MMA urges support for bill to facilitate establishment of municipal utilities

The Honorable Thomas A. Golden Jr., House Chair
The Honorable Benjamin Downing, Senate Chair
Joint Committee on Telecommunications, Utilities and Energy
State House, Boston
 
Dear Chairman Golden, Chairman Downing, and Members of the Committee,
 
On behalf of the cities and towns of the Commonwealth, the Massachusetts Municipal Association strongly urges you to issue a favorable report on H. 2866, an Act Relative to the Establishment of Municipal Lighting Authorities, sponsored by Representative Stephen DiNatale. This legislation would ensure that all municipalities have a new choice or option regarding the distribution of electricity, expanding to all communities a vitally needed form of competition in this costly segment of the utility industry.
 
According to a 2010 report from the Department of Energy Resources, electricity rates at municipal light departments (“munis”) are demonstrably and consistently lower than at investor-owned utilities (IOUs). In fact, in 2006 alone, rates offered by municipal light departments were lower by 30 percent. Because this 30 percent savings is a comparative analysis, and may not reflect the market and exact savings in every locality, H. 2866 provides a process that includes an in-depth economic feasibility study and analysis to be presented to the DPU to ensure and document the benefits and viability of this undertaking. The legislation presents a very balanced and reasonable framework that has the potential to provide major savings to taxpayers and consumers across Massachusetts.
 
This measure has widespread and enthusiastic support. In the past, 120 individual cities and towns from across the state have voted to support similar legislation.
 
The legislation would amend a century-old statute that has made it impossible for municipalities to acquire the assets of an existing utility and establish a municipal light authority. Currently, any IOU can choose not to sell its assets to a municipality at the price set by the DPU. The only current “remedy” is to allow a municipality to establish its own redundant distribution network, duplicating the IOU’s. At the turn of the last century (1900), that may have been feasible, but establishing a second network infrastructure is clearly uneconomical and virtually impossible today. Municipal officials cannot realistically propose doubling the number of poles and wires in a community when that infrastructure already exists. As a result, it is not practical for any community to even conduct a feasibility study to establish a municipal light facility absent the legislative relief that H. 2866 provides.
 
This antiquated anti-consumer statute is the reason why no city or town in Massachusetts has acquired an IOU’s assets and formed a municipal utility since 1926. H. 2866 would repair our currently flawed statute, and thus would benefit all consumers, including municipalities, residents and businesses.
 
The MMA strongly endorses this legislation because the measure would provide a reasonable option to allow communities to lower their own municipal energy costs (saving taxpayer dollars), and would reduce the energy expenses borne by residents and businesses at a time when high energy costs are dampening our state’s economic competitiveness.
 
Under the legislation, if the municipality and the distribution company fail to agree on a price, the municipality would submit an initial filing to the DPU. The DPU would then determine the value of existing utility assets based on a standard formula developed by the department in subsection (d) of the bill. The MMA is opposed to specific language in section (d) that would dictate to the DPU how to determine the value of the utility assets (specifically the inclusion of stranded costs). We believe the legislation should only provide guidelines, not requirements, to the DPU regarding asset valuation.
 
Once the DPU determines a fair value of the existing utility’s assets in a community, the utility would be required to sell to the city or town if the community so requests. After the value has been set, communities would conduct a detailed feasibility analysis and decide whether to form a municipal facility based on their findings and on the benefits to residents and consumers. Finally, there would be a town- or city-wide approval vote at the end of the process.
 
In addition to the benefits to municipalities and residents, the prospect of competition may compel IOUs to work harder to reduce their rates. Competition is good for the consumer, and any tool the Legislature can provide to cities and towns to help reduce energy costs and provide savings to their residents is certainly in the public interest.
 
We urge you to support the prompt passage of this important legislation. If you have any questions, please do not hesitate to have your office contact me or MMA Senior Legislative Analyst Tom Philbin at any time.
 
Thank you very much.
 
Sincerely,
 
Geoffrey C. Beckwith
Executive Director & CEO, MMA