HomeMy WebLinkAbout2003-03-26-UTIL-rpt.pdf Electric Utility Ad Hoc Committee
Report to the 2003 Town Meeting
The Selectmen appointed the Electric Utility Ad Hoc Committee on February 4, 2002 with
the following charge: "The Committee is charged with evaluating the options available to
Lexington to improve the reliability and reduce the cost of electrical service. The Committee
shall evaluate all options available to the Town regarding improving the reliability and cost of
electrical service with the understanding that Town Meeting has already provided some
flexibility, if warranted, with the passage of Articles 37 and 42 at the Annual Town Meetings of
1996 and 1997 In addition the Committee shall evaluate the performance of the current electric
utility and its compliance with all state and federal statutes in relation to performance and
service, and shall make all necessary recommendations to ensure future performance and
compliance."
Since it was appointed, our Committee has met 13 times, starting on February 13, 2002 and
most recently on March 11, 2003 In addition, various members of our Committee have,
individually or in small groups, gathered data, worked with the utilities, regulators, other
municipalities, and other interested parties; and performed analyses.
Our work has focussed on seven areas:
• reducing the cost of electricity for Town accounts,
• town-wide aggregation of power supply,
• reliability of power delivery,
• double poles,
• municipalization of the electric distribution system in Lexington,
• possible power generating facility at Hartwell Avenue,
• public outreach and community information.
Reducing the Cost of Electricity for Town Accounts
Lexington Town government(including the schools) pays NStar about $1.5 million
annually for 11.8 million kWh of electricity The top 14 facilities—nine schools, Town Offices,
police station, main pumping station, DPW barn and Greeley village—represent 88% of those
expenditures.
Our Committee is pursuing two approaches to reducing the Town's electric bills:
1. Reducing our NStar bills by ensuring that each of our 80+ accounts is on the proper NStar
rate and combining multiple accounts at a facility NStar has already reimbursed the Town
$25,000 because the High School was billed incorrectly under "Default service" which is
more expensive than "Standard Offer;" we expect other reimbursements from NStar.
Monthly meetings will be held with NStar's account executive responsible for Lexington to
further optimize the billing of all of our Town accounts by NStar
2. Reducing our generation charges by competitive procurement of power for the Town
facilities. Our Committee and Town staff are monitoring the bidding process run by the
State's Health and Education Facilities Authority (HEFA). So far, electricity markets have
been such that no HEFA bid has been preferable to NStar's Standard Offer We will
continue to monitor whether any competitive suppliers can offer us more attractive
wholesale electricity prices than NStar
Town-wide Aggregation
Currently, most electric customers (including the Town) purchase generation services from
NStar at its "standard offer" or "default service" rates. In addition to selecting an alternative
supplier for the Town's generation services, the Town has the option of purchasing power for all
electric customers in Lexington (other than those who have selected their own supplier). Town
Meeting authorized that action in its approval of a municipal utility in 1996 and 1997 NStar
would continue to own the wires, deliver the power, and provide billing services.
At this point, high fuel prices and uncertainties about recent changes in New England
electric pricing rules, market prices are higher than NStar's standard offer. We will continue to
monitor the wholesale electricity markets to determine whether town-wide aggregation becomes
an attractive option. If we decide to proceed, we would seek bids from a number of generation
suppliers, who will determine the costs of serving the particular mix of loads that the Town
would be aggregating.
NStar has provided a summary of its sales to customers in Lexington. Overall, 408 million
kWh are used annually in Lexington, at a cost of about $38 million for 2002, of which about $20
million is for generation charges. The 30 largest commercial accounts use about half the total
electricity, some 10,900 residential customers use a quarter, and 1,700 smaller commercial and
Town accounts make up the other quarter
NStar has also provided a list of its largest individual accounts in Lexington which we will
use to contact those customers, should town-wide aggregation become an attractive option, so
that potential competitive suppliers can determine which of these large customers will want to
participate in the aggregation.
Reliability
On May 31, 2002, our Committee sent a letter to NStar's Chairman and CEO (and other
NStar staff) requesting specific information that would allow us to determine whether NStar
provides acceptable levels of reliability in Lexington, and to understand the origin of our major
reliability problems. NStar responded on October 9, 2002.
We will be seeking additional information from NStar, as their answer was incomplete
around several issues, most notably lacking a detailed analysis of which individual circuits have
the most frequent outages in Lexington and proposals to improve the reliability of those circuits.
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Double Poles
When utilities replace poles, they typically leave the old pole connected to the new pole,
while they transfer wires and other equipment from the old to the new pole. While necessary as
a temporary measure, these "double poles" are unsightly and potentially dangerous. State law
(MGL Ch.164 §34B) requires that double poles be eliminated within 90 days. The utilities that
own the poles in Lexington (NStar and Verizon) are in violation of this statute at about 400
locations, out of a total of some 6,400 poles in Lexington.
