask one just kind of fun wrap-up question, which is to ask each of you to share a favorite, or if you can’t pick one, maybe a couple favorite local, independent businesses that you want to shout out.
Sarah:
This is nothing composting-related. It is food-related though. I love my local pizza place.
Jess:
Solid answer. Monique?
Monique:
Every Saturday, I walk to my local yoga studio and take a class, and then go next door and get … there’s a coffee shop right next door, and have a coffee. And it’s basically my favorite morning of the week. So shout out to Light On Lotus and Alana’s Coffee in Mar Vista.
Jess:
Okay, Brenda, would you like to share?
Brenda:
Yeah, I want to do a shout out to a FullFillery, which is, as you might guess from the name, a refill and low zero waste shop in my neighborhood in TaKoma Park, Maryland. Love them.
Kourtnii:
I’d like to give a shout out to Kilovolt Cafe in West Oakland. I’ve had many a much needed sandwich on long work days there, and hosted good discussions there. And I’m really just always grateful for their delicious sandwiches and hospitality.
Jess:
I love a good sandwich shout out. That’s great. Thank you.
Kourtnii:
One thing that I did want to talk about, when you first said local business, I was actually just going to give a shout out to the city of Alameda, who has been the one who’s most embraced the Community Composting for Green Spaces, and community composting projects in Alameda County. And we’re working with the Alameda Point Collaborative there, as a part of a youth development and apprentice program, to actually use the site to provide capacity for residential generation of materials. So they’re actually building it into their capacity statement for their own city’s zero waste goals, but what they are able to actually recover and recuperate, in a local sense, for building their local soil. So it’s kind of a model, a city decision, where I’m working, that I’d really like to just elevate the discussion and use this as an example. And we’re really excited to start showcasing this project in the next year.
Jess:
I realized I asked everyone else without thinking about what mine is, but definitely, up at the top, there’s a children’s bookstore a couple blocks from my house, called Red Balloon Books, which is a great place to go and spend a lot of money on very wonderful children’s books. So that’s my enjoyable way to spend a weekend afternoon. With that, unless anyone has a final comment to share, I think we’re at the end of the conversation. So thank you, everybody.
Brenda:
Thank you.
Monique:
Thanks, guys.
Sarah:
Thank you, Brenda. Thank you, Jess. Thank you, Monique.
Jess:
Thank you for tuning into this episode of the Building Local Power Podcast from the Institute for Local Self-Reliance. You can find links to everything discussed today by going to archive.ilsr.org, and clicking on the show page for this episode. That’s archive.ilsr.org. While you’re there, you can sign up for one of our many newsletters and connect with us on social media. You’ll also take the opportunity to help us out with a gift that helps produce this very podcast, and supports the research and resources we make available for free on our website. Finally, we ask that you let us know how we’re doing with a rating or review on Apple Podcasts, or wherever you find your podcasts. This show is produced by me, Jess Del Fiacco, and edited by Drew Birschbach. Our theme music is Funk Interlude by Dysfunction Al. For the Institute for Local Self-Reliance, I’m Jess Del Fiacco, and I hope you’ll join us again in two weeks for the next episode of Building Local Power.

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Audio Credit: Funk Interlude by Dysfunction_AL Ft: Fourstones – Scomber (Bonus Track). Copyright 2016 Licensed under a Creative Commons Attribution Noncommercial (3.0) license.
Photo Credits: Featured image – Monique Figueiredo; Body images – Sarah Boltwala-Mesina and Monique Figueiredo
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42 min
February 17, 2022 Building Local Power Highlight: Independent Musicians and the Anti-Monopoly Movement
Kevin Erickson, Director of the Future of Music Coalition discusses how music is being impacted by monopoly power and what kind of marketplace breeds broad participation.… Read More
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February 10, 2022Local Organizing Efforts Are Reframing the Digital Divide
On this episode of the Building Local Power Podcast, host Jess Del Fiacco is joined by her colleagues on the broadband team, DeAnne Cuellar who leads our community broadband outreach work, and Sean Gonsalves who is a senior reporter and editor. They discuss where the bulk of the broadband funding from the Infrastructure Investment and Jobs Act is geared toward and how to engage local champions to create community broadband strategies.
Highlights include:
How states will be impacted by the fact that cooperatives, nonprofits, public utilities, and local governments are eligible to use Infrastructure Investment and Jobs Act funds to build networks.
Which states are well-poised to submit a five year strategic plan before accessing the broadband money and which states are not.
How digital equity organizing efforts in LA County are a perfect example of a willingness to collaborate, design community solutions, and be community-driven in terms of building better broadband infrastructure.
Why having access to telehealth and remote learning are human rights.

“The bill largely targets rural America, which is sort of unfortunate, because it feeds into this idea that the digital divide is between urban and rural America, which isn’t the case. A digital divide exists within any locale that you are in.” – Sean Gonsalves
“As advocates of digital inclusion… and building community broadband networks, we see connectivity as critical infrastructure, life-saving critical infrastructure.” – DeAnne Cuellar

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Transcript
Jess Del Fiacco:
Hello, and welcome to Building Local Power, a podcast dedicated to thought-provoking conversations about how we can challenge corporate monopolies and expand the power of people to shape their own future.
Jess Del Fiacco:
I’m Jess Del Fiacco, the host of Building Local Power and communications manager here at the Institute for Local Self-Reliance. For more than 45 years, ILSR has worked to build driving equitable communities where power, wealth, and accountability remain in local hands.
Jess Del Fiacco:
And hello, everybody. Welcome to our show today. I’m joined by my colleagues, DeAnne Cuellar who leads our community broadband outreach work and Sean Gonsalves who is a senior reporter and editor on our broadband team. We’re going to talk about a few different things today, but well, first of all, welcome to the show. Let’s start there.
Sean Gonsalves:
All right. CBN is in the building or buildings.
DeAnne Cuellar:
Hi.
Jess Del Fiacco:
Hi, and we have, it’s DeAnne’s debut for Building Local Power, so it’s always a special episode.
DeAnne Cuellar:
Hello. Thanks for having me.
Jess Del Fiacco:
So happy to have you guys on the show. And with that, let’s dive into some questions for Sean. So last fall, I believe Congress passed the Infrastructure Investment and Jobs Act so Sean, could you talk about that as it relates to the broadband world? Maybe we can start with just a general description of what’s in this bill.
Sean Gonsalves:
Good question. Good question because there’s different pots of money that are floating out of there, floating from the federal government to states and so this shouldn’t be confused with the American Rescue Plan money, which has already made its way to state coffers and the difference really between the money that’s available in the American Rescue plan and the money that is going to be available once it makes its way to the states in the infrastructure bill is that the American Rescue Plan money is a lot more flexible, which is important.
Sean Gonsalves:
So the money that goes to the states and local communities, it gives a lot of wiggle room, the spending rules. There’s a lot of wiggle room on how you can spend those funds, which includes the ability of local communities to define what’s considered affordable and reliable and use that to justify deploying networks or initiatives or projects in places even that are considered in the narrow sense of the term served by an incumbent provider.
Sean Gonsalves:
So the money that a lot of state legislatures and local communities already have in hand, at least a good portion of it is the American Rescue Plan. As you mentioned in November, the infrastructure bill passed and in the infrastructure bill, there was $65 billion for broadband alone. And in that you’ve, well, we should, first of all say, because this is important. It’s the largest federal investment in broadband ever. So it is a watershed moment in terms of federal investment in broadband infrastructure and expanding broadband access.
Sean Gonsalves:
So $65 billion dollars. What does that get you? That’s 42 and a half billion that’s going to be allocated to the states in the form of block grants under what they call the BEAD program. I think it stands for Broadband Equity, Access & Deployment Program. BEAD. B-E-A-D. And that’s going to be administered by the department of commerce as the NTIA.
Sean Gonsalves:
And essentially broadly speaking, so the money is, so the way the language of the bill is written, the money has to first target is defined in the bill as unserved areas. And those are areas that are where people don’t have access to 25/3 megabits per second broadband service, which is the federal minimum definition around speeds of your connection.
Sean Gonsalves:
Now, there aren’t many places in the country outside of the most rural regions of the nation that don’t have access to 25/3 broadband. So in that sense, the bulk of the money in terms of deploying for money to build new networks is really geared towards funneling that money mostly to those rural regions, at least to take care of those areas first.
Sean Gonsalves:
Only after all of the areas that don’t have 25/3 are served can the money then be used to bring better networks and service to what the bill calls underserved areas and those are areas that don’t have access to service between 25/3 megabits per second, and 120.
Jess Del Fiacco:
So just that area would include much bigger chunks of urban areas, for example, correct?
Sean Gonsalves:
Correct. Correct. And so it’s fair to say the bill largely targets rural America, which is sort of unfortunate because in cities, because it kind of feeds into this idea that the digital divide is really between urban and rural America, which isn’t the case. A digital divide exists in any local that you’re in. The contours of it change depending on your location.
Sean Gonsalves:
Some places in many rural areas don’t have the infrastructure at all. In more densely populated areas they’re more likely and in most cases do have networks that are available, but when you talk about how you define the term served, there’s a lot of places that have a single monopoly provider who charge high rates for an unreliable second-rate service and there’s lots folks in urban areas and in densely populated areas that don’t have access to broadband for a variety of reasons. A lot of it has to do with affordability. As we like to say, “If it’s not affordable, it’s not accessible.”
Sean Gonsalves:
So and then basically, each state is going to get a hundred million dollars just for broadband in this infrastructure bill and the remaining money will basically be divided up based on this formula that calculates how many unserved households are in each state, which kind of brings us around to the FCC maps because we’re hoping that the FCC does a better job of updating their notoriously inaccurate broadband coverage maps in the near future.
Sean Gonsalves:
Because otherwise as Doug Dawson points out, one of our friends, Doug Dawson, the states with the most inaccurate FCC maps are going to lose funding. And so why that’s important, that mapping piece. So broadly speaking, that’s what’s in the infrastructure bill. There are some very good things in there that are even accessible and will be accessible to cities and towns that are not rural areas.
Jess Del Fiacco:
Well, let’s get into that. I mean, what are the good points in this bill?
Sean Gonsalves:
So, I mean, from our perspective, we advocate the idea that there ought to be… The closer you get to the problem, which are local communities, the better information that you have, particularly since the FCC and even states by and large, don’t have really precise granular information about where connectivity challenges really are, but in local communities, that have been dealing with overnight, essentially having to deploy hotspots because they’ve got hundreds or thousands of kids who can’t do distance learning.
Sean Gonsalves:
We’ve got businesses who are in the midst of trying to figure out the remote work situation, or even if it’s not a remote work situation where you have been businesses that where e-commerce has become central to the survival of small businesses, reliable connectivity is super important and local communities have the best sense of where those challenges are in their communities.
