Town ponders ownership of power system
Selectmen eye savings for residents
By Robert Knox, Globe Correspondent, 2/26/2004
The average Plymouth household's electricity bill is $391 more a year than a similar user in Norwood. The difference is $291 in Braintree, $256 in Mansfield, and $224 in Hull, according to Selectman David Rushforth.
The reason for the lower costs in these towns, Rushforth said, is their municipally owned electric distribution companies. At his urging, the Board of Selectmen has agreed to appoint a committee to consider creating a "muni" in Plymouth.
Plymouth residents, like householders in most communities, receive power from private corporations known as investor-owned utilities. NStar, which provides electric service to Plymouth, charges $72.21 for 500 kilowatt hours, Rushforth said. A comparison of the rates charged by 15 municipal power companies in Eastern Massachusetts over a 10-year period, made by the Lexington Electric Utility Ad-hoc Committee, found their residential customers paying an average of 24 percent less than NStar customers. Commercial customers paid an average of 10 percent less, the committee found.
With local taxes and other expenses rising, selectmen hope a town-owned power distribution company would benefit Plymouth residents.
Paul Chernick, chairman of the Lexington Electric Utility Ad-hoc Committee, said municipal power companies not only charge less but provide better service. "There may be a natural size for a distribution utility," he said. "The manager of the system knows every circuit, many of the poles, lots of the customers. He knows what linemen have been doing day by day." In an investor-owned utility, he said, several layers of management may keep information from the lineman.
Municipal utilities own poles, wires, transformers, and substations, and they perform the functions of an electric power company by providing power, maintenance, and billing. They buy power from the same sources used by investor-owned companies. Some are run by boards of selectmen acting as commissioners. Others have separately elected boards.
In addition to eliminating the need for profits, municipal companies save by borrowing more cheaply through tax-free municipal bonds and avoiding federal taxes. Chernick said the companies also put some of their revenues back into the town, make short-term loans to the town, and share equipment with the local department of public works. According to the Lexington committee's study, there are 41 municipal electric companies in Massachusetts. "The towns are happy to have them," Chernick said.
While towns like Plymouth and Lexington have formed committees to examine the possibility of setting up municipal utilities, no new local companies have been formed since 1926. The reason, according to supporters, is a vaguely written state law, Chapter 164, covering how communities may acquire a distribution plant from a private utility. A coalition of cities and towns, known as the Massachusetts Alliance for Municipal Electric Choice, is supporting a bill, H1468, that would explicitly require a utility to sell its assets to a municipality once a fair value has been established for the existing distribution plant.
State Representative Thomas O'Brien, a Kingston Democrat and one of the bill's cosponsors, said passage would bring an element of competition promised by the energy deregulation act of 1998.
"If you allow the municipalities to get into the act, then we see a whole new change," he said, and competition "would actually do what the deregulation bill was supposed to do."
Middleborough, one of the towns O'Brien represents, has a municipal utility, the Middleboro Gas & Electric Department. "I have seen [municipal companies] in operation," he said. "I know they are very successful. They provide electricity at more reasonable rates than some of the large corporations and are answerable to the local community."
Investor-owned utilities have opposed the proposed legislation, saying communities can find better ways to save money.
"Everyone favors lower rates," said NStar spokesman Mike Durand. "It's our experience that looking at something like aggregation in the current world we live in is a more effective approach than government taking over an entire electrical system and hiring staff to maintain it." Aggregation involves all or most of the customers in a community forming a group to negotiate a lower price for electricity from a power generator.
According to Rushforth, response to the announcement of the study committee has been so strong, that selectmen have decided to expand its membership from five to seven. Interested persons should call 508-830-4132.