Sunday, October 12, 2014
Muni electric cos. beat National Grid on price
West Boylston Municipal Light worker Matt Scirpoli adjusts the bucket as he works to string new lines along Maple Street last week.. ((T&G Staff/CHRISTINE PETERSON))
By Sandy Meindersma CORRESPONDENT
Residents who live in towns that have municipal electric companies enjoy smaller monthly electric bills than customers who live in communities served by National Grid.
The gap between National Grid and the "munis," as they are called, is growing even wider on the heels of a 37 percent rate increase by National Grid that will go into effect on Nov. 1.
Nine local communities — Ashburnham, Boylston, Holden, Paxton, Princeton, Shrewsbury, Sterling, Templeton and West Boylston, included in a total of 41 towns statewide — have municipal light departments which deliver electricity to consumers in those towns, in place of a large electric company like National Grid.
National Grid residential customers, currently paying about $121 per month for 750 kilowatt hours of electricity per month, will see their average monthly bill spike to $181 per month, starting Nov. 1.
Shrewsbury Electric and Cable Operations, or SELCO, currently has the lowest rate for electricity in the area. Its customers have a bill of $87 for the same amount of electricity that currently costs National Grid customers $121. Shrewsbury residents will see their monthly electric bills jump to $101 on Nov. 1 (see chart), still the cheapest in the area but more in line with what other municipal electric companies are charging. Princeton customers pay the highest rate among local munis, at $145 per month.
Why the big difference in munis versus utilities?
Municipal light departments are owned by the ratepayers, rather than by stockholders, and they have greater flexibility in purchasing power and in structuring their contracts, which typically translates into lower rates for their customers.
Because of the electric utility restructuring act of 1997, investor-owned utilities, like National Grid and NStar, are no longer permitted to own their own power generation systems. These utilities are therefore forced to purchase power on the open market. Unlike municipal power companies, which can buy power contracts that last decades, investor-owned utilities are limited to contracts that last six months.
"We have already purchased our power for the winter," Jake Navarro, a spokesperson for National Grid said. "But the market is anticipating some more of those cold days due to the polar vortex next winter, which is why the costs are so much greater than last year."
The entire region is facing higher winter power costs, following last year's exceptionally cold winter. The polar vortex that froze the Northeast and upper Midwest last year is expected to return again this year.
Power cost increases due to increased demand are exacerbated by the fact that the Salem Harbor coal fired power plant and the Vermont Yankee nuclear plant are no longer producing power, and the fact that there is not enough capacity in the natural gas pipeline to service both power plant and residential home heating.
"Eventually, the power cost increases will touch every electric customer in the region," Mr. Navarro said. "When it does may be different, due to when contracts come due, but this is region-wide."
Of the nine local municipal light plants, only Shrewsbury, which currently has the lowest electric rates in Central Mass., has approved a rate increase effective November 1.
Michael Hale, general manager of Shrewsbury Electric and Cable Operations, said that a power cost adjustment of 16 to 18 percent will take effect on November 1.
"Then we plan to back it off on April 1, with the increase being between zero and 4 percent," Mr. Hale said.
Holden's electric customers saw a 7 percent rate increase in July, but Holden Municipal Light Department general manager James Robinson expects no further increase, unless the upcoming winter is as bad as last year's.
"The rate increase was to recover what we didn't collect last winter," Mr. Robinson said. "We have locked in contracts for 90 percent of our needs, so I think we can get through the winter without changing anything."
Brian Allen, general manager of the Princeton Municipal Light Department, which at $145 per month has the highest rate of the Central Mass. municipal companies, said that he is anticipating a rate increase in December or January, but that increase is not tied to power costs, but rather to increased transmission costs and operating expenses.
"We have long-term contracts, so we are not facing volatility, and we didn't last year," Mr. Allen said. "But our operating costs have gone up, and our last rate change was in August 2011."
Boylston Electric Light Department general manager Mark Barakian said that he reduced the amount of power he needs to buy on the open market to 10 percent of the town's anticipated needs for the upcoming winter. While he expects no rate increase during the winter, Mr. Barakian said that a rate study was last completed eight years ago; a new one is expected to be commissioned in 2015.
Jonathan Fitch, manager of the West Boylston Municipal Light Plant, said that he has power contracts locked in through 2040, and that no increase is forecasted for the winter.
Templeton increased its rates by 4 percent in January 2014 following a rate study, and John Driscoll, manager of the Templeton Municipal Light and Water Plant, said no further increase is expected.
The Ashburnham Municipal Electric Light Plant reconfigured its rates in July, which resulted in a slight decrease for some residential customers and a slight increase for others, and a 3 percent increase for commercial and industrial customers.
Sean Hamilton, manager of the Sterling Municipal Light Department, said that his department's rates have decreased 25 percent over the last three years, due to restructuring of contracts and reduced operating expenses.