Sean Gonsalves:
So the good news is that unlike previous federal allocations, for example, RDOF where they have this reverse auction, where the FCC kind of doles out money based on these bids. We’re getting closer to the local communities where this money is being sent to states in the form of block grant, so that’s one step in the right direction.
Sean Gonsalves:
There’s a couple other really good new things in the infrastructure bill though, as it relates to local internet choice and community-driven broadband solutions, which is that the bill does specifically say that states cannot exclude cooperatives, nonprofits and public utilities and local governments, et cetera, from being eligible for tapping these funds, which raises an interesting question in some states, but it’s good that, that language is specifically in the bill.
Sean Gonsalves:
The other good thing is that funds can be used to bring low cost broadband to multifamily housing units. The reason why that’s important is because according to the data that you see from a lot of observers about where in urban areas there is a real connectivity challenges it’s often concentrated in multi-dwelling units for a variety of reasons, so that’s really important.
Sean Gonsalves:
I’ve seen a study that estimated that something like between 20 and 25% of households in urban areas that lack access to broadband live in multi-dwelling units, so that’s an important piece that’s in the bill. And then there’s also, there’s real money in there for digital inclusion efforts. That’s things like digital devices, digital literacy, because even if you have a internet connection, if you don’t have the devices to access it, if you’re not comfortable using it, again, it means that it’s not really accessible.
Sean Gonsalves:
And then finally, I would say that one of the other good things about this bill is that the Emergency Broadband Benefit Program, which was a temporary program, which is, it’s a subsidy to $50 a month for a discount off of your internet service and they converted that into a permanent program called the Affordable Connectivity Program.
Sean Gonsalves:
Now they allocated money for that. The one thing about that is that oftentimes when there are budget cutbacks, it’s the social safety net that gets trimmed, and so this particular program requires that Congress continues to fund it. And so one of my concerns and others is that down the road, if austerity is in the air and they’re looking to cut because the deficit hawks come out and scare everybody into thinking that we’ve got to cut, cut, cut, it’s programs like this that often are on the chopping block. So unless Congress continuously funds this, that’s a benefit that could go.
Sean Gonsalves:
I should also mention that the EBB is a $50 a month subsidy for eligible low income households to pay for internet service subscription. The Affordable Connectivity Program, while it does make it permanent it reduces that subsidy from $50 to $30, which helps, but considering that we pay as a country some of the highest prices for internet service in the developed world, even that discount for some families, it still leaves a home internet subscription out of range.
Jess Del Fiacco:
You mentioned that this would raise interesting questions in some states. Could you expand on that a little bit? I’m assuming that, that might refer to the language in this bill that doesn’t prohibit municipalities, nonprofits, et cetera, from establishing these networks. Is that a potential conflict with states that do have some of those restrictions on their own books?
Sean Gonsalves:
Bingo. I mean, that’s just it. So what we were hoping for, what would’ve been ideal is that there would’ve been something in the infrastructure bill that preempted states from these various is preemption law. So right now there’s 17 states in the country that either prohibit municipal local governments from, for lack of a better term, getting in the broadband business in terms of building and operating networks, or they erect barriers to such a degree that makes it virtually impossible to do so.
Sean Gonsalves:
So the uncertainty comes from in these states where these preemption laws exist, like North Carolina for example, is a state that has these preemption laws, so if on the one hand you have this federal legislation that says you can’t prevent municipalities from access in the money, but you have state preemption laws that say municipalities can’t build broadband networks. What happens in those cases?
Sean Gonsalves:
The answer to that question, isn’t exactly clear to us and that’s something that we’re trying to get some clarity on in talking to some legal scholars. And ultimately it might not actually be crystal clear until there’s some sort of legal challenge, which we may see.
Sean Gonsalves:
Another bit of uncertainty and actually this is a big one, which is how ready are states going to be? So the infrastructure bill requires that states submit a five year strategic plan before they can even access the money. Now, depending on what states you are in some states have broadband offices and actual strategic plans with staff and other states don’t like my state, for example.
Sean Gonsalves:
So Maine and Vermont for example, are well poised. Okay. They’ve got a great plan. They’re putting real investments in broadband infrastructure. They’re putting local internet choice at the center of those plans, giving a tremendous role to local governments, municipalities, regional governments, to play a leading role.
Sean Gonsalves:
Vermont, they’ve got the communication union districts, which is going to be their primary vehicle to deliver a universal broadband across a very rural state. But in Massachusetts, for example, there really isn’t a plan. There’s no central broadband office. There really isn’t a plan. The money that they’re talking about possibly deploying is pretty paltry in comparison to other states in New England. And most of it’s not for the deployment of new networks.
Sean Gonsalves:
So there’s a bit of uncertainty in terms of which states will do what with the money. Some will do well with it. Others will just probably throw the money at the big incumbent providers and cross their fingers and hope for the best.
Sean Gonsalves:
And then I would just say the last thing is that is around sort of managing expectations. So this is also important to know about the infrastructure bill, which is that the bill says that the NTIA has six months, which began in November, so what they’ve got, what? I guess, another four months or so left for them to come up with the rules on how states can and apply for the money and spend it.
Sean Gonsalves:
And then there’s the fact that the states have to submit these plans. So in many states and maybe most of them, it will probably be late 2022 at the earliest, probably early 2023, before any of this money gets to the states to spend on broadband. Now is the time where you think about the American Rescue Plan money that’s already out there, the forthcoming fund from the infrastructure bill that’s on its way. States and localities that don’t have their act together and don’t have a plan the time to get to work is yesterday. It’s a good time now to really be pooling resources and thinking seriously about how they’re going to solve these connectivity challenges.
Jess Del Fiacco:
If we have any folks who are working at the local level or at the state level, what would you say is step one to getting started on that?
Sean Gonsalves:
I mean, well first of all, what you need is, you need some local champions and you need a group of folks who are willing to… This is a sustained effort. This isn’t something like a lot of things that maybe people might be think are accustomed to, which is, “Oh, we have the money. Let’s buy something. And next week or tomorrow it’s there.”
Sean Gonsalves:
Building networks is not an overnight process by any stretch. If you’re talking about a fiber deployment, you’re talking anywhere from, if you’re doing it quickly, 18 months to five years to six years. So, some of these connectivity challenges are immediate, which is why different communities are considering different technologies that they can stand up quicker than say a full-blown fiber to the home network.
Sean Gonsalves:
But certainly you need a group of people, local champions who are committed to stay engaged on this issue and in particular engage key local officials who can see beyond sort of the normal election cycle, and really start to look at tapping funds to create broadband strategy plans, to conduct feasibility studies with the intention of not just studying something for the sake of studying it, but studying something for the sake of getting the kind of data and information you need to understand what the landscape is, to start collecting data in terms of affordability and reliability.
Sean Gonsalves:
For example, school districts have a lot of that data because the other ones had, in many instances in many communities, had to set up community hotspots. Those are indicators of where in communities there are real connectivity challenges. So it’s all about really doing your homework, getting together a group of people, including community leaders, business leaders, informing these plans about how to move forward. And then also having folks that understand where the various pots of money are, how you can apply. All of these kind of things.
Sean Gonsalves:
So there’s kind of a lot of spokes to the wheel, but it’s doable. And there’s communities across the country where these projects are starting to really take off. And then of course, which is why DeAnne is here, but you’ve got organizations and people like DeAnne and folks all across the country who are at the ready to help communities think about how you organize these type of efforts and leverage this moment.
Jess Del Fiacco:
Yeah. Thank you, Sean. That was a great kind of summary. Before we dive a little deeper into DeAnne’s organizing work, we’re going to take a short break.
Jess Del Fiacco:
Thanks for listening to our conversation. If you’re enjoying the show, I hope you’ll consider heading over to Ilsr.org/donate to help support our work. And if you want to learn even more about our broadband work, you should check out another ILSR podcast called Community Broadband Bits. You can find it wherever you find your podcasts. Thanks and now back to the show.
Jess Del Fiacco:
There’s obviously a lot of work to be done, but what an exciting moment that we have all these different pots of funding to keep track of. We’re in a great moment looking forward to the future of connectivity in this country. So with that, DeAnne, as I said before, welcome to the show and welcome to ILSR. Could you tell our listeners just a little bit about what your work focuses on here at ILSR?
DeAnne Cuellar:
Sure. I am new to the team, but I am bringing over 10 years of coalition building and movement building work from the grassroots to the beltway to my role. I actually also come from a city, San Antonio, Texas, where we’ve done work that’s similar to what other geographies are doing, and I’m hoping to work as a team with people like Sean and Chris and Ryan, everybody else to make sure that we can get the research tools and other resources needed out across the country so that a lot of these municipal broadband networks or community broadband networks can advance quickly.
Jess Del Fiacco:
Could you talk a little bit about the work that’s happening right now in LA County?
DeAnne Cuellar:
Sure. So LA County is a perfect example of what we would like to see across geographies in different parts of the country. And as Sean talked at great depth about is that you have local laws, which we don’t get into too much, then you have state law, state rule making, then you have federal rule making that’s going on that impact whether or not connectivity projects are going to advance.
DeAnne Cuellar:
And in LA County, what’s interesting about this is that you have a large city, right? It’s Los Angeles, LA County, you have a lot of density. You have the in between markets and then you have the world. So we have the kind of all three that we talk about. We talk about these three different types of customers that would be the people that would connect to the internet.
DeAnne Cuellar:
What’s really interesting about LA County is the stakeholder groups and in order for anybody who’s listening that’s considering starting something with community broadband in the locale is that, in order for you to do that, there has to be a willingness to collaborate and there has to be the different stakeholder groups, which Sean also talked about.
DeAnne Cuellar:
In LA County. You’ve got, I haven’t seen a coalition. A coalition of coalitions is what we’ll call LA County. That’s what makes it different. It is a coalition of coalitions. So you have grassroot organizations, you have anchor institutions, you have people that are elected in office, you have the business community, you have people that are working on health equity, you have people that represent not just county, but also the counties, but also the cities, and then you have individual leaders that the broadband connectivity probably wasn’t their first issue for the last five or 10 years, but now it’s become their second issue.
DeAnne Cuellar:
So there’s a lot of momentum to succeed and it’s continuing to be a dynamic area of the country, or probably going to, it might, I don’t know if Sean agrees with me on this, it could become the testing ground. It could become one of the geographies testing ground to see how a lot of this work rolls out this year.
Sean Gonsalves:
I agree, especially a city as large as Los Angeles. It’s a challenge in large cities where there’s multiple providers in all of the politics and machinations that go on with that. But there are huge pockets of folks who are on the wrong side of the digital divide in urban areas, even as large as Los Angeles where you think they would have everything.
