I'll just post my experience with this style of moderation: The Marvel Comics forums.
It didn't work too well having specific members of the community given moderation powers. There was too much abuse, and way too much bias.
For example you couldn't make a joke about The Avengers without one very diehard Avengers fan who was a moderator through their program taking it way out of context and then taking action against you.
That was just one example. You mix in Sider-man fans, and various X-Men fans, and it was just an overall horrible forum experience due to the fans themselves, along with all of their biases, coming together and not even agreeing on any form of consistent moderation.
The community/customers already have their own agenda and biases. So making them moderator is already doing it from a negative.
But hey, whatever you all think will work. I've never seen that type of program work. Marvel just happens to be the most egregious example I've experienced.
If a Community Moderator is found to not be moderating the forums fairly, and impartially, we will remove them from their position. Simple.
I wish it were that simple. But the problem is ... this type of abuse does happen in these programs. And the overall impact of such negative behavior is huge. Recovering from that kind of damage is never simple.