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 Detroits 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.
"Theyre just postponing doomsday," said Henri Onuigbo about
Detroits lighting department. Onuigbo, the president of the Association of Detroit
Engineers, explains that "the citys lighting system is antiquated, and the
department has too few engineers and repair people to keep it running."
Administrative problems also plague Detroits 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. Whats 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 Poor service with outdated equipment is followed by bureaucratic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. Detroits electric lighting system was originally handled
by a private supplierthe 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
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 cant
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 DELPCs 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 Detroits 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 DELPCs 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,
Pingrees 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." Whats 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
What this shows is that privatization can be either sensible or
foolishdepending on how it is done. Competition is the key, as Mayor Pingree pointed
What this shows is that privatization can be either sensible or foolishdepending
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.
Its time for Mayor Archer to take Mayor Pingrees illuminating advice:
"What we want is plenty of competition." Lets bid out the lighting for
Detroits streets and give the contract to the most efficient provider.