Jess Del Fiacco:
Was there a particular catalyst for these coalitions coming together in this larger coalition? I mean, was it the pandemic, was there a spark for it or has this been kind of just a gradual growth?
DeAnne Cuellar:
I mean, on the outside looking in, I mean, I would want to hear directly from the leaders on the ground that are leading this work, as it should be their voice that’s offering this opinion up, but on the outside looking in, I think we have people at the state level that are not waiting for rule making at the federal level to impact the solutions that they would like to design with the community.
DeAnne Cuellar:
So we saw something simpler last week with the net neutrality coming back up in California. Right? And how that’s going to play out in DC is to be determined. TBD, right? So there was also a local ordinance in Oakland that is really similar to what Sean was talking about that I thought really kicked the door open for codifying policy at the local level, as it relates to multi-dwelling units. So again, testing ground. So we’re seeing in California this willingness to collaborate, this willingness to design community solutions together, and the third thing is that it’s all community driven.
Jess Del Fiacco:
So what are we doing? What are groups doing to support this coalition specifically, or others around the country as they grow and are stepping up to meet this moment?
DeAnne Cuellar:
Mm-hmm (affirmative). Well, so we definitely have one plug that we have, we have a great [inaudible 00:23:15]. The Community Broadband Network Initiative Team has this great [inaudible 00:23:18]. If you’d like to join, you should definitely reach out to us. We have a lot of research, we have a lot of one-pagers, and we have videos that can really help galvanize conversation in your community. I say that because if you’re a community that hasn’t done a roadmap or feasibility study, or the research, we might have something that already exists that could get that work going in your community, possibly could be repurposed.
DeAnne Cuellar:
So don’t come and say, like, “There’s no research.” The Institute for Local Self-Reliance has that ready now. I think the other thing that our team could be really resourceful at with local communities is that just because you have a roadmap or a plan that you have invested resources into, that plan is not going to go anywhere, unless you have experts at the table that can help you put that plan into place.
DeAnne Cuellar:
It could just be a plan that just sits there and it’s a beautiful plan. So the expertise of our organization could help you break through some of those challenges that might have been an idea that cannot go forward.
DeAnne Cuellar:
And the last thing is the issue around digital inclusion, tech equity, and the digital divide. Sean mentioned being a champion. Being a champion is great. You could be a champion of the issue, but if the leadership and the vision is not there to help your community get from point A to point Z, that could be another stuck point in this work that we might be able to help you with.
Sean Gonsalves:
Sure. As something else that, just listening to you, I forgot to mention is that, so now that the infrastructure bill is passed the cable and big telco lobby is going to focus their efforts at state houses. What do I mean by it?
Sean Gonsalves:
So these big incumbent providers would much rather have monopoly markets where they’re the only game in town, you have no choice but to come to them, and so they see a lot of community broadband projects as threats to their bottom line and to the power and control that they have over these markets. And so you can expect that they’re going to focus some of their lobbying power, which we’ve seen as waned a little bit over the past few years, just as this problem has just become so apparent and the track record has become apparent that what we’ve been doing isn’t working.
Sean Gonsalves:
So that’s another thing that’s important because we’ve seen communities where you have a robust public education campaign can make a difference in how a community decides to move forward. These incumbents will pull out every trick in the book, all these tactics, “Oh, it’s a boondoggle. It’s a waste of taxpayer money. It doesn’t work.”
Sean Gonsalves:
All of these kind of things and so communities are going to need to educate themselves and be prepared for those type of campaigns, which can really torpedo plans that have been long in the making if you’re not constantly talking to city leaders and city officials and obviously to your neighbors and citizens to give a real grasp of what the issues are at stake and the need for there to be a more competitive market where people actually have choices and it’s not just the big guy or nobody.
Sean Gonsalves:
And so these are things that that folks ought to prepare for as well. And that’s where the work of what DeAnne is doing and other ally organizations are doing can be really useful and helpful because this is a road we’ve been down before. We’re pretty familiar with all the obstacles and challenges and roadblocks, and why reinvent the wheel, if you don’t have to?
Jess Del Fiacco:
Yeah. I’m guessing we could essentially predict, like you said, everything that the big telcos are going to say. We could just write a script basically. We already have all of our own evidence and resources to back up why these solutions work and why communities should have the decision-making power to choose their own solution. Right?
Jess Del Fiacco:
DeAnne, I don’t know, was there anything else you wanted to add on Sean’s point?
DeAnne Cuellar:
Yeah, I’ll add one thing. I think what’s really interesting about our work is the approach is different. So yes, I expect the opposition being the big telcos to pop up like whack-a-mole eventually, right? As soon as we start seeing the waterfall of resources into local communities, but I also think that there’s a broader conversation that leaders in their neighborhoods and their communities could be having with one another around affordability.
DeAnne Cuellar:
Not just affordability whether it’s free or high speed internet access is the approach is different. Big telco companies want you to be a very elegant consumer or customer and so that’s why they’re saying, “That’s more expensive. That’s too hard. Come to us. It’s free. It’s high quality,” because they’re looking at you as this elegant customer consumer, whereas advocates of digital inclusion and digital divide and building community broadband networks we see connectivity as critical infrastructure, life saving critical infrastructure, and also letting communities be critical content creators as it should be, really similar to what we saw in low par FM radio movements decades ago.
DeAnne Cuellar:
So I hope that conversation, it starts to bubble to the top now that we see more people coming to the table. The table is so much wider now, which is the good thing. One good thing that came out of the pandemic is that the amount of people that are now looking at working on the digital divide has probably quadrupled.
Sean Gonsalves:
Yeah. Yeah. I mean, all good points. It’s something that DeAnne just touched on, which is important because it’s the infrastructure, so it’s not connectivity. Just, I mean, it touches on almost everything that we do in our lives now, so it’s not just about remote work or distance learning as important as those two things are.
Sean Gonsalves:
But a real important thing for example, is telehealth and the emergence of it and how that can be a social determinant of health outcomes. That’s a phrase that you hear a lot in the space where there’s now the potential, right in the palm of our hands to improve health outcomes through various telehealth initiatives and utilizing the infrastructure that can be built and also a tremendous amount of cost savings. That’s important because it touches on everyone.
Sean Gonsalves:
So in other words, we’re not just talking about as important as entertainment and those things are, and they really are, but we’re not just talking about gaming or folks being able to stream things in 4K high definition, but we’re talking about everything across the board, from economic development to, Deanne talked about this vision that a lot of these companies have of, “You just be a nice little consumer.”
Sean Gonsalves:
But there’s applications now and abilities that you need greater upload speeds and symmetry and everything to do things that are more than just buying stuff online that have to do with being a producer, that have to do with being a small business owner or being a creator. And so there’s all of these things, but I think telehealth in particular is an area that can really, or should really drive a lot of the discussion about why this is so critical as a piece of info structure. I mean, it’s one thing if healthcare organizations have access to cutting edge technology, but if the patients don’t, then it doesn’t mean a whole lot.
DeAnne Cuellar:
Right? And telehealth and access to telehealth and access to remote learning are human rights. Everybody should have a right to healthcare. Everybody should have a right to an education. And if you’re talking about infrastructure, if every resident living in a community cannot access those at a high quality at any time, then your community at this moment is not future proofed.
DeAnne Cuellar:
And the pandemic, that’s how the pandemic got connected to access to the internet is that for decades, we’ve been told that everywhere that you see a red dot or a map or some other, infographic there’s access to the internet, you just have to subscribe to it and you can get it. And that wasn’t true, right? If that was true, then how come school buses had to thread together to make mesh networks? How come there were public school teachers teaching from a parking lot?
DeAnne Cuellar:
The list is long of the things that were we saw and it was nationwide. It was across the country, so we have let historically big companies tell us that that was the solution. We did it their way and now we’re going to have to walk and chew gum. Like I always say, you have to walk and chew gum at the same time. I think that we’re going to have to come to terms with the fact that there are unmet needs that have to be addressed so that our needs can be future proofed.
Jess Del Fiacco:
Yeah. Thank you so much for that. I have one final question for you. It’s the same one I asked John earlier, which is basically for listeners who are hearing all this information right now, and maybe they don’t have, LA County is certainly not the only place where this kind of movement building is happening, but if they either want to join or kind of establish this sort of coalition in their own community, where should they get started?
DeAnne Cuellar:
They should definitely get started by visiting muninetworks.org. We have lots of resources that are public now. I would scour through what’s publicly available. If there’s a particular tool resource you don’t see, I would reach out directly to one of us on our team. We’re all very friendly and we can set up some time to chat and begin going over, what there is and what there isn’t currently going on in your community and we might even be able to help come up with a little starter kit.
Jess Del Fiacco:
Fantastic. Thank you guys so much. Is there anything else you’d like to add before we sign off here?
Sean Gonsalves:
Organize. It’s all about action. It’s all about action. It’s the time for studying and thinking, and all of these things should be in the rear view mirror. There’s unprecedented amount of funds available. There’s a tremendous demand, there’s communities that are doing this all over the country, which should be encouraging to folks that are wondering if they can do it. It can be done.
Sean Gonsalves:
So it’s an exciting time in this particular thing. And like DeAnne says, we’re going to have to walk and chew gum at the same time. There’s a lot of pressing issues that people are thinking about and are dealing with, and they’re all important. But when you talk about infrastructure, it’s not as sexy or leading the news all of the time, but you notice it when, for example, if you’re living in a world that needs highways and real roads, and you live in a place that only has dirt paths, that’s a problem and there’s a way to fix that.
Sean Gonsalves:
Or if you’re living in a world where everybody needs electricity and fortunately we’re past that point for the most part, we don’t want to settle for living in the society where some folks have a fully electrified home and other folks just have a light bulb or two that works, so this is where we’re at and the time is now.
Jess Del Fiacco:
All right. And as usual, if folks want to get started, you can find all the resources we mentioned and the websites on archive.ilsr.org. We’ll have a page up for this episode. Thank you, Deanne, thank you, Sean, for joining me day and thanks everybody for listening.
Jess Del Fiacco:
Thank you for tuning into this episode of the Building Local Power podcast from the Institute for Local Self-Reliance. You can find links to everything discussed today by going to archive.ilsr.org and clicking on the show page for this episode. That’s archive.ilsr.org.
Jess Del Fiacco:
While you’re there, you can sign up for one of our many newsletters and connect with us on social media. I hope you’ll also take the opportunity to help us out with a gift that helps produce this very podcast and supports the research and resources we make available for free on our website.
