Here is the link to one of a bunch of articles I've written with background & supporting info.

http://www.recycled-energy.com/documents/articles/sc_tran ...

See Figure 1 for the whole efficiency history.

1910 is simply when the industry peaked, but even Thomas Edison's first power plant was more efficient than the current grid (50% vs. 33%).  Put another way, the industry has NEVER been less efficient than it is today, which is really fairly remarkable (and vastly under-reported).

The difference is one of thermodynamics, economics and system design.  Thermodynamically, you can't make power without also making heat.  Economically, if your goal is to make as much money as possible with the minimum cost (not the way the electric sector works, but the way that functioning markets work), you recover that heat and sell it.  Which brings us to system design.  Before we regulated the electric sector, industry entrepreneurs sought to maximize their revenue per dollar of cost, and sited plants next to thermal loads where the heat could be recovered and sold.  Once we went to a cost-plus regulatory model, utilities just became electric companies and moved their generators far away from thermal loads (building them much bigger in the process).  

If this sounds confusing, think of it as a dairy, where whole milk is analagous to fuel.  Would you rather sell cream, skim milk or a whole slate of products?  Economics says you ought to sell the whole shebang.  Our electric industry right now just sells the cream and pours the rest down the drain (or into the atmosphere, as the case may be).  Meanwhile, lots of other parts of the economy would like to have skim milk (heat), and therefore burn more fuel to make the industry the electrics just finished throwing away.  

Your question on municipalities is interesting, but for different reasons.  The history of electric regulation has almost always been jurisdictionally confusing, and a case can be made that electric utilities outgrew municipalities in part to get away from municipal regulators.  A case can certainly be made for jurisdictional consistency, but that's more appropriate at the federal level (since electrons don't know where state and municipal boundaries lie). That said, there is a really interesting question with relate to whether there is any public good created by a for-profit monopoly, and a strong case can be made for utilities being forced either to embrace competition (and be subject to anti-trust enforcement) or be civil servants (and get rid of their profit drag on the public good).  But that is a post for another time...

Jon, you say "I have always felt that municipalities should always own the electric utilities." Why?

Long ago (during the mid-1970s) I worked for a municipal power company in Florida. Eventually put in charge of environmental-monitoring and reporting, I attended state-wide meetings with counterparts from other munis and from the private utilities. While the private companies were active and effective in lobbying the State Capital to water down environmental regulations that they did not like, once the regulations were the law of the land they tended to abide by them. I can't say the same for all the munis.

Also, government environmental inspectors pursued the privates much more assiduously, and seemed almost reluctant to look too closely at the performance of the munis.

The managers of the city for which I worked were always looking for ways to cut corners. So when my boss once suggested we hire somebody whose whole job would be to reduce our fuel costs (both through shrewd purchasing and improving efficiency), they said "Why? With the fuel-adjustment clause, we can pass on the cost to our rate-payers." In short, they refused.

The experience left me less than impressed with munis. Give me the regulated private-industry model over the government-owned one any day. (And then there is the federal-government owned Tennessee Valley Authority ... )

I think these issues are critical because the grid is going to become more and more important, and will be at least as important as the wind or solar that I believe we will eventually have to use to replace fuels.  The efficiency problem I find interesting -- and this too might have to wait for a post -- because a dear friend of mine, the late Professor Seymour Melman, for decades used the cost of electricity as a proxy for national productivity.  If memory serves me, the cost went down -- just like computers -- for something like a century, and then leveled off, but I can't remember when.

Also, the muni question is interesting from a more general point of view as a possible important part of economic democracy, something I (and Melman) have thought (and he wrote about in a book "After Capitalism, you can also see his site) about quite a bit (the other main part of economic  democracy being worker ownership and control, but that too is another post).

Couple interesting points there.

1) You are absolutely right about electric trends.  Someday, I will figure out how to hyperlink in these blogs, but until then you will have to suffer through my lengthy links.  Check out a recent presentation I did:

http://www.recycled-energy.com/pubs_sean_casten.html

Click on the 2nd presentation about the "Goldilocks opportunity", and go to slide 7 to see the long term  electric price trends.  The reason for the inversion is deeply structural, and will keep going up for the foreseeable future due to a combination of stricter environmental rules for coal plants, fundamental increases in gas plants, and a shortage of new generation/transmission.  

2) A really interesting link between energy costs and economic growth is the work of Bob Ayres, a PhD physicist and economist at INSEAD.  Google him for full links, but the simplified version of his career worth of work is that the single best long-term predictor of GDP growth is declining real prices of delivered exergy.  No typo there, but if you're not a thermodynamics wonk, you can think of that as useful work.  (The price of light in your home, vs. the price of coal at the power plant).  His work is compelling, and shows among other things that the recent inversion in energy costs may be suggestive of long-term structural disruptions in the economy.  If he's right, efficiency isn't only important from a pocketbook/environment perspective, but may be the only way to ensure future economic growth.  Chew on that one for a while.

Our firms take on INSEAD here, but worth going to the source if you're interested in reading more.

http://www.recycled-energy.com/pubs_tom_casten.html

(Go to third link to see paper co-authored with Ayres)