Our subcommittee dedicated to double poles met seven times with the various entities that
use the poles (NStar, Verizon, AT&T Broadband, RCN, and the Fire Department) between
March and September, 2002. This process, assisted by the efforts of a Lexington resident who
drove every mile of our streets to locate double poles, has helped NStar and Verizon create an
accurate database of double poles in Lexington which is accessible online by the various
entities. The database allows each entity to know on which specific double poles it must next
transfer its wires and equipment (such transfers must be done in a fixed order, from the top to
the bottom of the pole).
Even with this information, the utilities have not yet substantially reduced the number of
double poles along our streets because double poles are not a high priority for them. The Town's
only recourse would be to hire contractors to remove the double poles, and bill the utilities for
the expense. We have received a commitment from Verizon (which is responsible in Lexington
for the overall management of utility poles) that 20 double poles will be removed each month.
Verizon will provide biweekly updates regarding double poles so that we can closely monitor
progress (or lack thereof) towards reducing the current inventory of 400 double poles down to
acceptable levels within the next 18 months or so
Municipalization
In Lexington, as in most Massachusetts communities, electricity is delivered by investor-
owned distribution utilities, in our case, by NStar (formerly known as Boston Edison). But in 41
cities or towns in Massachusetts, a "municipal light plant" ("Muni") owned by the city or the
town exists instead of an investor-owned utility the Muni owns and operates the local electric
distribution system (poles, wires, transformers, substations, etc), delivers the electricity and bills
its customers. Just like investor-owned utilities, these Munis purchase their wholesale electricity
from competitive generators. Near us, Concord, Belmont and Wellesley each have a Muni.
Munis have generally charged much lower rates than NStar we reviewed the 15 Munis in
the greater Boston area that are similar to Lexington in size and found that over the past ten
years, these Munis consistently offered lower rates than NStar, on average 24% lower for
residences and 10% lower for businesses.
Munis also generally provide better service reliability (fewer outages) than investor-owned
utilities: this is confirmed by nationwide satisfaction surveys which show that customers prefer
Munis over investor-owned utilities and from the personal experience of Lexington residents
who are familiar with Concord or Belmont.
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Based on the financials of the Concord Muni, our initial analysis of the costs to the Town
of purchasing NStar's distribution assets in Lexington and of operating a Muni suggests that
Lexington residents and businesses might save $6-8 million per year overall. Each household
would save 20-25% on its electric bill, which would drop to $75-80 instead of the current
$100/month charged by NStar.
Other advantages exist if Lexington had its own Muni. For example, the Muni could deal
directly with removing double poles, improving reliability and implementing other projects the
town may undertake, such as Concord's multi-decade plan to put the infrastructure underground.
Considering the high costs and poor quality of NStar's service, and the other advantages a Muni
could provide, we believe that the Town should continue to explore formation of a Muni.
Chapter 164 of the Massachusetts General Laws describes the century-old process through
which a town can establish its muni by acquiring the assets of the existing utility This law is
outdated and vague about the municipalization process. To simplify and facilitate future
municipalization, we drafted a bill (H1468) to clarify Chapter 164 with the support of other
towns including Brookline, Arlington and Bedford. The bill's chief sponsor is Representative
Dan Bosley, the author of the 1997 Electricity Restructuring Act and it is co-sponsored by 7
other Representatives, including Jay Kaufman and Tom Stanley
We are working to ensure passage of this bill by generating support among other
Massachusetts cities and towns: if municipalization becomes a practical option for a city or
town, it may encourage existing utilities to improve their service and lower their rates, avoiding
the need to actually form a Muni. Several additional towns, including Brookline, Arlington,
Bedford, Stoneham and Burlington, have joined in supporting this bill.
Once the bill is enacted, further studies will be necessary to confirm the feasibility and
costs of establishing a Muni in Lexington, including:
• Engineering analysis of the assets that would be purchased from NStar, required
improvements and the cost of rearranging shared facilities.
• Economic analysis, including better estimates of the costs of the purchased plant,
staffmg, equipment and financing, and savings from NStar rates.
• Legal analysis of the provisions in State law for formation and governance of a Muni, and
other issues involved in untangling our system from NStar's.
Our Committee expects to recommend that the Board of Selectman include in the initial
versions of the FY05 budget (next year) an appropriation of$150,000 to allow the Town to
proceed with the engineering, economic and legal feasibility studies that would precede a
decision to form a Muni, if bill #H1468 is enacted.