Jess Del Fiacco:
Finally, we ask that you let us know how we’re doing with a rating or review on Apple podcasts or wherever you find your podcasts. This show is produced by me, Jess Del Fiacco and edited by Drew Birschbach. Our theme music is Funky Delude by Dysfunctional.

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Audio Credit: Funk Interlude by Dysfunction_AL Ft: Fourstones – Scomber (Bonus Track). Copyright 2016 Licensed under a Creative Commons Attribution Noncommercial (3.0) license.
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36 min
February 03, 2022 Building Local Power Highlight: Centering Racial Justice in the Antimonopoly Fight
In this miniseries, we return to our most insightful podcast conversations. These five minute episodes highlight critical themes that are still relevant today. Jeremy Greer and Solana Rice argue for organizers of color to be embedded and centered in the antimonopoly fight.… Read More
7 min
January 27, 2022The Movement to Take Back Control From Monopoly Electric Utilities
On this episode of Building Local Power, we share a recording of ILSR’s recent event Democratizing Power: New Citizen Initiatives Challenge Monopoly Electric Utilities. Across the country, powerful utilities are actively blocking decentralized solar energy, degrading the reliability of the power lines even as they raise prices, and failing to make the grid investments needed for a clean, carbon-free future. Listen to ILSR’s Stacy Mitchell and John Farrell facilitate conversations with the advocates who are leading the movement to take back control from electric utility monopolies.
Highlights of the event’s discussions include:
Rep. Seth Berry and Sen. Rick Bennett of the Maine State Legislature discuss Our Power, a citizen-led ballot campaign in Maine that aims to convert the utility serving most of the state to a consumer-owned electric company, allowing for competition and innovation on a public grid system.
Jean Su, Energy Justice Director at the Center for Biological Diversity, explains how advocates in Arizona are using antitrust and anti-monopoly laws to fight a big utility’s plans to crush customer-owned rooftop solar power.
Mariel Nanasi, Executive Director of New Energy Economy in New Mexico, tells the story behind a recent and highly unusual rejection of a proposed utility merger in New Mexico, brought about by grassroots advocacy effort.
“Clean electricity is how we get out of the climate emergency. And all of that needs to flow over the poles and wires. Those poles and wires are a monopoly. And because of the last 150 years or so of the evolution of that industry, we have allowed it without really thinking about it. Without really noticing, we’ve allowed it to globalize, we’ve allowed it to conglomerate. We’ve allowed it to be the province of the few in order to extract value from the many. And so this is about power. It is about money. It’s also very much about climate. If we’re going to decarbonize, we know that we need to shift to consumer ownership because it works.”

Related Resources
Democratizing Power: New Citizen Initiatives Challenge Monopoly Electric Utilities
The Role of Antitrust Law in Creating Energy Justice — Episode 127 of Building Local Power
Mainers Consider Putting Electricity, Internet in Local Hands — Episode 103 of Building Local Power
In Santa Fe, Momentum Builds for Locals to Take Charge of Electricity System – Episode 39 of Local Energy Rules Podcast
A David and Goliath Fight to Tap World Class Solar – Episode 14 of Local Energy Rules Podcast
Transcript
Jess Del Fiacco:
Hello. Welcome to Building Local Power, a podcast dedicated to thought-provoking conversations about how we can challenge corporate monopolies and expand the power of people to shape their own future. I’m Jess Del Fiacco, the host of Building Local Power and communications manager here at the Institute for Local Self-Reliance. For more than 45 years, ILSR has worked to build thriving, equitable communities where power, wealth, and accountability remain in local hands. Hello, today we have something slightly different for you. Last week, ILSR hosted an event called Democratizing the Grid. And at that event ILSR Co-directors, John Farrell and Stacy Mitchell were joined by Representative Seth Berry and Senator Rick Bennett of Maine, as well as Mariel Nanasi of New Energy Economy in New Mexico, and Jean Su of the Center for Biological Diversity. This group discussed the people-powered movements around the country that are taking on the electric utility monopolies with the aim of accelerating the shift to clean energy and winning democratic community control. We’re going to share a recording of that conversation with you today. So without further ado, here’s ILRS’s Stacy Mitchell.
Stacy Mitchell:
Hello everyone. Welcome today. My name is Stacy Mitchell. I’m the co-executive director of the Institute for Local Self-Reliance, and I’m super excited about today’s event. I’m excited to welcome all of you. We had over 700 people register for this event, which is just incredible. We are making a recording today, so there’ll be video of this event that we’ll post on our website and our YouTube page. We will email it out to everyone who registered, so we encourage you to share it with your networks and with people who weren’t able to attend today. ILSR’s mission is to challenge concentrated corporate power and to build thriving, local, equitable communities. We’ve been engaged in energy policy work since our founding in 1974. If you’re interested in learning more about that work, it’s really just an incredibly exciting time in the energy sector. A lot of important change going on, and a lot of important opportunities. I invite you to check out our energy democracy initiative, which you can find on our website. We publish reports. We produce a weekly podcast and newsletter, and we’re very active working alongside grassroots organizations across the country, building coalitions and working to build an equitable, decentralized, democratic energy future.
Stacy Mitchell:
The reason we wanted to host this event today… Because as I said, it’s just a really incredible important moment in the shape of the electricity sector and we wanted to have a conversation about how our electricity system is structured and how the structure that we have now, the structure of investor-owned monopoly electric utilities, which may have made sense a hundred years ago, today is really at odds with the public interest, is really working across purposes with building a carbon-free future with rectifying racial inequality and with building strong local communities and a vibrant democracy. The good news is that there are some just really incredible grassroots initiatives going on across the country in which people are coming up with innovative ways to challenge control by monopoly utilities, and moving towards implementing new policies that would completely restructure the electricity system and really change the structure of ownership, of scale and decision making within the electricity system. And do so in ways that would very much align our electricity sector with the public interest.
Stacy Mitchell:
Today’s event is a chance to meet some of the cutting-edge leaders and to hear about what they’re doing in a number of different places across the country. If you’re coming to this conversation because you mainly focus on energy issues or climate issues in your work, I think today’s event’s going to offer a chance to hear and explore how some of the frameworks and the thinking around anti-monopoly and anti-monopoly policy tools may be useful in what you’re doing. If you’re coming to this from doing work on antitrust and anti-monopoly, I think the energy sector is a really intriguing case study, particularly in helping us think about how to govern network industries, how to govern infrastructure. I think there’s some really important insights we can glean here as we think about what are the public policies we need to govern new forms of infrastructure, including in particular, the tech platforms, Google, Amazon, Facebook and so on. The run of show today, just to give you a quick overview of how today is going to work, we’ve got two really terrific panels. Each is going to be about 25 minutes.
Stacy Mitchell:
In the first, hear from two state lawmakers from my home state of Maine, who led a successful effort in the legislature to pass a law that would allow our dominant investor-owned electric utility to become a consumer-owned electric utility. That law was vetoed by our governor. The lawmakers we have here today have joined with a set of citizen leaders and are working to put that on the ballot in 2023. It’s really an incredible campaign called Our Power. That’ll be the first panel. And then for the second panel, we’re going to broaden out and talk to some cutting-edge thinkers and advocates who are working to address utility power in other parts of the country, including challenging utility mergers and using antitrust law to go after some of the predatory things that monopoly utilities were doing.
Stacy Mitchell:
The event ends at 2:15 today, and then we’ll bring everybody together for a final short roundup and questions. Throughout today, we are going to be trying to take questions from the audience. If you’ve got a question, instead of putting it in the chat, please put it in the Q&A, and we will keep an eye on those and work those into the conversation.
Stacy Mitchell:
Today’s event ends at 2:15, but there will be an after party, so we encourage you to stick around afterwards if you like. That after party is going to be a chance to talk to the two leaders from Our Power, from the main initiative campaign. If you want to go more in-depth on what they’re doing, it’s a really interesting campaign. There are lots of opportunities to get involved. And if you want to just learn more about that, just hang on after the event ends officially at 2:15, and we’ll transition to having a more intermittent conversation with leaders of that. Finally, I want to thank Jess Del Fiacco, ILSR’s communication manager, who’s been instrumental in pulling together this event. And with that, I’d like introduce ILSR’s other co-director, John Farrell, who is going to moderate the first panel. John is the director of our energy democracy initiative. Welcome, John.
John Farrell:
Well, I’m so glad to be here with you, Stacy. I’m here from my basement office, my COVID retreat. If I’m shivering on screen, it’s because it’s cold here in Minnesota, -10, but I’m also shivering in anticipation of this conversation, which I’ve been looking forward to for a long time. What’s going on with our power and with the other panels I’ll be talking to is really a transformational conversation that’s happening in the electricity sector that is tying into this broader conversation about corporate power. In the electricity sector, specifically it’s the culmination of almost a decade of exploration by cities, by communities, by states on this idea of who owns the energy system and how can communities have more choice. We’ve been tracking, at ILSR, lots of places that have done municipalization campaigns, public power takeovers that have looked at ways, in California and Illinois and other states where cities can take control of energy purchasing, but without getting too much into the weeds.
John Farrell:
I just have to say that this, really, what has been discussed in Maine with Our Power really is transformational in terms of talking about the platform of the utility system as a platform, as this idea, as a place where people might be able to transact, to innovate. Entrepreneurs and businesses could really help us solve the naughty and thorny, clean energy and energy reliability and affordability questions of the 21st Century. And they’re doing that in a really novel and exciting way, that I think is the evolution of a lot of these other efforts that have been building up. I am very pleased to welcome Senator Rick Bennett and Representative Seth Berry to join me for a conversation about Our Power. Seth and Rick, thank you so much for joining us for this conversation today.
Seth Berry:
Thanks for having us
Rick Bennet:
Wonderful to be with you.
John Farrell:
I just want to start off by asking a question, the generic question for people who might not be as familiar as I have been in following the Our Power effort. What is this really about? Why did this idea of a consumer-owned utility that would open access to the grid system, why did the legislature feel compelled to step in and to restructure the state’s electricity market in Maine? Rick, I was hoping to start with you.
Rick Bennet:
Sure. Well, I hope you go over to Seth because Seth really has been the leading light in this amazing battle that has turned into quite an amazing movement in Maine. The reality is that we’re undergoing so much change in the world today. I mean, people feel lost in the traditional institutions that we’ve relied on to govern our activities, whether that’s in the banking sector, the power sector, the university sector, the media. And at the same time, we have an immense opportunity to democratize our decision making. And so, it’s interesting that in this area of power where we need to have a grid, which is more responsive and more elastic and more flexible, where electrons are moving in all directions, not just from one big power source out, but from many, many thousands of power sources around and feeding into the grid, we still have this antiquated system of governing our actual grids. We rely on these investor-owned utilities in Maine for most, but not all, of the grid management in Maine. These investor-owned utilities have proven unworthy of the job.
