The Benefits of a Municipally Owned Utility
EXECUTIVE SUMMARY
The Municipal Power Advantage® (MPA) report outlines the many benefits of operating a municipally owned electric utility. These benefits go well beyond keeping the lights on — some deliver measurable financial impacts, while others provide community value that is harder to quantify but equally important.
For the City of Luverne (the City), its electric utility is more than just an energy provider – it’s a vital community asset. The public power business model empowers the City to provide numerous benefits to the customers it serves, including:
AFFORDABILITY: City customers pay electric rates up to 8% lower than the average rates of other regional rural electric cooperatives (RECs) and investor-owned utilities (IOUs), depending on their customer class. This cost advantage is due to lower wholesale power costs, tax-exempt financing and the utility’s not-for-profit status, which reinvests in the local electric system and community.
From 2021-2024, franchise fees and transfer payments from the electric utility totaled over $5 million (an average of 15.5% of annual electric revenues). These payments to various city funds help pay for expenses that would otherwise rely on sales tax, property tax and other fees.
RELIABILITY: The City consistently provides a high level of reliability to its customers. Based on nationally recognized measurements and data, city electric customers can expect power over 99.997% of the time.
LOCAL CONTROL AND SERVICE: The city electric utility is communityowned — the customers are its owners — and governed by the city council. Additionally, local citizens are employed to work at the utility and operate the system, which means city staff serve customers who are also family, friends and neighbors.
ECONOMIC AND COMMUNITY IMPACT: The City offers discounted rates for qualifying loads, provides energy-efficiency rebates and extends utility services to attract and retain businesses. The electric utility also makes interdepartmental loans available for large projects and helps fund local community and economic development initiatives. In addition, dollars from utility staff salaries and spending at local businesses are recirculated multiple times throughout Luverne, further contributing to a healthy local economy.
The utility is part of a nationwide mutual-aid network of public power communities. If a major storm causes widespread power outages, these communities work together to restore power quickly and efficiently.
1867
CITY FOUNDED
As a public power utility, the City of Luverne supplies electricity to residents and businesses in Luverne. The utility prides itself on providing reliable electric service with affordable rates, local control and exceptional customer service. The City also provides water, wastewater, garbage and recycling to homes and businesses in the community.
Luverne is one of approximately 2,000 community-owned electric utilities in the U.S. that serves more than 55 million Americans.
UTILITY ESTABLISHED 1892 ELECTRIC CUSTOMERS
4,946
LUVERNE’S POPULATION
2,590
73. 8 M $ 8. 8 M ELECTRIC REVENUE
kWH SOLD IN 2024
1 in
7
CUSTOMERS IN THE U.S. ARE SERVED BY PUBLIC POWER
In a community served by a municipal utility, customers are the owners and have a voice in how the utility is operated. The electric department is governed by the city council, which is comprised of five officials (including the mayor) elected to four-year terms.
Acting together, the council enacts policy and governs matters relating to the City and its departments. Each council member sits on one or more of the city’s advisory boards and committees.
LUVERNE’S POWER SUPPLY
Luverne is committed to using renewable and carbon-free resources while maintaining reliable and cost-effective electricity for the community. The utility’s power supply is provided by Western Area Power Administration (WAPA) and Missouri River Energy Services (MRES). The City has a power supply contract with WAPA through 2050. The utility also has a supplemental power supply contract with MRES that is secured through 2056. WAPA supplied Luverne with 62% of the utility’s energy requirements in 2024.
A DIVERSE POWER SUPPLY
The electricity the City purchases from WAPA is clean, renewable, reliable hydropower from dams on the Missouri River. The supplemental power supplied by MRES helps reduce risk through diversity in fuel sources and geographic locations. The power provided by MRES also focuses on environmental stewardship by developing renewable and carbon-free resources.
* This chart does not represent environmental attributes associated with the power supply mix, and no environmental claim is made by this chart.
LUVERNE′S POWER SUPPLY
The City actively participates in the Bright Energy Solutions® (BES) energyefficiency program offered by MRES, which offers cash rebates for residential and commercial customers when they purchase new energy-efficient equipment. When this equipment is installed, it helps the City reduce the wholesale demand and energy purchases from MRES, saving customers money.
From 2008 through 2024, Luverne saved nearly 12 million kWh, including 3.2% distribution line losses, and over 2,100 kilowatts (kW) in cumulative onpeak demand savings.
Based on the Environmental Protection Agency’s greenhouse gas calculator, this is the equivalent of the electricity used in about 1,600 homes per year.
LUVERNE CUSTOMERS RECEIVED ABOUT $ 730,00 0 THROUGH REBATES OFFERED BY BES.
*2008 -2024
AFFORDABILITY
WHOLESALE POWER SAVINGS
Luverne pays lower wholesale power supply and transmission costs compared to the average price per kilowatt-hour (kWh) of other regional wholesale suppliers.
As shown below, the blended power supply and transmission cost for the City in 2024 was 4.8 cents per kWh, represented by the red bar. The average wholesale composite rate of 20 area power suppliers was 7.6 cents per kWh (orange bar), about 59% higher than the City, or a difference of 2.8 cents per kWh.
