Note: bold by MAMEC
Town-owned entities have better rates and service, report says
By Sarah Favot, firstname.lastname@example.org
At a time when prices at the gas pump have been rising and grocery items like milk, bread and coffee have become more expensive, some residents are seeing a decrease in their monthly electricity bills.
While many Unitil customers in Fitchburg, Lunenburg, Townsend and Ashby will see their rates climb, in Groton and Littleton, the municipal electricity departments recently lowered rates for residential customers.
National Grid, which serves Leominster, also lowered rates for residential customers in May.
Residents in Littleton and Boxboro, who pay the lowest rates for electricity in the state according to Massachusetts Municipal Wholesale Electric Company (MMWEC), will see a half a cent decrease in rates, which calculates into a monthly savings of $5 for the average user, according to the Littleton Electric Light Department.
Groton Electric Light recently lowered its rate by $1 for its 3,800 residential customers, according to Executive Assistant Tammi Lemire.
National Grid lowered its rate for electricity for residential customers in May, which translated into about a $5 reduction in customers' monthly bills. For using 500 kilowatt hours of electricity in one month, a customer now pays $76.08, according to a press release from National Grid.
Unitil's residential customers using 500 kilowatt hours will pay $101.40 up from $93.73, according to spokesman Alec O'Meara. Unitil asked the Department of Public Utilities, which oversees investor-owned utilities, like National Grid, NStar and Unitil, for a rate increase partly to pay for costs associated with the 2008 ice storm.
NStar did not respond to calls for comment on this story.
According to a 2010 report from the Department of Energy Resources, on average, municipally owned electric utilities have lower rates compared to investor-owned utilities.
For example, a residential customer who uses 1000 kilowatt hours of electricity in Littleton will pay $110.15; in Ayer, served by National Grid, a customer will pay $134.08 for the same usage; in Acton, served by NStar, they will pay $165.25; and in Townsend, a Unitil customer would pay $186.12, according to data compiled by MMWEC in June 2011.
Some of the reasons for the disparity outlined in the report include: on average, municipally owned departments have lower distribution and generation costs, municipal utilities are not subject to state procurement rules and regulations and can have long-term entitlements to the value of power from power plants and municipal utilities are exempt from state, federal and municipal taxes.
However, municipal utilities do pay in-lieu of tax payments to municipalities. Savos Danos, general manager of Littleton Electric Light Department said the in-lieu of tax payments his department made to the town of Littleton this year would have exceeded the required tax payments a IOU utility would have made.
Another reason municipal utilities have lower rates, Danos said is if the municipal utility has more than a 6 percent rate of return, the excess revenue gets turned back over the rate payer in the form of reduced rates.
Municipal utilities are not required to participate in low-income rate programs and energy conservation programs that are required by investor-owned utilities from the state.
Aside from lower rates, municipal utilities generally have faster response times to storms.
With the outages caused by Tropical Storm Irene at the end of August, power in Littleton was restored by Monday at 8 a.m., Danos said.
In Groton, Lemire said residents were out of power for about four hours at a time.
In contrast, some National Grid and NStar customers were without power until five or six days after the storm.
Some customers in Unitil's service area in Massachusetts were without power until 36 hours after the storm.
One reason response times are faster for municipal utilities are because the line workers live in or near the town. In both Groton and Littleton, line workers are required to live within 30 minutes of the town in order to be able to respond quickly.
Investor-owned utilities, on the other hand, have to bring in crews, sometimes from out-of-state to respond to a storm.
There are only about 40 municipal utilities in the state and one of the reasons for that is that it is nearly impossible for a town to start its own utility.
To start a municipal utility, a town must buy all of the IOU's assets in the town or start from scratch because an IOU can deny the town's request to purchase the assets no matter the price it is willing to pay, according to the report from DOER.
The last municipal utility was founded in 1927, according to DOER.
Patrick Mehr, of the Massachusetts Alliance for Municipal Choice, has been advocating for a change in the law since 2001.
"The 100-year-old language allows an incumbent utility to basically say no and the only thing the town then can do is to start from scratch its own separate distribution network," said Mehr. "This was feasible 100 years ago, when a distribution system consisted of three poles and three streetlights."
A bill has been filed in the Legislature since 2004 that would no longer allow the IOU to reject the town's request to purchase its assets.
Mehr said the legislation has died each session because of extensive lobbying from IOUs.
Mehr said that it would still be a lengthy and complex process if the legislation passed and he thinks only two or three new municipal utilities would be formed in 50 years.
After the 2008 ice storm, Townsend, served by Unitil, wanted to form a municipal utility.
"Especially after the 2008 ice storm, it had been a real item of focus here because the response to the storm was so poor," said Town Administrator Andy Sheehan.
He said those efforts ended after the town discovered that it was nearly impossible, unless the legislation on Beacon Hill passed.
"If that passes, I would expect this whole issue would come forward again," said Sheehan.