Rick Bennet:
I also have to say, somehow along the line, the main owners and managers of Central Maine Power Company and the old Bangor Hydro, which is now Versant, suddenly we wake up one day and Central Maine Power Company is owned by a Spanish conglomerate named Iberdrola, which in turn is the largest owners of the Norway Oil Fund and the government of Qatar. The old Bangor Hydro isn’t owned in Bangor, Maine anymore. It’s owned by the city of Calgary, Canada, 100%. We have this distant ownership. We have an unresponsive failing on every scale, in fact the lowest rated power companies in the country because of reliability problems, cost problems. And so, we come to this point where this isn’t just about electric power, it’s about power of people for self-determination to control the grid themselves and make it a grid for the future. That’s really what this movement has become, more than just about electrical power, but really about political power.
John Farrell:
I thought that I loved it. If you have more to add to that… But also, could you talk a little bit about why there’s this specific focus on ownership and control of the grid platform? Rick already alluded to this, that we’re talking about absentee ownership in a way. You have these utilities, these private companies, they’re not even owned by entities that are within the state of Maine, within the United States. In the proposal that Our Power put forward in the legislation, in the ballot initiative question, it really focuses on this idea of consumer-owned utility that will have open access. Can you talk about how that addresses this issue of power and why that’s such an important piece?
Seth Berry:
Sure. First of all, it’s just so great to be here with all of you. I’m honored and proud every time that Senator Bennett and I get to work on this together. I think it’s important to note for folks that aren’t familiar, senator Bennett was the president of the Maine Senate in a previous lifetime. He’s now the lead on the environment and Natural Resources Committee. He’s also on the board an internet services provider, a fantastic, scrappy business here in Maine, among his many other impressive credentials. I come at it from the other side of the aisle. I am a former democratic legislative leader. In front of you, you have a Republican, former State Senate president, and a democratic former House majority leader. We have joined in this effort because so much is at stake.
Seth Berry:
I think, John, your question goes right to the heart of it. This idea of a nondiscriminatory platform provider and this concern about monopoly is pretty hot right now in the information space. People kind of get that. They’re like, “Facebook is take over. This is a problem.” there, there are two major cable companies and they have a stranglehold. They’ve agreed not to compete with each other. They have a monopoly in their areas. Cell phone services are much better. So as we’ve seen the information highway be purchased and increasing toll plazas is put up on it and really a huge negative impact on our very democracy, which depends on good information. We’re familiar with that. That’s more in the public eye.
Seth Berry:
But there’s this other thing happening, which also has to do with poles and wires, and it is electricity. I would argue that every bit is much as at stake. Because if you think about it, how do we decarbonize? How do we save the planet? We all know that the planet has very few seconds on the clock left if we don’t do something drastic, and that involves electricity. We need to shift to electric vehicles. We need to shift to heat pumps to heat and cool our home. Clean electricity is how we get out of the climate emergency. All of that needs to flow over the poles and wires. Those poles and wires are a monopoly. Because of the last 150 years or so of the evolution of that industry, we have allowed it. Without really thinking about it, without really noticing, we’ve allowed it to go globalize. We’ve allowed it to conglomerate. We’ve allowed it to become the province of the few in order to extract value from the many. And so, this is about power. It is about money.
Seth Berry:
It’s also very much about climate. If we’re going to decarbonize, we know that we need to shift to consumer ownership because it works. Because if you look at the first six communities in the US, the only six that I know of that have actually fully decarbonized, all six of them were served by consumer-owned utilities. I can rattle off the names if you like, but four of them just happen to be in conservative parts of the country. Consumer-owned utilities, by the way, are not a new thing. They serve 28% of America right now. Some are co-ops, which serve the rural areas. They were the the last to get service because the big boys didn’t want to cover them, wasn’t profitable enough. So, thank you, FDR. Munis have been around for even longer. They’ve been around since the very dawn of the electrical era. Between the muni’s and the co-op’s 28%, those are the places where they have turned to it, that have decarbonized fully successfully, gotten to a hundred percent renewable electricity.
Seth Berry:
In the large utility space, I think of SMUD, I think of LA. They’re the leaders in getting to a hundred percent renewables as well, and they just happen to be consumer-owned. It’s not an accident. It is very analogous to the information space. If you want a utility that isn’t intent on preserving and protecting its stranglehold on that highway of electricity, just like the information highway, then you need to have the right motives, the right incentives, and not perverse incentives. Right now, all the incentives are about protecting what they have, maintaining the status quo, making sure that that transition is frankly as expensive as possible. And that’s not going to help us if we’re trying to get there. I’ll stop there, but have a lot more to say, John.
John Farrell:
I’d love to actually get into this a little bit more. One of the things that you’ve already highlighted, in terms of the benefits of this approach, is that we can meet some of the climate and clean energy goals that we hold collectively easier, whether it’s in transportation, whether it’s in building heating and cooling, there are all of these different facets of our economy that can run on electricity. And electricity is something that we know how to clean up and make renewable and make low carbon and make pollution. You referenced this in terms of the way that these businesses operate. They’re for-profit businesses. They’re operating in an environment that encourages them to do certain things and make money in certain ways. Can you tell me about how the flip side of that, how going to consumer ownership brings benefits in terms of trying to get to those broader goals? What are some of the other benefits that you’re going to see, whether it’s in terms of costs or workers or labor, in using this approach to structuring the utility, the electricity market?
Seth Berry:
Sure. You want to start off, Rick, or should I?
Rick Bennet:
Sure. I’ll just jump in with a couple of thoughts. This shouldn’t be difficult for Maine people to understand, because as Seth said, there are 2,900 municipal or cooperative, COU kind of structures serving electricity customers today in the country. Well, in Maine, there are nine consumer-owned utilities actually serving some of the most rural parts of Maine, Washington, and Hancock counties, for example, far down east. Those 97 towns, in fact, are served by consumer-owned utilities and they have experienced a much better rates on their electricity, 53% less. They’ve got a much more reliable service, isn’t disrupted as much by storms. I think the proof is already there about the savings that can be achieved and the responsiveness that you can get when you have owners who are the customers. They are going to insist that the company run for their benefit, not for the investors in far off lands.
Rick Bennet:
Seth was also saying, I mean, part of these savings and just because people are nicer because they live closer to the utility or the grid, it’s because of the way that the finance works. Most utilities, because they’ve got captive customers, that natural monopolies, people love to give them very low-risk bonding. And so, revenue bonds can fund much of the capitalization necessary for modernizing the grid with consumer-owned utilities. Those revenue bonds are currently selling at two or three percent. The investor-owned utilities, however, because of Supreme Court decisions from starting nearly a century ago, have baked in returns for capital investments, returns in equity of eight to 12 percent, with some variation. Because of that differential, between the two and three percent and the eight and 12 percent, there is an opportunity to recapture money that ratepayers are now paying in and have savings in the monthly bill, but also to capture some of that money to update and modernize the grid. That’s already been shown. If people are interested in the impact on Maine, particularly, there’s a lot of research available at our website, ourpowermaine.org, in that way.
Seth Berry:
That’s right. I’ll just chime in that we initially began this journey in 2019 with a bill that went before the legislature. That bill turned into a feasibility study. The public utilities commission contracted with London Economics. Our PUC, by the way, they’re friendly with the utilities. That’s who they see on a day-in and day-out basis, so we didn’t have super high. And by the way, London economics, most of their work is for investor-owned utilities. So for that reason too, we weren’t super optimistic, but they came back with a clean bill of health. They said, “Number one, this is constitutional. Yes, you can require that the utility sell to a new consumer-owned utility. And number two, it will save you money.” The chances are, their reference case, their middle of the road assumption was you might see a little bit of an uptick in rates in the first few years, five to seven years, and then increasing savings, lower rates from there on out, and continuing, continuing, continuing to get lower.
Seth Berry:
That analysis was then reviewed by a Maine-based energy economist by the name of Dr. Richard Silkman. He took it a step further and said, “Wait a minute. You forgot to mention there’s about $4 billion sitting on the books in a reserve account in your own economic model so you got to count that. That belongs to ratepayers, and some other adjustments as well.” He said, “No, you’re going to save $9 billion over the first 30 years alone, which in Maine is a lot. It might not be as much in California, but we’re a small state. $9 billion, and that’s in net savings. Even after you pay down the acquisition, and you will see ratepayer savings from year one. So, you can reduce rates. You can invest some of that money, some of that savings in building out the grid and modernizing the grid. It’s a win-win all around.”
Seth Berry:
We also, in our proposal, allocate some of that to better pay and conditions for workers. We make sure that the utility is required to use union labor, to invest in local businesses and provide some protections for workers. They keep their jobs, their benefits, their two collective bargaining units, so they go to the higher one. It is a win-win all around. Really, you do it as Rick said. You simply do this by displacing a very high cost business model, which has worked okay, I guess, in the 20th century, but is fundamentally broken for the 21st and for the challenges that we’ll face in the future.
John Farrell:
I guess one of the things I’ve been skimming the Q&A… Just want to remind folks that if you have questions, we probably won’t get to all of them like every webinar, but we are skimming through them to try to see what we can bubble up. I’m seeing a few folks mentioning this idea of… Well, two threads here. One is, “Why is public ownership necessarily better?” You mentioned that, Seth, already, a couple of places that are doing good. There’s also plenty of examples of publicly-owned utilities that aren’t necessarily doing great on the measures that we care about, especially around clean energy. How are you thinking about that? The other one I thought was really interesting was, “Why do you want to buy the grid assets when they may not end up being very useful?” I think those are both good questions, and I’m guessing that you’ve thought of answers to both of those as part of this.
Seth Berry:
Yeah. Those are great. Do you want me to take that, Rick, or do you want to jump in?
Rick Bennet:
Well, let me just say there’s… I know there are parts of this that you’re able to answer better, but I would say that accountability is key here. Nobody can guarantee performance, but you can certainly guarantee who’s accountable for that performance. And right now, as mentioned, we have a broken model. It’s built to serve people in distant places, not the ratepayers. The fundamental thing that we’ve got with this model. It’s not a government ownership model. It is a consumer ownership model. The board would shift from a lot of foreign business people to an ownership model where the board of directors for the nonprofit would be elected. Seven of them be elected by the people of Maine, and then six would be elected by those seven, so you’d have a full board of 13 members. In the six that would be elected by the seven would be people to infill skills gaps.
Rick Bennet:
And so, we’ve got this model which doesn’t have government ownership. It has no reliability and no reliance, I should say, on the tax payer. It doesn’t have any appointments by the governor or appointments by the legislature. This is an independent, not-for-profit corporation that will then hire a C-suite. A C-suite of executives will run the company. And so, you have that level of accountability where the management is hired to do a job by a board that’s elected by the people. It’s a completely different structure for following power and accountability in the structure itself. I think it’s better suited to actually serving the end-user client and customer.
