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Answers given to ‘muni’ questions
By Paul Chernick, Chairman of the Lexington Electric Utility Committee, Somerset Road Thu Feb 14, 2008

Lexington - Denis Kefallinos asked a number of good questions about a municipal electric utility (“muni”) in Lexington (“Consider move to ‘muni’ carefully,” Brickbats and Bouquets, Feb. 7, 2008). Here are some answers.

“Why support the muni legislation until we know more about the economics of a potential Lexington muni?” This is a chicken-and-egg problem. No town will invest the time or money required for a full feasibility study until it is clear that NStar can be required to sell. Current state law on this issue is about a century old, and does not clearly oblige NStar to sell. The pending legislation would not obligate any town to form a muni.

“Lexington should evaluate the economics of forming a muni based on more recent examples than Concord.” No new muni was formed in Massachusetts since 1926, except at the former Devens Army base (in 1996). A Lexington muni feasibility study would look at experience from Massachusetts’ 41 munis, especially those (like Concord) similar to Lexington in size and geography, and newer munis in the Northeast.

“Given the upfront investment and ongoing expenses, can a muni benefit Lexington?” The cost of acquiring NStar’s equipment and starting the muni would be estimated in a feasibility study. Our initial estimates suggest that a Lexington muni could reduce rates, increase support to the town, and provide better service and decrease taxes.

“Can muni staff know their distribution system better than NStar?” Yes. The 32 line staff at NStar’s Waltham center cover about 100,000 customers in 10 cities and towns, from Carlisle to Newton to Weston, and staff regularly shifts among NStar centers. Munis with 8,000 to 10,000 customers (Belmont, Wellesley, Braintree) have 12 to 15 staff, each of whom works in just one town.

“Are the only advantages of a muni its tax and non-profit status?” Apparently not, in terms of both cost and quality. Munis have fewer layers of management to support, and no huge bonuses to pay. Munis also maintain their networks better and work cooperatively with towns on reliability, green power and aesthetics.

“Can we change some laws to even the playing field between munis and electric companies?” Congress could make all electric companies tax-exempt, or Massachusetts could convert them all to customer-owned non-profits (as in Nebraska and Tennessee). The pending muni legislation is a more modest solution.

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Consider move to ‘muni’ carefully
By Denis Kefallinos, Evergreen Lane Thu Feb 07, 2008

Lexington - I would like to comment on Steven Kropper’s letter in support of legislation for the option to acquire NSTAR local assets (Brickbats and Bouquets, Jan. 31, 2008). I believe there are counterpoints to the benefits of municipal owned utilities.

We need to be careful in how we compare a municipal electric utility (“muni”) like Concord — which has been in operation for many years — to Lexington. If we are to look at other muni towns in comparison, we need to find towns that have recently become munis, because the costs — acquiring the plant and infrastructure, hiring personnel and management, purchasing equipment, power and prior obligations, and learning curves and growing pains — will be more accurate than using figures from a long-established muni like Concord.

A muni might be more responsive to our needs, due to its local proximity, but I question if it would be more knowledgeable about the distribution system. Is NSTAR not knowledgeable enough? Utility foremen I have met know their assigned towns, and the utility layout, like the back of their hand.

The question residents should be pondering is not so much the legislation, but simply “Does Lexington prefer to be served by a for-profit, investor-owned utility (IOU) or do we prefer to be our own utility?” Like any choice, there are pros and cons to either.

I am not ready to support muni legislation because all I have heard thus far are the positive aspects of munis. What are the risks Lexington assumes with the responsibility of procuring and delivering power? This proposed transaction will take years to prepare, finance, and execute. I anticipate huge legal costs. Once the dust settles and we “throw the switch,” will the total upfront investment and ongoing expense be low enough to deliver the benefits promised? Why do we need an expensive study to highlight these risks?

I am skeptical whether a newly formed muni will be able to provide power at a lower cost than NSTAR. Is the only natural advantage of a muni its tax status and non-profit status? Can we not change some laws to even the playing field between munis and IOUs, pass the benefits on to rate-payers, and save ourselves the expense and effort of having to start our own electric company?