WHOLESALE POWER SAVINGS
The City purchased more than 77 million kWh from WAPA and MRES in 2024, and the utility saved over $2.1 million in wholesale power costs compared to the area’s average wholesale cost. This cost savings reflects the WAPA allocation and purchases from MRES, calculated by multiplying the total purchased kWh (77,269,436) by the savings rate of 2.8 cents per kWh.
Because the City is a not-for-profit utility, these savings stay in the community to fund important community projects and initiatives.
ADDITIONAL ONE-TIME BENEFITS
In 2020, the MRES Board of Directors (Board) approved a one-time refund for 10% of its members’ power supply bills from August 2019 to July 2020. Luverne received about $145,000 from the refund. Additionally, MRES secured a settlement from the Federal Energy Regulatory Commission, which gave the City nearly $327,000 as part of a transmission refund. The combined refunds of over $472,000 benefited all customers in the community.
CUSTOMER RATES
A residential customer using an average of 900 kWh per month will spend an estimated $130 monthly on their electric bill, which is comparable to regional rural electric cooperative (REC) and investor-owned utility (IOU) customers. Commercial and industrial customers will spend about 8% less than similar customers served by an REC or IOU.
TRANSFER TO THE CITY’S GENERAL FUND
Luverne’s electric department paid franchise fees and made transfer payments to multiple city funds, totaling about $1.25 million each year from 2021 to 2024. These average transfers represent about 16% of the annual electric operating revenue each year.
The cost of replacing all or a portion of the transfers would likely result in higher sales and property taxes collected by the City, or an increase in service fees.
CITY ELECTRIC FRANCHISE FEES AND TRANSFERS TO THE CITY AS A PERCENTAGE OF REVENUE
ACCESS TO TAX-EXEMPT FINANCING
The City can access tax-exempt financing, which typically carries lower interest rates, which, in turn, leads to reduced borrowing costs. Utilities often issue tax-exempt bonds to finance large infrastructure or generation projects that improve local reliability, safety and other community benefits.
RELIABILITY
Utility customers depend on reliability, and the City has a strong record of maintaining an electric system that operates continuously and efficiently. Based on nationally recognized data, Luverne customers can expect power 99.997% of the time. The average amount of time that electric customers were without power from 2021 to 2024 is three minutes per year (excluding major events).
Based on reliability data collected from 2019-2023, the American Public Power Association awarded the City of Luverne the Certificate of Excellence in Reliability in 2024.
AVERAGE OUTAGE TIME FOR ELECTRICITY CUSTOMERS PER YEAR*
*WITHOUT MAJOR EVENTS 2021-2023
Data sources:
https://reliability.publicpower.org/ and https://www.eia.gov/electricity/data/eia861/
EFFICIENT OPERATIONS AND MUTUAL AID
City crews maintain the distribution system to improve efficiency, enhance safety and increase the lifespan of equipment. Some of the ways Luverne achieves high reliability are:
u Converting powerlines from overhead to underground
u Testing and monitoring of equipment
u Planning and budgeting for system improvements
In addition, the City invests in advanced technology solutions that offer benefits to both utilities and customers. These customizable programs help utilities reduce risk, increase security and protect revenue in the rapidly changing electric industry. Programs hosted and supported by MRES include:
u Advanced Metering Infrastructure (AMI) Program
- Greater meter reading accuracy and efficiency
- Faster outage notification and restoration times
- Advanced power quality monitoring
u Coordinated Demand Response (CDR) Program
- Reduced demand charges, which keeps customer rates low
- Load control is a cost-effective alternative to building new generation resources
LUVERNE CUSTOMERS
ECONOMIC AND COMMUNITY IMPACT
ECONOMIC IMPACT
The City welcomes new customers to the community and supports existing customers to grow or expand their businesses. Luverne also works hard to contribute to vital community amenities and services that make it a great place to live or own a business.
Local utility ownership means that staff compensation supports the City’s economy by driving local spending and investment. In addition, the City purchases supplies and equipment and uses community service providers for essential business operations and vehicle maintenance. This local spending is recirculated multiple times throughout the community and contributes to its vibrant economy.
The utility’s economic development efforts include:
u Transfers to various city funds including the Luverne Economic Development Authority that support:
- Historic Façade Improvement Program offering low-interest loans and grants up to $28,000
- Revolving Loan Fund Gap Loan up to $25,000
In the unlikely event of an outage, Luverne is prepared to communicate with its customers through:
- Energy-efficient loans up to $5,000 at 0% financing
- Residential Lot Incentive Program offering $2500 credit per person on Manfred Heights addition
- Website Development Program providing up to $750 to businesses for website development
- Creative Sign Design Program to help businesses design a new or improved logo and/or signage at no cost
- Demolition Grant Program providing residential and commercial grants for demolition
- Discounted industrial park land
u Participates in the MRES Economic Development Rate Discount Program
u Provides energy-efficiency rebates for homes and businesses
u Supports tax-increment financing and tax abatement
u Helped fund planning and development of Kids Rock! Child Care Center
u Provided a low interest loan to developer to facilitate construction of 54 unit market-rate workforce housing
The City is actively involved in the community, sponsoring local events, programs and projects that make a positive impact and showcase the value provided through owning a municipal utility.
