Let There Be Light

Former Detroit Mayor Hazen "Potato" Pingree
Former Detroit Mayor Hazen "Potato" Pingree realized that lighting monopolies can gouge customers. Will today's city officials learn the same lessons?

The public operation of Detroit’s 87,000 streetlights has been a dim experience for many residents. Complaints of poor service abound. In March 1996, for example, a storm caused widespread outages that lasted for several weeks. The Detroit Public Lighting Department had to go to a private firm, Detroit Edison, to get the lights turned on.

"They’re just postponing doomsday," said Henri Onuigbo about Detroit’s lighting department. Onuigbo, the president of the Association of Detroit Engineers, explains that "the city’s lighting system is antiquated, and the department has too few engineers and repair people to keep it running."

Administrative problems also plague Detroit’s Public Lighting Department. Nearly $6 million in uncollected light bills keep the books unbalanced. Also painful was a bureaucratic snafu: The Detroit Medical Center was undercharged by about $100,000 each year for eleven years. What’s worse, sometimes valuable equipment is here today, gone tomorrow. No one in inventory seems to know where it went.

All of these inefficiencies have made it hard to compute what Detroit actually pays to light its streets. Even the most optimistic figures, however, make public lighting more than 50% more costly per megawatt hour of electricity than what Detroit Edison charges to light homes and businesses in Detroit.

Many Detroiters are clamoring for cheaper and better service from private companies. Last year, in fact, The Detroit News spoke for many when it headlined an editorial, "Public Lighting: Pull the Plug."

The sad story of public lighting in Detroit is repeated again and again with so many municipal services. Poor service with outdated equipment is followed by bureaucratic bungling, all of which hikes costs for local taxpayers.

There is an irony here. Detroit’s electric lighting system was originally handled by a private supplier—the change to municipal ownership was made in the 1890s because of a lack of competition. By 1891 only one private firm, the Detroit Electric Light and Power Company (DELPC), made a bid for a lighting contract in Detroit. The result was high prices.

Hazen "Potato" Pingree, the mayor of Detroit in the 1890s, recognized that competition was needed for privatization to work well.

Hazen "Potato" Pingree, the mayor of Detroit in the 1890s, recognized that competition was needed for privatization to work well. "What we want is plenty of competition," Pingree said, because "competition brings low rates." But as Councilman James Vernor observed, "In street lighting with arc lamps we can’t get competition."

Pingree began an investigation. He collected data on the cost of lighting in 88 U. S. cities and concluded that Detroit, with its absence of competition, was paying $33 more for each street lamp per year than was the average in the other cities he surveyed.

At this point, Pingree threatened DELPC’s monopoly by looking into municipal ownership of lighting for Detroit. In 1893, Pingree sponsored a local referendum on public lighting and asked the voters of Detroit to advise him on the issue. When more than 85% of the ballots were cast for public lighting, the executives at DELPC were on the spot.

William H. Fitzgerald, the general manager at DELPC, made a revealing comment. He said, "If the city were to do its own lighting at about half what the other companies bid, it would establish a bad precedent or example, and other cities . . . would be apt to follow Detroit’s example." Rather than lower the rates, however, DELPC still tried to press its monopoly advantage.

Councilman James Vernor urged the city to go outside and solicit bids from other private utilities. If Detroit had done this, other competitors might have submitted lower bids and that would have solved the problem. Pingree by this time, however, was disgusted with all private utility companies; he urged Detroit to build its own municipal electric plant and cancel DELPC’s contract. Mayor Pingree used the results of the referendum to club the other councilmen into supporting public lighting for Detroit. In 1894, the city council voted for public lighting and the next year the plant was up and running.

Was Pingree vindicated? He was during his years in office. According to Melvin Holli, Pingree’s biographer, "The cost of street lighting in Detroit declined from $132 per lamp per year in 1894 under private contract to $83 per lamp under municipal ownership in 1898 and to $63 in 1902." What’s more, the quality of service also improved. Even Alex Dow, later a president of Detroit Edison, said, "It was the right thing to establish a municipal lighting plant in Detroit, because the prices that were being charged here were exorbitant."

What a paradox we have! In the 1990s, public lighting in Detroit is woefully inefficient; but in the 1890s, it was much cheaper and gave better service than the local private utility.

What this shows is that privatization can be either sensible or foolish—depending on how it is done. Competition is the key, as Mayor Pingree pointed out.

What this shows is that privatization can be either sensible or foolish—depending on how it is done. Competition is the key, as Mayor Pingree pointed out. When DELPC had a monopoly, public lighting for Detroit was seen as a viable alternative. One hundred years later, however, the Detroit Public Lighting Department seems to think it has the same monopoly stranglehold on street lighting in the city.

It’s time for Mayor Archer to take Mayor Pingree’s illuminating advice: "What we want is plenty of competition." Let’s bid out the lighting for Detroit’s streets and give the contract to the most efficient provider.