MMA letter to Committee on Telecommunications, Utilities and Energy urging support for municipal electric bill

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The Honorable John Keenan, House Chair
The Honorable Benjamin Downing, Senate Chair
Joint Committee on Telecommunications, Utilities and Energy
State House, Boston

Dear Chairman Keenan, 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 to H. 869, an Act Relative to the Establishment of Municipal Lighting Authorities. 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.

Last June, the Joint Committee on Telecommunications, Utilities and Energy issued a favorable report to similar legislation (H. 4792).

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 munis were lower by 30 percent (DOER report, exhibit 11, p. 34). DOER notes that some new munis might not be able to replicate such low rates. That is why H. 869 would require a city or town that considers forming a municipal light department to present an in-depth economic feasibility study to the DPU to ensure viability.

This legislation has widespread and enthusiastic support. One hundred and twenty individual cities and towns from across the state have voted to support this legislation. Twenty of your colleagues have co-sponsored the bill this year, as did many in previous sessions. The administration has indicated its support.

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 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. 869 provides.

This is why no city or town in Massachusetts has acquired an IOU’s assets to form a municipal utility since 1926. Updating this statute is good for all consumers, including municipalities, residents and businesses.

The MMA strongly endorses this legislation because it would provide a reasonable option to allow communities to lower their own municipal energy costs (saving taxpayer dollars), and it would reduce the energy costs borne by their residents, businesses and industry during very tough economic times. Under the legislation, once the DPU determines the 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 benefit to residents and consumers. In addition to the benefits to municipalities and residents, the prospect of competition may result in IOUs working harder to reduce their rates. 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.

Thank you very much.

Sincerely,

Geoffrey C. Beckwith
Executive Director, MMA