Towns may soon be able to buy utility assets
By Cyndi Roy/ State House News Service
Thursday, September 22, 2005
Saying they want the option of better service at a lower price, more than 100 cities and towns are supporting legislation that would make it easier for municipalities to establish their own electric companies.
A bill (H 3294) sponsored by Rep. Jay Kaufman, D-Lexington, and 40 co-sponsors would require investor-owned utility companies like NSTAR and Massachusetts Electric to sell their assets - poles, wires, and substations - to interested cities and towns once state regulators determine a fair market price. Municipalities could then run their own municipal electric companies, or "munis."
Testifying on the bill before the Committee on Telecommunications, Utilities, and Energy Tuesday, supporters said allowing cities and towns to control their own electric power will lead to better rates and improved service, and will increase pressure on utility companies to lower their own prices.
"There is tremendous dissatisfaction with the poor service utilities in general provide," said Patrick Mehr, a member of the Electric Utility Committee in Lexington, a town that does not have a muni. "The key purpose of this bill is not much to see new munis formed, but to create a new form of competition."
Across the state, 41 cities and towns have established munis. Residents in those communities pay an average of 24 percent less than residents who get their electricity from NStar, according the Massachusetts Alliance for Municipal Electric Choice. But no municipality has formed a new muni since 1926, primarily because there is no guarantee a utility company will sell its assets once a community has undergone the extensive, and often costly, process of determining its feasibility, Kaufman said.
"There's a lack of clarity in the language of the state law," he said. "Nothing says the purchase has to go through. Utilities can take us through the theater of negotiations, but it's just theater." NSTAR and Massachusetts Electric oppose the bill, and say current law prevents rash takeovers by cities and towns that may not be prepared to run their own electric companies.
"Energy markets are no play-spaces for consultants or government employees who have no experience with the many risks involved," said NSTAR Public Affairs Director Mark Reed.
"The consequences of rashness or incompetence are tremendous, and present enormous exposure for customers of government-run distribution systems. Public officials who are not energy experts may make serious and costly mistakes that will be paid for by local consumers in the form of higher rates or higher taxes."
The companies also say that the current system allows costs to be spread equally between affluent and lower income communities. If more wealthy communities begin establishing munis, the costs will be shifted to poorer residents.
"Wealthier communities may be able to finance the acquisition of a distribution company's infrastructure but the customers in the remaining communities will face additional costs since the fixed costs of services like metering, billing, and customer service will be spread on the remaining customers," said Joseph Newman, vice president and Director of Public Affairs for Massachusetts Electric. The bill requires cities and towns to undergo an extensive assessment to determine whether they can afford to establish their own electric company, and subjects the plans to state review. The bill also limits to three the number of munis that can be established each year.
Residents of community-owned electric companies said they are happy with the service their cities and towns provide.
"I've lived in Belmont for 45 years," said resident Jim Sykes. "I live in a seven-room house with three TV's, four computers, and our average electric bill is $45. Talking to other people, I've realized, we've got a good deal."