The Advantage Of Municipal Utilities
A report by the state Department of Energy Resources about municipal electric utilities (or munis, like those in Shrewsbury, Boylston, Hudson, Littleton, Groton) found that munis charge less than large investor-owned utilities (or IOUs such as NStar, National Grid, Unitil and Western Mass Electric).
While still relatively unknown, Massachusetts has 41 munis that serve 16 percent of the state.
And their cost savings is significant. In fact, in each of the years 2004 through 2008, muni rates were 14 percent, 18 percent, 30 percent, 28 percent and 21 percent lower than IOU rates for all customers combined.
Behind The Numbers
In 2009, a residential customer using 500 kilowatt hours per month paid $102 to Unitil, $97 to NStar, $82 to National Grid and $70 to the average muni. In other words, munis charged $32 less than Unitil, $27 less than NStar and $12 less than National Grid per month for the same electricity. Remarkably, muni bills for residential customers — without any low-income discount — were lower than the IOU’s discounted bills for low-income customers, by $6 for NStar and $17 for Unitil, which means that electricity is cheaper for Groton homeowners than for low-income Fitchburg residents.
Public facilities also pay less to munis than to NStar. In 2006-07, similar size high schools in greater Boston had total electricity costs of 9.2 cents per kilowatt hour if served by munis and 18 cents per kilowatt hour if served by NStar.
Businesses also pay less to munis than to IOUs. In 2007, a chain of supermarkets with stores across Massachusetts had total electricity costs of 11.3 cents per kilowatt hour from munis, 13 cents per kilowatt hour from National Grid and 14.5 cents per kilowatt hour from NStar.
If NStar charged as little for electricity as the average muni, residents in NStar’s service area would save each year about $400 million on their electric bills, and businesses and public facilities (schools, etc.) would save about $300 million. In short, NStar’s high rates effectively impose a “drag” of about $700 million per year on our economy.
The report also found that munis offer comparable or better service reliability than IOUs — something North Central Massachusetts directly experienced after the 2008 ice storm. It took Unitil up to two weeks to restore power to its customers, but munis had power back in days — and more local control — munis move wires underground, but IOUs will do it, if at all, only by charging customers an extra 2 percent.
Two bills (H3087 and S1527) that would enable more competition for utilities are currently in committee on Beacon Hill. The proposed legislation is supported by more than 120 organizations (including the Massachusetts Municipal Association, MASSPIRG and Environment Massachusetts) and by more than 2,000 residents who signed a petition asking the legislature to enact the bills.
Specifically, the proposals amend a century-old statute whose obsolete language now gives IOUs a monopoly. Once passed, cities and towns would have the option to replace an IOU with a muni. Competition from possible new munis will put serious pressure on IOUs to reduce their high rates and improve their service. To sign a petition urging the legislature to act on this issue, visit www.tinyurl.com/munipetition.
Mehr is statewide coordinator of the Massachusetts Alliance for Municipal Electric Choice. He can be reached at patrick.mehr@gmail.com.
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