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Report analyzes utilities

By Dan Magazu,
Posted: 02/06/2010

LUNENBURG -- Existing municipal utilities in Massachusetts offer, on average, substantially lower rates and comparable reliability to private utilities, according to a new study released by the state Department of Energy Resources.

A newly-formed municipal utility, however, will likely have higher rates than existing municipal utilities because they will be saddled with higher levels of debt, according to the 61-page report.

Legislators on the state's Joint Committee on Telecommunication, Utilities and Energy have been awaiting the release of the report for several months as they consider legislation that would make it more feasible for a city or town to create a municipal utility.

A municipal utility, or "muni," is owned and operated by the local government, rather than a private utility company.

Current law allows a private utility to reject any attempt by a community to purchase its electrical infrastructure, according to the report.

House Bill 3087 and Senate Bill 1527 would amend state law so a community can purchase its electric infrastructure at a fair price determined by the state Department of Public Utilities.

State Rep. Jennifer Benson, D-Lunenburg, said she's looked over the report, but has not had a chance to comb through it thoroughly.

"It's definitely not as cut and dry as I thought it would be, which complicates the issue a bit," said Benson, who sits on the Utility Committee. "Everyone was waiting on this report hoping that it would really support the legislation, but it's not overwhelming."

Lunenburg resident Cathy Clark, who is one of the biggest local proponents of the legislation, said she believes the muni report confirms that municipal utilities are a better option.

"The facts are the facts," she said. "We would be better served by a muni. The laws on the books are obsolete and need to be changed."

Municipal utilities, on average, charge rates that are not only lower than standard rates charged by private utilities, but are also lower than reduced rates that private utilities charge to low-income residents, according to the report.

"Though not many municipal utilities have low-income programs, the data shows that for 2008, the average municipal utility overall rate for residential customers was lower than the low-income rate charged be each of the four (private utilities)," the report states.

The report provides no recommendation on whether or not the municipal utility legislation should become law.

"It was not the intent of this study to reach definitive conclusions regarding whether electric municipalization is, or is not, a desirable outcome," the report states. "It should be evident that the consideration of establishing any specific municipal utility will pose unique issues that will require situation-specific assessments."

Tom Alonzo, chairman of the Lunenburg Board of Selectmen, said he was not surprised by the inconclusive findings in the report.

"Basically it says that when your weighing the benefits of a municipal utility, everything has to be done and investigated on a case-by-case basis," Alonzo said. "There are all kinds of different factors. The one clear thing the study does show is that currently investor-owned utilities have the absolute ability to block any attempt by a community to purchase the infrastructure."

Alonzo said the muni legislation needs to pass because no community is going to go through a costly evaluation of its assets if it knows that at the end of the road the utility company can just say no to any offer.

"Hopefully the committee will get this legislation passed," Alonzo said. "It's not mandating anything. It's simply offering an alternative."

The report notes that municipal utilities are not required to implement many of the state's policies on efficiency and renewable energy standards, while private utilities are required to adhere to these policies.

"Serious consideration should be given to requiring new municipal utilities to comply with the commonwealth's goals and initiatives regarding its energy future," the report states.