Possible Power Generation Facility at Hartwell Avenue
The Town's Hartwell Avenue property (old landfill) may have attributes that make it
particularly well suited as a site for a power generation facility Several developers with
experience building peak power generation facilities have recently expressed interest in that site.
Our committee has discussed this possibility with the DPW Facility/Senior Center Re-evaluation
4
Advisory Committee. Members of our two Committees and DPW staff, have met with a
potential developer to explore this idea.
The Hartwell Avenue site is an attractive location for electricity generation, and possibly
quite unique in the greater Boston area, for three reasons.
• The Tennessee natural gas pipeline passes right by the site, and could provide fuel to a
power plant.
• The power from the plant could be delivered to the regional electric transmission system
through NStar's existing 250-megawatt Hartwell Avenue substation located next to the
property This would more than accommodate the amount of electric generation likely to
be developed at Hartwell.
• This site, like all of Lexington, is located in the Boston load pocket, an area with greater
electric load (i.e. demand) than supply and with limited ability to import power from
other parts of New England because of limitations in the capacity of existing electricity
transmission lines.
Moreover, a power generation facility would fit in well at Hartwell Avenue:
• There are no close residential neighbors, reducing costs of mitigating noise and
appearance concerns.
• A moderate-size plant would require only a fraction of the 25-acre site (about 6 acres for
90 megawatts), and would not preclude other uses for the site, such as a relocated DPW
facility
• A power generation facility does not create any significant vehicular traffic.
While some may be surprised that Lexington would be a suitable location for any power
generating facility anywhere in town, this location and the generation technology that would
make sense at Hartwell Avenue would minimize the normal siting concerns. The facility for that
site would use one or several gas turbines, much cleaner than older oil- and coal-burning plants.
They burn primarily (or exclusively) natural gas and produce mostly carbon dioxide and water,
along with a very small amount of nitrogen oxides. Gas turbines require exhaust stacks (which
might be 50 to 100 feet high), and in cold weather the water vapor in the exhaust would be
visible as a white plume. (Market electricity prices are not usually high enough in the winter to
justify running this sort of plant. This facility would run during peak hours of electricity
demand, or 15-20% of the time, mostly during the summer) Gas turbines produce some noise,
which would be moderated by the isolation of the Hartwell site, especially since noise levels can
be reduced with engineering and landscaping.
The potential advantages of a generation project on this site to the Town include some
combination of:
• Revenue from real-estate/property taxes or payments in lieu of taxes. a facility of this
type would cost in the order of$60 million to build.
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• Assistance in building the DPW facility, if it is relocated to Hartwell Ave, and the future
garage/warehouse facilities for a Lexington Muni (if the town creates one) which could
also be co-located on this site.
• Discounted electricity for Town buildings.
• A slight reduction in the market price of electricity, due to the improved supply-demand
balance in the Boston area. That would benefit Lexington residents on default service or
competitive power supply whenever their contracts are up for renewal, and all customers
when standard offer ends in 2005 or the Town initiates aggregation, or if the Town forms
its own Mimi, whichever comes first.
Our Committee expects to assist the DPW Facility/Senior Center Re-evaluation Advisory
Committee in issuing a Request for Information from potential developers for a power
generation facility or other facility that might share the Hartwell Avenue site with the Town's
potential uses to produce cash flow or other benefits to the Town.
Public outreach and community information
We have held several informational meetings for the public at large (Clarke School, Senior
Center, Belfry Hill, Merriam Hill and East Lexington Neighborhood Associations) and for the
business community (Business Partnership, Rotary), regarding the work of our committee,
particularly around the idea of forming a Muni. The possibility of having a power generating
facility at Hartwell Avenue was not presented because this possibility has emerged only in the
past few weeks.
We contributed 4 pieces which were published in the Lexington Minuteman, on the
following topics: overall areas of work of our Committee; double poles, how to read your
electric bill, and formation of a Muni in Lexington. The Boston Sunday Globe NorthWest
section has published several pieces about our committee's work.
