September 25, 2005
REPORTS THAT rising fuel prices could drive up the price of electricity for many homeowners by 20 percent are helping the cause of local officials who want the option of creating their own municipal electric utilities. Lower costs and better service through competition among suppliers -- the promise of the late 1990s deregulation movement -- never materialized for the long term. Residents are not only angry; they are ready to do something about it.
More than 20 town officials and homeowners testified Tuesday at a State House hearing in favor of a bill that would smooth the way for communities to buy local assets of major utility companies, including poles, wires, and substations, at fair value. The bill, sponsored by Representative Jay Kaufman of Lexington, would strengthen language in state law that allows for such transactions. In practice, current law makes it easy for investor-owned utilities, such as NStar, to reject reasonable offers. As proof, supporters of the bill say that no municipality has created an electric utility since 1926.
In price and service, municipal electric companies -- so-called munis -- routinely outperform the energy behemoths. Residential muni customers in Massachusetts pay 24 percent less than NStar clients, according to Patrick Mehr, a member of Lexington's Electric Utility Committee. While munis and investor-owned utilities pay roughly the same for power, the munis are often better at controlling distribution costs. Officials in Newton, Lexington, Plymouth, and dozens of other communities want to see whether it makes fiscal sense for them to create utilities similar to the 41 operating statewide, including those in Concord, Braintree, Peabody, and Taunton.
Roughly 2,000 munis operate nationwide. But new opportunities for Massachusetts cities and towns won't exist unless legislators set unambiguous rules for purchase of utility assets.
None of the bill's supporters anticipates a sudden increase in municipal electric companies. It's a costly and complicated task to form a muni. Many town officials are supporting the bill simply to put utilities on notice that local governments -- large consumers of electricity -- are not captive customers. But some towns, such as Lexington, appear ready to cut their ties to NStar. In addition to expected savings for both the town and its residents, Lexington officials see opportunities to place wires underground in the historic center, retire an underutilized substation, and increase usage of green energy.
Municipal power companies can and do outperform the big power brokers. They aren't for everyone, but local communities should be allowed to seek the best deal for their customers -- the taxpayers.