Shedding light on misinformation over municipal utilities
March 31, 2010
MICHAEL WIDMER’S comments (“Easing way for munis may not lead to lower rates,’’ Letters, March 19) on a Department of Energy Resources report about municipal light plants, or munis, repeats misinformation that investor-owned utilities routinely disseminate.
The report of the findings of the commission, on which I served with Widmer, finds that existing munis offer substantially lower rates than investor-owned utilities, but cautions, “A new municipal utility, however, will likely have higher rates than the typical existing municipal utility.’’ The report notes that a location-specific study would have to determine the economics of any new muni.
That’s altogether different from Widmer’s assertion that new munis would be unlikely to charge lower rates than investor-owned utilities.
The report notes that few munis offer rates for low-income customers, but concludes — something Widmer overlooked — that muni rates for all residential customers are lower than the investor-owned utilities’ discounted rates.
Existing munis do not let customers shop for power (do they really need to, since munis charge less?), and do not always fund the same level of energy-efficiency and renewables programs as investor-owned utilities. The legislation to allow new munis would require them to match investor-owned utilities in all these areas.
Finally, Widmer mentions “perils for customers and taxpayers’’ from new munis, ignoring that the legislation requires thorough reviews of the economics of any proposed new muni by the state and the local community.
The Legislature should restore to Massachusetts cities and towns the right to choose how their electricity is delivered, a right denied for about 80 years.
Lexington Electric Utility Committee
Easing way for munis may not lead to lower rates
March 19, 2010
THE GLOBE’S March 9 editorial “State should remove obstacles for towns to provide electricity,’’ heralding the benefits of municipally owned electric utilities, ignores the key conclusions of an independent 2009 commission, on which I served, which examined this issue. The report of the commission, which was chaired by the head of the Department of Energy Resources and mandated by the Legislature, concludes that new municipal light companies are not likely to be able to achieve lower rates than existing investor-owned utilities.
With respect to the difference to rate payers between investor-owned utilities and existing munis noted in the editorial, there are several factors that place investor-owned utilities at a disadvantage. Munis can enter into long-term contracts for energy, but by state law, investor-owned utilities cannot. Investor-owned utilities allow residential and commercial customers to shop for power, including green power, while munis do not.
All of the state’s investor-owned utilities offer low-income discounts for some disadvantaged customers, but only three of the state’s 41 munis do. Investor-owned utilities are required to offer energy-efficiency programs and renewable incentives, while munis participate only to varying degrees. The commission’s report points out that even with these additional costs for investor-owned utilities, some municipal light departments have higher rates.
Finally, the report found that existing munis and investor-owned utilities provide comparable levels of service.
Municipalities are under enormous financial pressures, and a careful reading of the commission’s report illustrates the perils for customers and taxpayers of creating new municipal light companies.
Michael J. Widmer
Massachusetts Taxpayers Foundation Boston