Seth Berry:
That’s a great answer. I’ll just chime in. Senator Bennett really helped us to give a lot of careful consideration and improvement to the board structure. That is something you absolutely want to pay attention to. It is possible to create a consumer-owned utility that is not well designed, and it doesn’t have good governance standards. We included things like freedom of access, it has to be transparent, conflict of interest provisions, all of that. The elected, appointed, hybrid, I think is a very useful addition as well.
Seth Berry:
But just stepping back a bit, taking it to the highest level. Yes, there are these nonprofit consumer-owned utilities and these for-profit investor-owned utilities. It is true that there are better investor-owned utilities and worse consumer-owned utilities within those two families. They’re not all created equal. In a way. I think a business model is like a tool. It’s potentially a very powerful tool. The part of the purpose of the investor-owned tool is to make money for shareholders. In fact, it’s their number one fiduciary responsibility. They would be doing a bad job on the board if that was not their top priority. That is removed from the consumer-owned model. They don’t have to worry about profit. Their focus is on people. And perhaps, if you make it so, it’s about planning. The people part matters. Their number one focus is people.
Seth Berry:
If I’m a consumer-owned utility in rural Nebraska, I might not be asked by my constituents to care about the climate. But you know what? If my constituents do ask me to care about climate, I can put my full attention on that. I don’t need to think about how I’m going to maximize the future profit of this enterprise. I can go full on to decarbonization, to adjust transition, what I like to call a full, fast, fair, and friendly transition, which is in fact what we have to do. It is absolutely critical that we do this. The proof’s in the pudding. I mentioned the communities that have done it so far. I think that’s a good indicator that the business model is the right tool for the challenges that we face today. Do we need to pay attention? Can we create it and then walk away? Of course not. We need to pay attention. Democracy is a participatory sport, not a spectator sport. And a democratic institution, like a consumer-owned utility, needs tending.
Seth Berry:
The other question was about why the grid… I almost took the question to be, “Is the grid going away in the future?” I don’t think it can. I think there are too many lower income, vulnerable communities that can’t simply put a solar panel on the roof and walk away. I think we also have to be cognizant that we use a lot of energy right now, not just in electricity. But to displace petroleum, to displace natural gas, to displace, number two, oil, to displace coal, we’re going to have to create a whole heck of a lot of grid to interconnect, to avoid situations where an isolated part of the grid goes down, like it did in Texas. I mean, you, you need a robust grid. You need transmission. It’s not all local microgrids and distribution, but that is a big piece of it. And by the way, we can do more with decentralized solutions if we do have a consumer-owned model, simply because you don’t have that built-in incentive to build out more transmission and get that high rate of return that Senator Bennett mentioned.
John Farrell:
I want to make sure that we check in with you to describe where this campaign is at right now, in terms of the referendum. I just wanted to add one little piece too I think that’s important for folks to understand about the proposal, which is that the Pine Tree Power Company, this consumer-owned utility would also have more open access, that it’s not the monopoly in the traditional sense of other consumer-owned utilities, where it’s the only player that can offer services. I think that open access model really changes the nature of it, because the accountability isn’t just through your board, it’s through the other players. It’s through the other folks that are participating that can bring energy services to the system. So with that in mind, tell us a little bit about how this campaign is going. You mentioned that there was work at the legislature. How has that transformed to go to the ballot? What does that look like? What’s that environment like? What’s the struggle here? What is your hope for it?
Rick Bennet:
Before we do that, John, I just wanted to mention one other thing which, in Maine, as in a lot of other places, there is a separation between this transmission and distribution side of utility and the generation side of utility. We already have separated that years ago in Maine. And so, what we’re talking about here is the control of the grid itself, which is a natural monopoly, which is the poles in the wires and the transformers and all of those things. And so, it’s different in other communities where the generation is also part of the mix. I’ll let Seth though talk about where the campaign is at right now.
Seth Berry:
Yeah. That’s a great note, Rick. I’m glad you brought it up just to keep people clear. We are looking at generation as well. There’s a wonderful book that I’ll recommend to people that maps out how generation can be a part of this as well, and even can be consumer=owned. But where are we? I mentioned that in 2019, there was a bill that led to a feasibility study and the following legislature in 2021, with the lead co-sponsor being Senator Rick Bennett and a wonderful bipartisan team, including actually an independent tribal member as well, the legislature. We put forward a bill. There was a ground swell of support from across the state. People are excited about this, an overwhelming testimony and support. We then had a vote of the House and a vote of the Senate that in each case was bipartisan and was successful, was more than half, getting it to the governor’s desk. The governor didn’t then veto it, although she said some nice things about the concept and does clearly have some real concerns about having the worst performing utility in the country, bar none, by every standard, customer satisfaction, high rates, worst reliability in the nation, so she gets that. She just expressed some concerns about implementation. Although we disagreed, we said, “Okay, governor. We’re going to take it to the people directly. We’re going to go out and get the signatures.” And that’s what we’ve done. O.
Seth Berry:
Ur Power coalition, and you can learn lots more at our powermaine.org, has gone directly to the people, exercising Maine’s constitutional right to. The ballot question, the citizen initiative. We have already, just in the last 11 weeks, collected 73% of the signatures needed. That’s a high 40 thousands, 46, 47,000 signatures. That was during the very peak of the pandemic here. Hospitalizations were twice as high as they had been. We had volunteers out in the cold, because you couldn’t do the signature collection indoors for the most part. No corporate money, a lot of small dollar donations. But it’s really been an astonishing, impressive, unprecedented effort. We’re very proud of what we’ve done so far. We are aiming for the 2023 ballot, so it won’t be on the ballot this year. It’ll be on the ballot next year, 2023. That gives us a lot of time to educate voters to finish up with the signature collection. We hope to network with other like-minded individuals around the country, because I know there are many folks out there working on similar things, including on this call today.
John Farrell:
I just want to, again, thank Representative Berry, Senator Bennett for joining us for this conversation about the efforts in Maine. Remind people that there’s an after party for folks who want to learn more about the campaign after this webinar ends in a little over half an hour. Thank you again. I just want to invite my co-executive director, Stacy Mitchell, back so we can get ourselves set for our second panel. Thanks again, Seth and Rick.
Rick Bennet:
Thank you, man. I’m honored to be with you.
Seth Berry:
Our pleasure. Hope folks stay on for the after party.
Jess Del Fiacco:
You’ll hear more from our amazing speakers after this very short break. Thanks for listening to Building Local Power. If you’re a fan of the show or if you want to support more events like Democratizing the Grid, hope you’ll consider heading over to archive.ilsr.org/donate to help support our work. If you want to hear more stories like this, you should also check out our other podcast, Local Energy Rules, where you can hear from folks across the country who are implementing local renewable energy solutions in their communities. Thanks. And now back to this conversation from our recent event, Democratizing the Grid.
Stacy Mitchell:
That was terrific. So interesting. I’m really struck, John, about… I think Representative Berry’s statement talking about the importance of figuring out ownership structures that are really aligned with the outcomes that we want to see, but that doesn’t obviate the need for nurturing those structures and having democratic oversight, and really useful, I think, way of framing and thinking about not only stuff in the electricity sector, but really across the economy and how we think about policy making. Excellent. And with that, I am going to introduce our next panel. I’m going to moderate this panel, and John is going to get to join as a speaker on this side. Let me introduce our two other panelists. Really terrific. Mariel Nanasi is the executive director of New Energy Economy based in New Mexico, which works to transform the energy system and foster a just transition to a renewable future. And Jean Su is the energy justice director and senior attorney at the Center for Biological Diversity based, I believe, in Washington, D.C.
Stacy Mitchell:
Excellent. Welcome, both of you. I’m so glad you could join. Just a reminder to everyone in the audience. We’ll have the second part of the discussion for about 25 minutes, and then all of our panelists are going to come together for a wrap up. I want to turn first, I think, to you, John. I was hoping that you could just zoom out a little bit and talk about how it is that policymaker structure the electric utility sector a century ago. That structure may have made sense at the time. I don’t know. But today, it seems that it’s really at odds with what we want to see. And I want to hear what changed, what’s different now, what changed over time.
Stacy Mitchell:
I think that there are people who may be listening, who are not involved in the electricity sector, who would say, “Well, these are regulated monopolies with public commissions that oversee them. Doesn’t that solve the problem of having a functioning sector? Can you give us a big picture overview?
John Farrell:
Yeah. Well, I’m so grateful that Mariel and Jean will be here to give specific examples of why that regulatory structure is not sufficient in order to oversee these companies. But when we set on this adventure of building an electric grid the idea was, essentially, that in order to build the grid, you didn’t want to build two grids or three grids. It wasn’t really a great idea to have a competitive enterprise in terms of stringing poles and wires to all our homes and businesses. And it was going to be enormously expensive and that you needed a lot of capital to come into the space in order to do that.
John Farrell:
The initial titans of the industry, Samuel Insull, was the right hand man to Thomas Edison, helped to essentially negotiate with state legislatures to say, “Hey, look, if you protect us from competition so that we have easier access to financing, we can then build out the grid less expensively and serve more people more effectively.” The trade off will be, these companies then get their guaranteed profit overseen by the public, these private companies. But in return, they’re going to offer something of high value to the public, which is access to reliable and affordable electricity. And for decades, as long as you are willing to accept the asterisk of the environmental impact that we were ignoring from that model, it worked terrifically. We built out one of the engineering marvels of the 20th century, which is to say we connected most folks to the grid. Thanks to the federal government, in the ’30s, we also connected rural homes and businesses that were left out from that initial wave. And we built ever larger centralized power plants that were lowering the cost of electricity. So decade by decade, you actually were paying less for electricity than you were the decade before.
John Farrell:
That all came to a halt in the 1970s, where essentially we ran into the wall of the economies of scale of power plant construction, that it became actually more expensive to build bigger. There was a breakdown in the model where folks assumed, who have been in the industry for decades, that energy use would just keep growing and they would always have a market to build more power Plants. What we had doing is, in the last 50 years, almost, we’re paddling upstream to get the things that we want, whether it’s energy efficiency or renewable energy, like solar energy, or access to the markets for community solar or other ways of developing energy. All of this is going against the flow of the incentives for the utility companies. Seth and Rick mentioned this in the first panel. Their incentives are to build more infrastructure to serve the electric customers. And the thing is that we don’t need them to build it in the same way that they’ve been doing it, but we haven’t restructured the rules of the market in order to encourage them to do something different. In part, because they oppose us when we try to do that.
