Unitil has the most expensive utility rates in the Bay State
ByMichael Hartwell, email@example.com
FITCHBURG -- Ever since the 2008 ice storm when some Massachusetts customers lost power for nearly two weeks, the Unitil utility company has been under the scrutiny of residents, politicians, business owners and activists.
The company has the highest electricity rates in the state, but company representatives and critics give alternate reasons for why those rates are so high.
The Department of Public Utilities uses 650 kilowatt hours as an average monthly bill and lists Unitil as the highest at $129.58. It breaks NSTAR into three entities and lists the Cambridge Electric Co. as $112.40 a month, Boston Edison Co. as $110.06 a month and Commonwealth Electric Light Co. as $101.13 a month. National Grid had the lowest at $93.56 a month, and the Western Massachusetts Electric Co. has $105.37.
"Their rates are higher than any other investor owned utility company in the commonwealth. It's clear," said Rep. Stephen DiNatale, D-Fitchburg. He faults the company for failing to trim tree limbs above the power lines in 2008, which resulted in many broken lines that sagged from the snow and ice.
The DPU regulates maintenance such as tree trimming, and DiNatale said Unitil meets the minimum standards but does not go further.
"They're telling us they're doing it, but the DPU does not have the resources to verify the fact that they are living up to their part of the agreement," said DiNatale. He said the company is more concerned with profits than with maintaining infrastructure like power lines.
"They need to provide a return to their investors. I understand that. This is America," he said. "But they're not returning a value to the customers in the form of infrastructure."
DiNatale was not entirely negative of Unitil. He said the company showed good preparations and response efforts to the October 2011 blizzard.
Unitil spokesman Alec O'Meara shared an independent audit prepared April 13 for the DPU by the Jacobs Consultancy group that says "Unitil's maintenance cycles and components are in line with industry practice." The report also says "capital and operating budgeting processes appear to be functioning adequately to provide sufficient infrastructure resources."
The report concluded that since the ice storm, the company "has been responsive and has undertaken significant initiates and steps to improve overall performance, and in particular, communications and storm response."
Still, the DPU did raise rates to partially pay for the damages from the 2008 ice storm.
Cathy Clark, founder of the Get Rid of Unitil activist group, said Unitil's response time was too slow.
O'Meara released a prepared statement for questions related to the ice storm.
"The 2008 ice storm was a major natural disaster which caused catastrophic damage to electrical infrastructure in both Massachusetts and New Hampshire. As a company, Unitil feels the DPU's August 2011 rate case order completes the regulatory review of this event, and Unitil as a company is focused on looking forward and preparing for future storms."
Patrick Mehr of the Massachusetts Alliance for Municipal Electric Choice said another issue that inflates costs is money the company spends on lobbying and compensation for its top executives.
"I see no rationale whatsoever for the CEO of a monopoly that cannot even keep the lights on to make millions of dollars a year," said Mehr.
Unitil CEO Robert Schoenberger has a total annual compensation package of $1.74 million, and CFO Mark Collin receives $630,000 in his compensation package.
Mehr initially compared these numbers to the salary the general manager of a municipally owned utility company makes, which he gave as a $100,000 to $140,000 annually, but that figure did not include benefits.
O'Meara said that's not a fair comparison. Schoenberger receives substantially less than $1 million in salary and oversees operations in three states, and said the general manager position should be compared to someone like Keith Caribo, manager of electric operations in Fitchburg.
Caribo's salary is not public information, but O'Meara said it compares to a senior vice president position within the company.
Reuters listed senior vice presidents Todd Black and George Gantz as receiving benefits packages of $389,465 and $508,506, but did not list how much of that is salary.
O'Meara said the total executive compensation is a minor part of the customers electric bill, less than one third of one penny of each dollar, or under 0.33 percent of what the customer pays.
"If you spread it out among more customers, it's a low amount," said Mehr. When pressed, he stopped comparing Schoenberger's compensation package to a municipal utility general manager and said he is not an expert on compensation. He changed the comparison to General Motors CEO Daniel Akerson who received $1.7 million in total compensation for running the troubled auto company last year.
O'Meara had some examples of his own for things that push up prices. He said 13 cents of each bill goes toward "transition charges" which he explained is from a restructuring act two decades ago that required the company to pay for things like the Pinetree wood burning biomass power plant in Westminster. He said almost all of that will be paid off in 2014 and be removed from the bill.
The DPU gives an average bill of $129.58 for someone who used 650 kilowatt hours a month, and when that sunsets in 2014 that monthly bill will be reduced by $15.72.
O'Meara said he could not answer how much delinquent rate payers and vacant properties bring up the rates of other customers, but said it does play some role in increasing costs.
"Speaking generally, economic conditions will have an impact on rate cases," he said.
Unitil spokesman Alec O'Meara says the salary of Keith Caribo, manager of electric operations in Fitchburg, is significantly lower than that of a senior vice president. A story Sunday misstated how Caribo's salary compares to a senior vice president's. Also, Cathy Clark, founder of the Get Rid of Unitil activist group, did not make a comment for this story on Unitil's response to the 2008 ice storm.