3/26/03
6
Electricity.from the power plant to your house Town accounts: reducing the Town s NSTAR bills
Lexington pays NSTAR about$1,500,000 annually for about
.,.„� 12,000,000 kWh/yr in over 100 accounts(including the schools)
,.,- e<-^'°" "' 'd.' ,..,4--04, :40'. - Most of that is for our 9 schools,Town Offices,police station,main. ', pumping station,DPW barn,and some housing projects
Glnaatb>n Df Transmission:otstNMMon ,— We are seeking ways to reduce those costs through a review of
e:leelnaty
— our NSTAR bills to ensure that each account is on the proper rate,to
correct billing errors and to combine multiple accounts at a facility
`—__Thr-----J'`—___„c--2 we received an initial$25,000 refund from NSTAR'the High
Power plants&very high voltage Imes: Substations,poles,wires School was incorrectly billed under the more expensive
"Supplier services" "Delivery services"by NSTAR "Default' rather than 'Standard' offer rate
(formerly Boston Edison)in Lexington additional refunds expected as we further study NSTAR's billing
— prices from alternative power suppliers(Supplier services)
nisi.Utility Ad hoe eomaete(Wali 2OW) lane.UMity Ad hie Commute(March 2003)
PubliclyOwned Utilities in the US (1998) �� : ">
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Muni rates are lower than NStar's Munis offer better service than NStar
In 2001,a typical Lexington household paid NStar 28%more than Residents familiar with Concord,Belmont and other Munis generally
Concord residents for the same electric consumption report fewer outages than in Lexington
— a difference of$280 per year per household In the 1997 April Fools snowstorm,the Belmont Muni had restored
service to all its customers while NStar was still seeking assistance
Over the 10-year period 1992-2001,the 15 Boston-area Munis from neighboring utilities
comparable in size to Lexington(with 7,500-15,000 customers For the 10-year period 1991-2000,the Massachusetts Mums that
Concord,Belmont,Wellesley,Wakefield,Peabody,Norwood, participated in the APPA reliability survey report 40%fewer outage
Braintree,Danvers,Hingham,Hudson,Mansfield,Marblehead, minutes for the average customer than does NStar
Mlddteboro,North Attleboro,Shrewsbury),offered Customer-satisfaction surveys consistently rate Mums above investor-
- for residences,rates Iowa than NStar's by 14%to 35% on owned utilities,for example,the nationwide RKS Emergency
average 24%lower than NStar's Response Benchmark Survey(October 2000—March 2001)
Investor-owned utilities Mums
— for businesses,rates on average 10%lower than NStar's
Residential customers 94.15 10302
Commercial customers 98.36 105 66
Them Utility Ad We Cme.e(WA Nal) Saint Utility Ad hoe Comms a(March 2003)
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Preliminary economics of a Lexington Muni Forming a Lexington Muni. next steps
Need to purchase NStar's infrastructure in Lexington Bill#H1468 clarifies the-municipalization process(MGL Chapter 164)
- utility must sell its assets,once a tau value has been set
- around$30-40 million financed with a 20-year bond,which would be
reimbursed by the Lexington Mum out of its revenues -Representative Dan Bosley chief sponsor with 7 co-sponsors
- support from several towns Brookline,Arlington,Bedford,
Our initial analysis suggests that the Lexington Muni could offer Stoneham,Burlington,others(Winchester,Woburn,Lincoln,Cape
- residential rates 19-24%lower than NStar's Cod communities,etc)
a nature Mimi bill of 575-80 per month Instead of the current Engineering feasibility study of municipalization
NStar bill of$100/month for a typical household -value of NStar's infrastructure in Lexington
- commercial,municipal and industrial rates 9-14%lower than NStar's - economics of a Lexington Muni operations
- overall,savings for Lexington residents,businesses and the Town of - confirm savings for residents and customers
$6-8 million pa-year - $150,000 estimated cost;will be requested next year
equivalent to 1-2 oven-ides Article 13 motion initiates the process as per Chapter 164
- Town Meeting to reaffirm its two votes from 1996 and 1997
asaitus,ry Ad h.,c ea.Dams soon a.m..USiry Ad hoe Cemme•(Mad 20031
Power generation at Hartwell Avenue?
Greater Boston area is"congested" leading to higher electricity prices Double Poles
- not enough power generation - i r ati '
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- not enough transmission lines to import power . ..;:,� �u�f�� }H aa �w.-.G7'�rgzj���t p;,
Hartwell Avenue site has: 1+$ Aro.,, FIt
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- a high voltage 250 MW NStar substation tai-.'.i '-.,..., tea.i"t `i;e4-;7. i\4\V,
Initial interest from one developer _ - - .r "-u.,- - i tit Crtsa„iri+' ,`fo7\I
- to build a 90 MW peak power generation facility(2 or more gas - -- h .i �e:`(" `t r .r • re 'ems- !u� Ntl
turbines)on 6-8 acres of this 25-acre site ;lv., �qr `.. � e .
a$60-100 million investment « i j,`+�b
- could be co-located with a new DPW facility(5 acres)and a future �`C �.a� �prr,.�a�,, a�{t'tg,Lf l'
Lexington Mud facility(1-2 acres) "3r„' ^i 4 "s.� +i=�-W�.
- in exchange for providing the land,One Town might get the DPW ,d err t • >CTegt?i„'wep4.
facility for free i. -.2./...,::S`gdr,{ Art t g1;211.i �r \k x`+"11 Ca
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