John Farrell:
We’re in this situation right now, where we’ve got a hundred years of flow in this river. And every once in a while, we’re trying to paddle to the shore or paddle somewhere different, but there’s just so much momentum behind it, whether it’s the institutional inertia of the utilities themselves, or the legal and political power that they have over the decision making process. And that’s led to what some of these hopeful moments though, in what we’re seeing, whether it’s in Maine or New Mexico and Arizona and other places, of ways that we can fight back against that flow.
Stacy Mitchell:
That’s great. Jean, I was wondering if you could just help us think about what does that actually mean on the… Talk a little bit about some of the examples and ways that you’re seeing utility power play out. What are the problems? What are the things that they’re blocking and doing at the ground level?
Jean Su:
Yeah, absolutely. I think one of the premises of the current power system is what people will call a regulatory compact or compact. What that is, essentially, is that we gave a ton of private companies a guaranteed monopoly over servicing territories. And with that was, as John was saying, democratizing the grid. We didn’t want to build two just overlapping grids. So with that, the compact was, “Hey, you’ve got a guaranteed set of customers. You’ve got a guaranteed revenue. And in exchange for that, we are actually going to govern you and put utility commission to regulate you, essentially” What’s happened is that we now have a pretty broken system in terms of regulation, and that have not been able to combat exactly what John was talking about. We have a system where we have pretty significant regulatory capture, where regulators are either coming from the utilities or being guaranteed jobs after with the utility that they are regulating. And it really becomes a situation where we have the fox guarding the hen house, in a lot of ways.
Jean Su:
The conclusion of all of that and the result is that we don’t have a system that’s fighting for our public interest anymore. We have a system that is actually benefiting private corporate interests or the utilities’ interests. We see this in a bunch of different ways. There are significant examples of energy violence that we see in our system. We have a system that is majority fossil fuel right now. Who suffers the most? The disproportionate amount of communities of color in this country who live disproportionately close within three miles of a fracked gas plant and a coal plant. Those are the people who are suffering from that dirty energy system. We also have energy violence in the form of unaffordability and energy poverty.
Jean Su:
We were able to track this year, the millions of families who were disconnected during COVID for failure to be able to pay. And at the same time, the increasing shareholder profits that all the top corporate utilities actually made this year. They could have taken just less than one percent of the executive compensation and shareholder returns that they got this year for COVID and put it towards saving the over one million households that they cut off, but they didn’t, and regulators didn’t force them to do that. I think the last type of energy violence that we’re seeing is, of course, the violence that comes from climate disasters. People are unable to actually keep on their connection during hurricanes, floods, wildfires, and heat domes right now. Distributed energy is a way that we can actually make energy truly resilient. All of those pieces are coming together to solidify monopoly power in this country. It’s also stifling the absolute clean energy transition that we need and the rooftop and community solar that we need to combat those types of energy violence, and actually work in the public interest.
Stacy Mitchell:
You. We’ve got this situation of ownership, models and market structures that don’t work. And we’ve got a captured regulatory oversight system, captured regulators. You were involved in a case in Arizona that looked to do an in-run around, as I understand it anyway, a relationship between the state’s public utility commission and an investor-owned utility there. You were involved in this case that used antitrust policy to actually go after some of the predatory behavior by that utility that had been supported by the public utility commission. I know there are lots of ins and outs of the case, but could you give us an overview of the approach that you took and we’re trying to do and where the case stands now?
Jean Su:
Yeah. It’s great that people are tuning into ILSR who’s at the forefront of thinking about monopolies and how this works. We are at the vanguard right now of applying antitrust law to the utility sector, which for so long has been immune from antitrust bombs. Essentially, just to back up a second, the whole point of antitrust, the thrust of creating these laws, was to actually protect our democracy. It was to ensure that corporations did not have greater voice over our democracy than everyday citizens. That is the background, and that’s why we need to break up large monopolies because we don’t want our regulators and our politicians to be controlled.
Jean Su:
What we’re doing right now is seeing how that type of law, antitrust law, can challenge pretty egregious behavior from utilities, where they are cutting out their competition. How can we do that? The case in Arizona is super interesting. The Salt River Project is a public utility, but it’s actually been found to operate like an IOU and a corporation. This is very common, so a lot of people on this call will hear this pattern and it’ll ring very true. SRP, Salt River Project saw that there was a threat to their revenue from rooftop solar, because suddenly people are generating our own power and we are biting into their revenue source. So what they did, is that they jacked up the rates for rooftop solar customers by 65%. What that did is it dropped the amount of applications for rooftop solar by 96%. So basically, it gutted rooftop solar in Arizona, in that territory. That is classic anti-competitive behavior under antitrust, because you have a company launching an anti-competitive action and literally obliterating the competition, so we used antitrust law in this case. Very interesting background. But right now, it is currently sitting before the ninth circuit and we are still waiting for a decision. But if the ninth circuit actually finds that, yes, this was antitrust violation, then this can actually open a huge area of case law to use antitrust against utilities and how they are trying to cut out competition.
Stacy Mitchell:
That’s terrific. That’s really exciting to hear. Mariel, I want to turn to you. Part of how we’ve gotten to where we are is we’ve had a ton of utility mergers over the years. We now have these giant utilities that span multiple states, in some cases as we learned earlier, owned by big global conglomerates, real lack of accountability to the places that they serve. Your organization challenged a utility merger late last year, which is pretty extraordinary. I’m wondering if you could tell us a little bit about what happened and what decision that came down. I’m really curious particularly about the basis of saying no to this merger. And also, as I understand it, it’s the same conglomerate that owns our electric utility in Maine, so a small world.
Mariel Nanasi:
Yes. Thank you so much for having me. I’m really honored to be here. Avangrid, Iberdrola, yes, the same company that has high rates and the highest forced outage rates, that means brownouts on blackouts in the country, sought to merge with the Public Service Company of New Mexico, that’s PNM, in an $8 billion merger. But Avangrid and Iberdrola could not overcome their own track record of outages and unreliability, diminished service quality, more than 63 million in penalties and violations in Maine, in New York, in Connecticut, and they failed to abide by our commission’s own rules and laws. They basically came in and said, “We got so much money. Kiss the ring right here. We’re coming in.” And we were like, “Not so fast.” Just one note to activists to create networks and connect to people nationally and internationally because Representative Seth Berry was critical. He actually wrote an affidavit that we ended up using as part of our fight to actually bring in Iberdrola, the parent company. They wanted to just have Avangrid, but we argued, “Well, but Iberdrola is literally pulling the strings.” And so, it was actually the affidavit, the declaration by Representative Berry that helped win the day in court.
Mariel Nanasi:
The hearing examiner and the commission found that the risks and harms significantly weighed any benefits for ratepayers, which was an enormous, enormous victory. The hearing examiner, some people call them an administrative law judge, and the commission found that the merger was not in the public interest, which essentially, just so you know, is a very low bar. But we worked and worked really hard to show that this company in particular was unworthy of coming into New Mexico.
Mariel Nanasi:
I’d like to just tell you one important story that really relates to what Jean had said before. Iberdrola and Avangrid testified that their goal was to you use PNM as their beachhead. It’s a military term to land. And from that landing, attack can be launched. So under cross examination, the Avangrid CEO admitted that their purpose was to consolidate renewable production for their own financial growth. It was not only the extraction of our resources, but literally the export of that money out, not only to wall street, but to Spain. So this is exactly what Jean was talking about. They wanted to consolidate the market, get rid of any competition, and then Jack up rates, and then sell to wherever they wanted. Literally, they said that they chose PNM to get a southwestern platform in the form of a government-protected monopoly for which they could make further acquisitions and sell our renewable energy for their private profit. Of course, all of us are in favor of renewable energy, which will shortly dominate the grid if we’re going to survive, but not for the exploitation of a foreign company with such a bad track record.
Mariel Nanasi:
I’ll just say one last thing. One of the things that they wanted to do is create these “baby affiliates” that then could buy up all the rest outside of PNM’s beachhead. And the commission found that they didn’t have the resources to police, not only Avangrid, PNM, but all those other baby affiliates that they said that they were going to create for the umbrella company, Iberdrola.
Stacy Mitchell:
Well, congratulations on that. That’s really terrific. I’m curious a little bit about the politics around that. I mean, a lot of the utilities, and I think Avangrid did this in this context. They make promises about, “We’re going to build a big solar, renewable power production. We’re going to offer these jobs,” these sorts of claims. I don’t know if this is true in New Mexico, but in some cases, it seems like people get hooked on those ideas and are willing to jettison concerns about ownership, about control, about oversight, all of the democratic qualities that you’re talking about that emerged in the commission’s decision. I’m just curious how that played out with other organizations and groups in New Mexico.
Mariel Nanasi:
Well, Avangrid repeatedly said we were the only one who opposed them. Well, we were. Even press people, they were like, “Mariel, why are you fighting this? You’re going to lose. Money talks.” And I said, “Well, we have to speak the truth and talk about energy democracy, really.” We also elicited a lot of evidence. I’ll just give you one example that made the papers. Three, count them, three PNM executives stood to make $29 million from the merger. You compare that to 480,000 residential New Mexican customers, so current PNM customers. You know what they were going to get? Less than those three people. $1.54 a month. It was that kind of information that we not only elicited, but then we… Of course, one of the other things is to, which Jean is also extremely good and Center for Biological Diversity is, take it out of the little confines of the legal case and to inform and educate people. We were on the front page of the newspapers on a regular basis, sometimes as much as once a week, to talk about these kinds of inequities.
Mariel Nanasi:
The question really that we should be asking is, are we going to… If we’re going to survive, we have to transform the grid and it’s got to be a hundred percent renewable. We’re on the cusp of not only transferring the electric grid for our electricity but, as Representative Berry said, to transform it to meet the transportation needs and the housing sector needs, so we are going to increase renewable usage by a lot. And the question is, are we going to replicate the exact same system of inequity and inequality and of racism, and then literally export the profits to Wall Street at 1%? Or are we going to shift that model? Are we going to have our power and stop the violence?
Mariel Nanasi:
Another point that I made in the hearing, also to Jean Su’s point, was literally the Monday after the hearing was supposed to end, PNM was set to disconnect ratepayers, 21,000 rate payers from electricity. Meanwhile, they’re throwing out millions and billions to the executives and the shareholders. And one of the things, what they said was, “We’ll eliminate about half of the COVID disconnect notices.” And I literally just asked, “Why not all of them? You’re doing an $8 billion merger. Why not just eliminate the COVID disconnects?” And they were just like, “Uh-uh (negative). We can’t do that.” It’s that kind of thing, over and over and over again. That’s the real day-to-day violence. Because when that orange notice comes into your mailbox and you are literally concerned about, “Should I have food on my table or have electricity?” That’s not what we want to do for a just society. I just read that during COVID, child poverty, including food insecurity has gone up. And meanwhile, PNM made $190 million in profit just last year.
