Credit State Sen. Scott Lautenbaugh for his willingness to tackle some big problems — Omaha’s $2 billion, federally mandated sewer upgrade and the city’s pension liabilities.
But the senator’s proposed solution, selling the Metropolitan Utilities District and divvying up the money, is the wrong answer to the right question.
MUD’s ratepayers, the City of Omaha and the metro area are better served if the water and gas utility remains a public entity.
Nebraskans have a long history with public ownership of utilities. Public power has brought the state some of the nation’s lowest-cost electricity. In Omaha, water and natural gas rates enjoy a similar edge.
So a key question must be answered before deciding to divest the public of utility ownership: Would the short-term benefits of any sale outweigh the long-term costs?
Over the years, Nebraskans have heard a number of ideas for how best to spend the proceeds of selling off our public utilities. Like those earlier proposals, any effort to sell MUD faces a steep climb to answer that question convincingly.
In the past, Nebraskans rightly balked at selling utilities to raise money for state government, and the state still managed to muddle through.
Selling MUD, which reports to ratepayers, not stockholders, would create the first privately owned local water system in the state.
Taking that route would jeopardize a key ingredient in the Omaha area’s prosperity mix — low utility rates. Those lower rates are a big advantage in recruiting new businesses — and jobs — to the metro area. The state’s own Department of Economic Development touts the advantages Nebraska has over competitors in natural gas and electricity costs.
The Greater Omaha Chamber of Commerce’s business recruitment publications point to industrial electricity rates 43 percent below the national average and gas rates as much as 20 percent lower than the average.
Here are two more specific examples: Business owners with office space in Omaha pay monthly gas bills of roughly half what their counterparts in Nashville or St. Louis pay, according to a 2013 Utility Bill Comparison study by the Memphis Light, Gas and Water Division. And Omaha-area homeowners pay less than half what similar homeowners pay in Boston or Phoenix.
What’s the biggest difference between the utilities in Nebraska and in those other places?
Who owns them.
So any person who wishes to sell a public utility for any purpose, no matter how well-meaning, owes the utility’s ratepayers a clear-eyed analysis of the long-term costs and benefits.
Ratepayers, who now elect MUD’s directors, would need to understand that the short-term gain of selling to pay for the federally mandated sewer separation improvements would undoubtedly lead to higher gas and water bills over time.
For-profit companies that buy utilities like to make money on their investments, and their shareholders demand it.
But that’s not the only problem.
Lautenbaugh proposes spending the proceeds on sewers, city pensions and technology for the Omaha Public Schools — certainly all worthy targets.
But MUD’s service area covers much more than one city or school district. It delivers natural gas to ratepayers in Omaha, Bennington, Fort Calhoun, Springfield, Yutan and much of Bellevue. It provides water to Omaha, Bellevue, Bennington, Carter Lake, La Vista, Ralston, Waterloo and the Papio-Missouri Natural Resources District, which supplies water to Fort Calhoun.
Wouldn’t those customers want a share of the proceeds?
Selling MUD also would likely kick off a rugby scrum of other local interests with good intentions seeking some of that cash. If OPS gets some money, why not Elkhorn Public Schools and Bennington, Papillion-La Vista, Millard, Bellevue and more?
In other localities that sold public utilities to fund similar public spending, the results haven’t always been positive, as The World-Herald’s Cody Winchester recently reported.
In the end, ratepayers paid more and competition for such large infusions of cash often led to competing interests, political deals and the decreased effectiveness of planned public spending.
In the early 1900s, the Legislature created MUD as a political subdivision of the state to provide water and natural gas to the Omaha area. It was a good idea then; it remains a good idea now.