Editing Municipalization (section)

==Cost-benefit analysis==

===Political/transaction costs===
The costs of municipalization tend to both front loaded and high. The largest costs come from the process of passing a ballot measure and acquiring the utility company. Although these many seem simple at face value these steps are often extremely costly and difficult because of the financial and political power that incumbent utilities possess. Still it is much more cost effective to purchase existing infrastructure in fact all processes of municipalization since the 1980s have purchased the incumbent utility assets.<ref name=":0" /> And the cost to the acquisitions has not been cheap, "most public power takeovers are in the vicinity of 140% of book value."<ref name=":0" /> Once the utilities have been acquired, local governments face the steep costs of financing the transition and developing the expertise to run a comprehensive system of electricity distribution as well as, in some cases, generation and transmission.<ref name=":1" /> The transaction costs are high, because cities must borrow to pay the IOUs for the power lines, they must develop the expertise and ability to manage a LTS, and they often face years of battles in courts and in elections due to challenges from the IOU.<ref name=":2" /> A study done by the Bay Area Economic Forum found that the key cost components that determine whether a new MU's rates will be higher or lower than the incumbent IOU's rates are: 1) "the combination of the income tax exemption and debt-only capital structure, both of which lower MU rates relative to IOU rates;"<ref name=":3" /> 2) "the premium over book paid for the distribution assets, which will increase MU rates relative to IOU rates;"<ref name=":3" /> and 3) "the MU's cost of generating or purchasing power, which is a wild card that could increase or decrease relative MU/IOU rates."<ref name=":3" />

===Potential benefits===
There are, however, benefits to this process as discussed in the motivation section above. Municipal bonds "typically have lower interest rates than investor‐owned utility bonds, resulting in lower costs."<ref name=":0" /> Municipal utilities also do not pay dividends to investors which can help reduce costs. Additionally, "municipal utilities are exempt from federal taxes."<ref name=":0" /> There is also potential for Economic development benefits to occur when municipalized utilities "promote economic development in their community by offering special rates or discounted connection fees for large customers or new businesses."<ref name=":0" /> There are also flexibility options in complementary policies such as offer" rebates, feed-in tariffs, and other programs to support increased" distributed solar energy programs.<ref name=":2" /> Since "Electricity rates not only recover costs, but also provide customers with price signals that influence how customers use electricity and whether to make investments in distributed energy resources, electric vehicles, or other technologies,"<ref name=":0" /> there are potential sustainability benefits to having increased control over electricity pricing. One example of such pricing is the introduction of time varying rates which are designed to reduce peak demand they are a type of demand response policy. Time‐varying rates can have considerable impact by "encouraging many customers to make small adjustments to the timing of their energy consumption, resulting in a flatter load curve for the entire system."<ref name=":0" />

===Potential downfalls===
According to a report on municipalization prepared for the District of Columbia:{{sfnp|Vitolo et al.|2017|p=6}}<blockquote>On the other hand, municipal utilities face challenges that can result in higher costs. The acquisition cost for the municipalized infrastructure was in some cases significantly higher than what was being recovered by the IOU, putting immediate and long‐lasting upward pressure on rates. Operationally, IOUs often have economies of scale that can lead to lower legal, management, and purchasing costs per unit of energy. Municipal utilities are not typically monitored closely by a public service commission, and inadequate auditing can allow poor utility practices to continue unchecked. Finally, the incumbent IOUs had a single, focused objective: safe, reliable power at least cost. Municipal utilities, on the other hand, also focused on the pursuit of other policy goals, which can result in higher electricity costs.</blockquote>