Stacy Mitchell:
Wow. Wow. John, I’m going to turn back to you just with a short closing question as we reflect on these really incredible fights and insights that our panelists have brought today. Are there transformative ways we can get out of having constant rear guard fights with utility companies over… In California, there’s this big thing around… They’re really trying to change the rules of net metering in order to stymie distributed solar. How do we think about this big picture, and how do we move in a way that that is more transformative? I mean that not only in the context of how electricity is structured, but how do we think about some of the points that Mariel and Jean have raised around the way in which monopoly utilities take advantage of racism and further racism in order to augment their power.
John Farrell:
Yeah. I’m going to take a stab at an answer to that question. I just want to emphasize for folks. If you like what you’ve heard from Mariel or from Jean or from Seth and Rick, three out of the four have been guests on ILSR podcasts, our Building Local Power or Local Energy Rules podcast, sometimes to talk about the very issues that they were here to join us to talk about today. So if you would like to hear them speak more at greater length, you can do that on our website. We are a nonprofit, as many other groups here. You can donate to help support this great work at archive.ilsr.org/donate, at New Energy Economy, the Center for Biological Diversity, or Our Power Maine. Please check out the work that they’re doing if you support and like what they’re doing. You can do that financially, as well as by joining this podcast and learning more about it.
John Farrell:
To try to tackle that very large question, Stacy, in terms of wrapping up, I think I would just say this. To go back to my river metaphor, we have to change the way that the entire system is flowing. The problem that we have right now, especially with investor-owned utilities, but not solely with them, as we mentioned before, that we can have even examples of public power that are running in a problematic way, is really how do we break down the institutional power that these organizations have and disperse it? Jean, I think, did such a great job of highlighting the importance of antitrust in all of this, that the purpose of that law was to protect our democracy from concentrations of power. That can be private power, as we have with investor-owned utilities. It can also be public power. One way we can do that is to not let one entity own everything. At some places they’ve restructured and already broken apart, like who owns power plants, who owns the distribution system. In some places, like New York, they’re talking about restructuring how companies earn money.
John Farrell:
Rick, I think, mentioned that we have these really high rates of return that are almost guaranteed from monopoly utilities, and we pay them for things we don’t want them to do anymore, like build giant power plants. We need to change that. Hawaii has moved to a system of almost entirely performance-based regulation. It’s very new and we don’t know if it’s going to work very well, but there’s a lot of hope behind that, and at least we’re doing the right thing. And then, there’s what Our Power is trying to do, which is honestly, I think one of the best things, which is to say, “Let’s break up this utility. Let’s create a consumer-owned core of it. And let’s also do that with the idea that we’re going to allow lots of other entities, not just this utility, to make the decisions about how the system runs.” So, like lots of folks building rooftop solar or energy storage, or homes and businesses, community solar, all of the kinds of things that allow people to make decisions independent of the utility that shrinks not only like the market share of that utility within the electricity sector, but then all of the political power that comes with that of having the monopoly, of the relationships with regulators, the virtually unlimited amount of money they can have for the legal fights to promote their own mergers, to reward their executives.
John Farrell:
All of these things come back to this idea that we’ve concentrated the power in this market within these particular companies. We need to attack it directly whether that’s even just rhetorically, like noting that and these fights in California and saying, “Look, the utility wants to quash rooftop solar because it’s a threat to their market share, to how they make money building transmission lines and building substations and transformers.” Those are the things they want to do that they profit from. So of course, they’re opposed to this. Or by bringing to the table real substantive reforms, like in Hawaii, like in this, it’s called a high DER proceeding in California. I don’t want to get into the weeds, but talking about how do we restructure the system to reduce the power of those institutions.
Stacy Mitchell:
That’s great. Let’s bring back Seth and Rick for our final wrap up here. We’ve got just a few minutes left. But I think I want to ask everyone, what really motivates you? What’s one thing that really drives you in this work? What’s the vision and thing that really is why you do this? This part two of the question. If you could say just something about how people who are in the audience, who are listening today, what’s something that they can do to get involved or an initial step that you can offer them? Rick, let’s start with you.
Rick Bennet:
Well, thank you again, Stacy. It’s great to be with you. I think I may have hinted at this in the answer to the very first question. But what motivates me is the need for people to be in control in an increasingly volatile world. We need to create structures where people are actually in control. We can no longer rely on the institutions that historically we’ve turned to, to run things for us. The good news is we don’t need to. We have the tools through all of the craziness of today’s world, involving social media and means of connecting with one another at an individual level. People have shared interests to work across the usual power structures, across the silos and share information, share passions and enthusiasms and get this done. I think we have an opportunity to build a more democratic, small B, future where self-determination is respected, where people are really in charge.
Rick Bennet:
But we’ve also seen the downsides to some of these technologies that are allowing that, so we all have to be vigilant. But that’s really what motivates me. I would say, to your second question, people, just throw yourselves in. Find something worthy and get involved with it. I have to tell you, I’ve learned a lot from Seth Berry. I’ve learned a lot from a lot of other people because I’m newly back to the legislature. The world has changed a lot in the 20 years since I was gone. But information’s very accessible. It’s so easy. In Maine, you raise your hand at the wrong moment, you’re elected to the school board. I just think that it’s a great chance for people just to throw yourselves in. And we certainly would love you to throw yourselves in, even remotely, to the Our Power effort. Ourpowermaine.org is where you can connect. Thanks.
Stacy Mitchell:
That’s great. Seth…
Seth Berry:
Yeah. I feel so many echoes in my head of what Rick just said. I mean, the partnership that this is engendered has been incredibly inspiring, working with Rick, working with Mariel, with John and Stacy. ILSR has been an incredible partner. This is building. It’s become a movement here in Maine, but I really feel that there’s a movement incipient in the US as well. The industry has its eye on us. They’re probably on the line here today. They want to crush it, but I think we can crush it. I think we could do this. I think we have something that the American people are ready for, and that many communities are eager to take on. There are so many ways into this idea. What I love about working in this space is that Our Power is about equity and a just transition. It is about anti-monopoly, yes, and self-reliance. It is about climate, for sure. That’s my number one motivation and entry point for myself. And it’s about democracy, and more democratic economy.
Seth Berry:
Every problem that I go to bed at night worrying about, every problem that… When I think about my children, my two sons and… I used to be a teacher… my former students and their children, the next generation, there’s so much to worry about for them. And when I go to bed at night and worry about them and their future and what that plan is going to look like and what their democracy is going to look like, I find an answer in this effort and in this partnership with all of you. So I hope people will go to ourpowermaine.org. That’s my ask. Stay on for the after party because we look forward to trying to answer all of the incredible questions. So many good comments going into the chat and the Q&A, so please stay on with us if you can.
Stacy Mitchell:
Great. Jean…
Jean Su:
There’s a lot of promise to this after party, so everybody really should stay on. A lot of fight here. Yeah. I began my career through climate, working in different parts of Africa and Asia, and I know we have global folks on the line today, which is amazing, so I take this from a climate standpoint. We really, literally, only have the next eight years to significantly radically change our energy system. When I came to the States and started working here, I think there is such heartbreak in how racist and violent this energy system is. It is a form of all the societal issues that we face here, so the fight for climate justice is the fight for racial justice, for societal justice, for gender justice. That’s what keeps me motivated to do this work. We have to keep going because we have no choice. I think for those who want to get involved, you can actually start right now to figure out your energy system and how to change it. This isn’t about decarbonization. This is about the whole picture, so get on in and do it, whatever angle it is, and run. You have Representative Berry here and Senator Bennett, Run, run and make a change, that you can be the decision maker, instead of all of us trying to get decision makers to do the right thing.
Stacy Mitchell:
I love that. Mariel…
Mariel Nanasi:
Dare to struggle, dare to win. Courage is contagious. Once you start fighting, then people want to be and join. I was texting a Representative Berry, and I would tell him when we got something good that happened. He’s like, “You go.” I mean, I have to just tell you, that’s love. I’ve never met Representative Berry. But what does Cornel West say? Justice is love made public. That’s what we’re after. I just want to say that I got into this because I was thinking… I used to do police misconduct work. Not a light subject. I knew about climate, but I didn’t understand the urgency. This is now 12, 15 years ago. And I thought, how can I look at my kids in their eyes and say, “I didn’t do what I knew how to do”? And so, what I’m asking you all out there who are listening is, I don’t know what your talent is. What are you passionate about, and what can you bring? Are you a pianist? Are you a painter? Are you a great computer graphic artist? Are you a writer? What do know how to do? We need you. We need you. This fight is big enough to include your talents. It’s about getting involved. And it’s about making your family bigger than just your nuclear family. It’s about making your family our movement family to create justice in the world. Thank you so much.
Stacy Mitchell:
I am so energized after hearing all of you. An incredible work. I mean, it’s remarkable what’s going on. I want to thank you, all of our panelists for participating. I want to thank everyone who turned out in the audience. If you want to stay connected to ILSR, I encourage you to sign up for one of our newsletters. I’ll drop that in the chat. As John mentioned, we are a nonprofit organization, so all of this work is made possible through donations. You can follow us on social media, but please do engage if you’d like to be involved, both in our energy work and in the anti-monopoly work we do across different sectors of the economy, and in Building Local Power at the community level. Thank you.
Jess Del Fiacco:
Thank you for tuning in to this episode of the Building Local Power Podcast from the Institute for Local Self-Reliance. You can find links to things we discussed today by going to archive.ilsr.org and clicking on the show page for this episode. That’s archive.ilsr.org. While you’re there, you can sign up from one of our many newsletters and connect with us on social media. We hope you’ll also take the opportunity to help us out with a gift that helps produce this very podcast and supports the research and resources we make available for free on our website. Finally, we ask that let you let us know how we’re doing with a rating or review in Apple Podcasts or wherever you find your podcasts. This show is produced by me, Jess Del Fiacco, and edited by Drew Birschbach. Our theme music is Funk Interlude by Dysfunction_AL. The Institute for Local Self-Alliance, I’m Jess Del Fiacco, and I hope you’ll join us again in two weeks for the next episode of Building Local Power.

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About Building Local Power

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Building Local Power brings you thought-provoking stories and new ideas for breaking the hold of corporate monopolies and expanding the power of communities to chart their own futures. We deliver insights from trailblazing lawmakers, scholars, business leaders, and advocates. Plus, conversations with in-house experts at the Institute for Local Self-Reliance help reveal the patterns and policies that shape our economy and communities. These stories and conversations help map solutions that distribute power to everyday people.