West Note: bold by MAMEC
Power to the people
Because of the state law deregulating the power industry, communities with municipal electric companies offering lower utility bills -- for now
By Matt Viser, Globe Staff | October 13, 2005
The electric bill for William and Kay Chirolas's single-family home in Newton was $88 last month. If their Victorian house could be moved just 100 feet to the south -- across the Wellesley line -- they would pay half as much.
Perhaps they just need a few extension cords.
The Chirolases get their power from NStar. But across the Charles River, the Wellesley Municipal Light Plant supplies the electricity.
''I would prefer that we were on the other side and got lower rates," William Chirolas said. ''But what can I say? We aren't."
As energy prices have soared, suburban homeowners using the biggest electric companies -- NStar and National Grid (until this week called Massachusetts Electric) -- are seeing increases of more than 25 percent.
The average homeowner, who uses 500 kilowatt hours per month, this month will pay $80 for electricity from those companies.
But residents of Boylston, Hudson, Shrewsbury, and Wellesley -- all of which own their own electric companies -- can splurge a little bit this month. Their average bills will be about $50.
''The way it looks now, municipally owned utilities are better off for this winter," said David Tuohey, a spokesman for Massachusetts Municipal Wholesale Electric Co., a nonprofit created in 1976 to help municipal utilities leverage buying power and spur competition.
''They are facing a need to increase their rates also. But the increases I've seen are nowhere near the magnitude of what investor-owned companies are seeing."
Shrewsbury Electric, for example, on Oct. 1 implemented a 4.8 percent rate increase, which has driven average residential prices from $48.60 per month to $50.90. National Grid, on the other hand, recently announced a 27.5 percent increase -- pushing average household bills from $63 to $81 -- that will go into effect Nov. 1.
''The cost of natural gas and oil has gone up so high that we're being charged a huge amount of money to supply power to the customers," said David Graves, a spokesman for National Grid. ''It puts us in the middle. It puts the customer at a disadvantage."
Much of the difference stems from a state law approved in 1997 that began deregulating the electricity market. Under the law's changes, private utility companies had to divest themselves of power plants. They can still manage the grids and power homes and businesses, but they can no longer generate the electricity. This forces them to obtain power from other companies at rates that fluctuate with the market. By state law, they have to seek new bids from electricity-generating companies every six months and adjust their rates; municipal plants can enter into multiyear contracts.
''They're in a difficult position right now," said David L. O'Connor, commissioner of the state Division of Energy Resources. ''Just looking at it in a six-month or year time frame doesn't provide a good standard. Over the past six or eight years, [the private companies] have had pretty good prices."
Municipal plants were able to lock in favorable rates at a time when electricity was cheaper. But there have been other times, several municipal managers say, when they were locked in to unfavorable rates and were charging more than the investor-owned utilities.
''You look at the market," said Bradford White Jr., manager of the 103-year-old Boylston Municipal Light Department. ''I don't want to get into a long-term deal because the price may come down. Then, in five years, all the other places are lowering their prices and you're stuck."
Boylston has several contracts that are staggered over about 10 years. The company has also bought into several power plants, including Millstone in Connecticut, Seabrook in New Hampshire, and Stony Brook in Ludlow. The last was built by and for consumer-owned utilities; Shrewsbury is another co-owner.
Wellesley is in the third year of a favorable five-year contract with Baltimore-based Constellation Energy Group, which supplies 96 percent of the town's electricity. The other 4 percent of Wellesley's power is hydroelectric and comes from the New York Power Authority.
Municipals have also been able to stave off sharp hikes by dipping into reserve accounts.
''Municipals don't have to make dividends for shareholders," said Yakov Levin, manager of the Hudson Light & Power Department, which also provides electricity for Stow residents. ''We charge our customers just enough to keep up a reliable system and maintain good service."
Hudson and Shrewsbury own small power plants that can be used at peak times when it is cheaper to generate their own electricity.
Hudson's power plant, for example, can run on natural gas or oil, depending on which is cheaper, and can supply a quarter of its customers.
Shrewsbury has five diesel generators that can also power about a quarter of the town, according to Thomas R. Josie, general manager of Shrewsbury Electric.
''There's no dispute that the existing municipals have the lower rates in the state," said Michael Durand, a spokesman for NStar.
Durand said that the larger companies offer benefits to customers that municipals do not necessarily provide, such as discounts for low-income customers and personal advice for making homes more energy-efficient. They also incur costs that the municipals do not, such as property taxes and maintaining the grid that transmits high-voltage electricity from power plants to substations.
''Companies such as NStar, through their rate, pay for maintenance and upgrades of that system; municipal electric companies do not," he said. ''If every city and town became a municipal, what would happen to the critical transmission infrastructure in this state?"
While municipal plants may not enjoy the economies of scale of the massive private companies, they do benefit from smaller, more flexible bureaucracies. That can make innovation easier.
Wellesley's power company, for example, now collects monthly meter readings using a truck that has an antenna on the roof. It used to employ four meter readers. Now it has one, who also works for the water and sewer department.
A decade ago, the company launched a $12 million project to bury electric lines. It expects to save in the long run by spending less on repairing downed wires and trimming trees.
A coalition of local officials recently began pushing for legislation that would make it easier for cities and towns to form municipal electric companies.
No municipality has formed a power company since 1926, which supporters of the legislation lay to a complicated negotiating process for purchasing equipment, such as poles, from private utilities.
Twenty of the 37 cities and towns covered by Globe West have signed on as supporters of the legislation, but investor-owned utilities have argued against it.
''It is a careful, deliberate process by design," Durand said. ''Any city or town looking at taking over the electric company needs to look at every aspect of that carefully, because it's not for everyone. ''It's been nearly 100 years since someone has set up a municipal company," he said. ''That's likely for a reason."
Managers of municipally operated electric companies say that if prices keep going up, they will have to pass the increases along to their customers. But most say the hikes are several months away and would likely be in the single digits.
''If we have another catastrophe, who knows?" White said. ''As it stands right now, I don't see anything drastic in the near future."
Matt Viser can be reached at firstname.lastname@example.org.