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Note: bold by MAMEC

Conventional utility companies, 'munis' have different criteria in determining rates

By Michael Hartwell,

ASHBURNHAM -- Massachusetts residents love to compare their electricity rates, and conventional wisdom is correct when it says municipally owned utility companies have the lowest.

But officials from both camps say the lower rates results from the fact that public and private utility companies play by different rules.

The lowest bill in the state is from the Littleton Electric Light and Water Department at $69.55, using a standard of 650 kilowatt-hours. Other municipally owned utility companies, or munis are also relatively low. The muni in Groton is $78.68 and the one in Ashburnham is $94.25.

The Department of Public Utilities reports the private Unitil company has the highest in the state at $129.58 for the same usage. National Grid comes out to $93.56 a month. 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.

Most muni mangers interviewed mentioned profits as a factor in why their bills are lower, saying public ownership allows them to reinvest any profits into the utility instead of paying investors. However, they also mentioned differences in state laws as crucial to the price differences.

"Our power supply is really where we're able to save money," said Stan Herriott, the manager of Ashburnham Municipal Light. Under a deregulation agreement, munis are allowed to own or invest in power-generating plants directly while investor-owned utilities, known as IOUs, are not and must bid on electricity several times a year.

Herriott said his department has a 50-year contract with a nuclear power plant as a major source of electricity, something an IOU isn't allowed to do.

"Nuclear is very stable in price," said Herriott. "It doesn't fluctuate with the market like gas and oil." He said having a locked-in price that spans several decades is a big source of savings.

Savas Danos, the general manager of
Littleton Electric Light and Water Department, operates the lowest cost of any utility bill in the state at 10.7 cents per kwh. He said the nature of his area, which includes Boxboro as well as Littleton, is a big contributor. The high amount of commercial property in the coverage area contributes a high volume of electricity use at a predictable rate, two factors he identified as key to saving money.

"We have a very aggressive program for going out and buying electricity," said Danos. That includes buying in large bulk at predetermined amounts.

Danos said IOUs have to focus on delivering electricity to the customers and use other entities to produce the electricity and transmit it to town. As a muni, his department is able to have a stake in all three stages, from producing electricity, to transmitting it and delivering it locally.

He said unlike IOUs or most other munis, the electric commission for his department is elected directly by the residents and will not be re-elected if that let costs rise. By direct election, he said they aren't exposed to the same political pressures an appointed board would face.

Kevin Kelly, manager of Groton Electric Light said his department is invested in various power-generating plants, including Seabrook Station and Millstone nuclear power plants, the Berkshire Wind Power Cooperative and the Stony Brook oil and natural gas plant, with Berkshire being the most expensive and the nuclear plants being the cheapest.

"It helps to diversify our portfolio," said Kelly.

He stressed that comparing the ways munis and IOUs operate is difficult, because they are structured differently and in some cases incomparable.

Littleton combined the cost of the electricity itself, known as the power supply, with the transmission rates required to get the electricity to town. That makes up 77.6 percent of the customer's bill, with the remainder paying the operating costs of the utility company.

Ashburnham had those numbers combined as 61.4 percent of the bill. Groton has them at 71.6 percent of the bill. The managers would not say if it's good or bad for that amount to make up the majority of the bill.

Unitil, however, has 41 percent of each bill go toward power supply, with an additional 5 percent for transmission. These need to be combined to 46 percent to make a fair comparison. National Grid has 63 percent of each bill go toward these purposes; 13 percent for transmission and 50 percent for supply. NSTAR has 46 percent in supply and 8 percent in transmission for a comparable number of 54 percent.

"We're tax exempt, and that saves a ton of dough right there," added Herriott. IOU customers have a portion of their bill go into state and federal taxes as part of the operating costs, while munis are exempt.

"You'd just be taking money out of one pocket and paying it in another," added Herriott.

Alec O'Meara, spokesman for the Unitil utility company that provides electricity to Fitchburg, Ashby, Townsend, Lunenburg and parts of Leominster and Shirley, said another important factor is the energy efficiency and renewable resources fund charge that IOUs are required to make and munis are not. This charge is 6 percent of the bill for his company, 6.5 percent for National Grid and 4 percent for NSTAR.

The Green Communities Act of 2008 established a fund tacked for rebates for customers who install energy-efficient equipment like new boilers. Only communities that pay into the fund are eligible to take from it

There is currently a provision in the Massachusetts muni choice bill that would require muni's to participate in this program as well.

Herriott, the Ashburnham Municipal Light manager, said his department is one of about five munis in the state that choose to participate in the Renewable Energy Trust Fund, but it includes only half a percent of each bill.

"We did it because we felt it was the right thing to do for our customers," he added.

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