Here’s how the City and the utility department have engaged with the community in recent years:
u The City and the utility department funded and continue to maintain the trailhead building, bike-fixing station and trail lighting to support the bike paths and trails, including the Luverne Loop, Ashby Trail and Blue Mounds Trail
u The Economic Development Authority sponsored Tour de Loop bicycling event on the Luverne Loop
u Chamber of Commerce member and partner - $50,000 annually
u Rock County Historical Society sponsor with an annual contribution of $25,000
u Southwest Initiatives Foundation supporter with $5,000 annual contribution
u Luverne Initiatives for Tomorrow sponsor with an annual contribution of $7,000
u Ag/Farmer Appreciation Day sponsor
u Community Education Summer Recreation program support - $8,000 annually
u Partnered with MRES since 2018 to provide electric education kits and curriculum to 524 fifth grade students in Luverne through the Smart Energy Squad® program
u Option for customers to round up utility bills and proceeds go to Luverne Area Community Foundation
u City-owned Palace Theater building and maintenance and annual contribution of $48,000 to Blue Mound Area Theater
u City-owned Blue Mound Ice Arena and maintenance and annual contribution of $22,000 for winter recreation funding
u City-owned and -operated Luverne Aquatics & Fitness
u Electric and public works departments decorate the community for Light the Night winter display
u Electric, public works and water/wastewater departments educate children yearly about equipment during Touch-a-Truck Nite
u Electric, public works and water/wastewater departments assist with annual spring cleanup
u City owns and maintains Redbird Field, home of the Redbirds amateur baseball team, and covers lighting, watering and other costs
u Electric department staff hang and maintain city banners on Highway 75 and high school graduate and veteran banners on Main Street
u Community co-sponsored events/projects with electric provider MRES, including: Trunk n’ Treat event staffed by electric department and office staff — including bucket truck demonstration and candy giveaway; Rock County Fair sponsor and donkey-racing participation; Blue Mound Ice Arena support through Zamboni advertising
LOCAL CONTROL AND SERVICE
As a public power electric utility, the City is committed to serving the local community. When citizens have concerns, they can communicate directly with city council members or city staff who live in the community and have Luverne’s best interests in mind. Citizens are also welcomed and encouraged to attend public meetings, and the City offers local customer service with a payment office in Luverne.
The utility employs local people who know and listen to the customers. They take pride in their work and know the customers as family, friends and neighbors.
EFFICIENT OPERATIONS AND MUTUAL AID
The City electric department and operations are located in the heart of the community. The staff are familiar with the utility’s service territory and can quickly identify and correct problems. Crews can arrive at the outage site faster because they do not have to drive long distances to start restoring power.
MUTUAL AID
More than 1,100 utilities, including the City, are linked through a national mutual-aid agreement. Mutual aid means utilities help each other in the event of a major storm or disaster. Utilities offering mutual aid may be reimbursed through the Federal Emergency Management Agency, or FEMA. Knowing that the City has access to a network of aid in the event of a major incident is one more benefit to the community.
Luverne assisted Rock Rapids, Iowa, after flooding, and helped to bring electricity to the underserved through the Light Up Navajo project along the Arizona-New Mexico border.
PARTNERING WITH MISSOURI RIVER ENERGY SERVICES
BUILDING SOMETHING GOOD TOGETHER
Along with 60 other public power utilities, Luverne can reap the benefits of being an MRES member. This includes a more diverse power supply, transmission planning and many other energy-related services.
Shared costs and mutual support make the effort more manageable and cost-effective for all MRES members. Other MRES member benefits include:
u Economies of scale
u Aligned values and viewpoints to meet future challenges together
u Mutually beneficial programs and opt-in services
u Reduced risks
Key services offered by MRES include:
u Power supply and transmission planning
u State and federal legislative advocacy and regulatory compliance
u Communications and marketing
u Customer information/billing system (CIS) support
u Energy-efficiency and electrification programs
u Strategic planning
u Leadership and supervisor development
u Load control and metering services support
u Rate studies
u Scholarships and school education programs
u Community event sponsorships
u Cybersecurity assessments
u Education and training
u Proactive maintenance services
u Workforce development and succession planning
NORTH DAKOTA
CONCLUSION
This report reinforces the dependability of the local electric system and outlines the value of the financial and community benefits provided by the utility. As part of a public power community, Luverne’s electric customers can count on:
u Reliable electric service
u A diverse power supply portfolio
u Affordable rates
u Governance that includes elected local citizens who are also customers
u Local decisions that reflect community values
u Financial contributions and in-kind benefits that support the City and its residents
u Economic development support
u Quick emergency response because crews live in the Luverne area
u Municipal utilities working together for shared success
From providing affordable, reliable power to investing in the community in measurable ways, the City’s electric utility plays a valuable role in making Luverne a great place to live and work.
