Legislation could help start more municipal utility companies
By Brad Petrishen/Daily News staff
The MetroWest Daily News
Posted Sep 18, 2011
A decade-old bill aimed at eliminating the monopoly of the four large investor-owned utilities in Massachusetts is gaining steam as a result of anger over Tropical Storm Irene, but whether that anger will be enough to turn the tide of history remains to be seen.
More than 20 legislators have supported a bill that would require utility companies to sell their equipment to towns for a price deemed fair by the Department of Public Utilities. Currently, utility companies are not required to sell such equipment - which would include utility poles, lines and transformers - and, as a result, no municipal utilities have been established since 1926.
Legislators across the state have roundly criticized investor-owned utilities NStar and National Grid for their handling of damage and lost power following Irene's swipe at New England, saying that most of the 41 municipal utilities in the state restored power to their communities quicker and communicated with customers better.
The Hudson Light & Power Department, for example, was able to restore power to 99 percent of its customers by midnight on the Sunday of the Aug. 28 storm, General Manager Yakov Levin said.
In neighboring Marlborough, however, power was not restored to most of the city until Tuesday, with some customers left in the dark until the weekend.
"During the hurricane, four people with private utilities came to the office wanting to switch," Levin said. "Unfortunately, we can't just go into neighboring towns and take over."
Levin, like many legislators, believes that municipal utilities have a leg up on investor-owned companies because they are serving themselves and know their towns best.
"Our employees service and maintain lines that feed their own houses," he said. "Our response time is less than 20 minutes because we're right in town, and we don't have shareholders to report to."
Levin said he also believes he has more line crews per customer than the big companies.
Patrick Mehr, spokesman for the Massachusetts Alliance for Municipal Electric Choice, agreed.
"We have discovered that municipal utilities use 50 percent more linemen per town than the utilities," he said, referring to a study he conducted comparing nine area municipal utilities to NStar, National Grid and Unitil.
NStar spokesman Michael Durand said his company has as many crews as it needs to provide effective service, along with automated power-restoration equipment municipal companies can't offer.
He said comparing the response of municipal and investor-owned utilities "is like comparing apples to oranges."
"In communities we serve, NStar, too, had power restored to some much more quickly than others," he said. "It comes down to the size of the town and the amount of damage sustained, not the number of communities we serve."
Durand said the proposed bill is unfair to companies because it takes away their power to determine fair market value for their equipment, and added that taxpayers should oppose the bill because towns and the state would lose out on substantial tax revenue.
NStar pays the state about $30 million in income taxes per year alone, he said, and has paid almost $100 million in property taxes to cities in towns in fiscal 2011. Framingham, for one, collected more than $2.4 million from the company.
Mehr said the tax argument is a non-issue, however, citing a Massachusetts Department of Energy Resources report that states that in 2008, most municipal utilities provided voluntary payments in lieu of taxes to the towns they serve that were similar to what investor-owned customers paid in taxes.
The report does say, however, that municipalization would cause state and federal tax collections to decrease.
Another component of the utility issue is rates.
Mehr said that a 2011 study his organization conducted showed that municipal electric companies charge between 4 percent and 36 percent less monthly for average users.
Durand said while it is true that some municipal companies charge lower rates, the comparison is unfair because the company has a number of federal mandates that require additional charges. His company, he said, is required to purchase a certain amount of more expensive renewable energy, for example, as well as provide energy-saving services to customers that add benefit but also add cost.
State Sen. Jamie Eldridge, D-Acton, said while he supports the bill because he believes it will result in better service, also believes municipal electric companies should have to pay the same fees.
Mehr said while he hopes the bill will pass, utility companies have so far killed every iteration of the bill by spending hundreds of thousands in lobbying in the last decade.
If it does pass, Mehr and Levin admitted that a new municipal utility would be extremely expensive to start up in the modern world, and might not be economically feasible for most towns.
"We're not saying every muni is great," Mehr said, acknowledging that some municipal light departments, such as Belmont, actually charge more than the big companies. "We're saying we want the option."
"If this passes, all of a sudden they no longer have a monopoly and investor-owned companies will finally be forced to be efficient," he said. "Maybe."
(Brad Petrishen can be reached at 508-490-7463 or email@example.com.)