HomeMy WebLinkAbout2002-10-07-UTIL-rpt.pdf Report of the
Electric Utility Ad Hoc Committee
to the Board of Selectmen
October 7, 2002
Since it was appointed February 4, 2002, the Electric Utility Ad Hoc Committee has met
eight times, starting on February 13 and most recently September 24 This is an average of
slightly more than once per month.
In addition, various members of the EUAHC have, individually or in small groups,
gathered data, worked with the utilities, regulators other municipalities, and other interested
parties, and analyzed the information we collected.
Our work has focussed on five areas.
• reducing the cost of electricity for municipal accounts
• town-wide aggregation of power supply
• reliability of power delivery
• double poles
• municipalization of the electric delivery system
The following sections discuss the EUAHC's accomplishments and recommendations in
each of these areas in turn.
Reducing the Cost of Electricity for Municipal Accounts
Lexington Town government (including the schools) pays NStar about $1.5 million
annually for 11.8 million kWh on electricity The top 15 facilities—the nine schools, Town
Offices, police station, main pumping station, DPW barn, Greeley Village and Vynebrooke
Village—represent 91% of those expenditures.
Our Committee is pursuing two approaches to reducing the Town's electric bills:
• Reducing our distribution charges, such as by ensuring that each of our 80+ accounts is on
the proper NStar rate and combining multiple accounts at a facility As our next step, we
will meet with the NStar account executive for Lexington. At some point, a few days of a
consultant's time may be required to assist in this process.
• Reducing our generation charges by competitive procurement of power for the Town
facilities. The EUAHC and Town staff are monitoring the bidding process being run by the
State's Health and Education Facilities Authority (HEFA). Once HEFA selects the winning
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bid, the Committee will work with Town and school staff to determine whether the bid is
preferable to NStar's Standard Offer
These efforts may save tens of thousands of dollars annually, depending on the number of
existing billing errors and the price of the competitive market offer
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 by votes at the annual town meetings in 1996 and 1997 NStar
would continue to own the wires, deliver the power, and provide billing services.
Once we see the results of the HEFA bid solicitation, we will have a better sense of how
much Lexington residents and businesses could save through aggregation. 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 us a summary of its sales to customers in Lexington. Overall, the town
uses 408 million kWh annually, at a cost of about $38 million for 2002, of which about $20
million is for generation charges. The 26 largest commercial accounts use half the total energy,
some 10,800 residential customers use a quarter, and smaller commercial and Town accounts
make up the other quarter.
Potential suppliers will need to know whether those 26 big customers will be participating
in the aggregation, so the Town must be able to identify and contact them. At the request of the
Board of Selectmen, the Massachusetts Department of Telecommunications and Energy will
instruct NStar to provide the names of those customers. We have drafted a letter to that effect
which we recommend that you send to DTE.
Reliability
On May 31, 2002, the Town 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 has not yet responded.
On Tuesday, I talked to Joe Nolan, the NStar account representative for Lexington. He said
that the responses had been assembled in June, but had been mislaid. He promised us a response
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within a few days. If that response is not forthcoming, we will draft a letter for the BOS to
consider sending to the DTE, seeking assistance in obtaining the requested information.
Double Poles
When utilities replace poles, they typically leave the old pole connected to the new pole,
while they transfer wires and other equipment. While convenient 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.
Committee members have met seven times with the various utilities that use the poles
(NStar, Verizon, AT&T, RCN, and the Fire Department). This process, assisted by the efforts of
a Lexington resident in driving every mile of Lexington road to locate double poles, has
corrected many omissions and inaccuracies in NStar's database of double poles. The utilities
now have a reasonably accurate picture of where the double poles are, and whose equipment
remains to be transferred.
Even with this information, the utilities have not reduced the number of double poles along
our streets. This is simply not a high priority for them. The Town's only recourse appears to be
to hire contractors to remove the double poles, and bill the utilities for the expense.
We have attached a letter that we recommend you send to the pole-owning utilities, asking
them to report periodically to our DPW on their progress (or lack thereof) regarding double
poles and reminding them of the Town's option to correct this problem at their expense. We
hope that such a letter will encourage the utilities to fix this problem themselves.
Municipalization
In Lexington, and most other Massachusetts communities, electricity is delivered by
investor-owned distribution utilities, in our case, NStar (which used to be Boston Edison).
Forty-one municipal-owned light plants, including those in nearby Concord and Belmont, serve
the cities and towns that own them and, in some cases, adjacent communities.
The municipal utilities have generally charged much lower rates than NStar, and appear to
provide better service reliability Our initial analysis of the costs to the Town of purchasing
NStar's distribution property in Lexington and operating a municipal light plant suggests that
Lexington residents and businesses might save millions of dollars, and each household over
$100, annually Considering the high costs of NStar service, the poor quality of service, and
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NStar's reluctance to cooperate with the Town in the various areas described above, the
EUAHC believes that the Town should continue to explore formation of a municipal light plant.
Further studies are necessary to explore the feasibility and costs of establishing a municipal
light plant, including
• A more detailed analysis of the components of NStar's costs.
• 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, staffing,
equipment and financing, and savings from NStar rates.
• Legal analysis of the provisions in State law for formation of a municipal utility, and other
issues involved in untangling our system from NStar's.
The EUAHC has started the process of working with other interested municipalities in
pursuing possible changes in State law that would simplify and clarify the process of formation
of municipalization. The prospect of municipalization may encourage the utilities to improve
their service, avoiding the need to actually form a municipal utility
Our Committee recommends that the Town include in the initial versions of the FY 04
budget 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 pursue formation of a
municipal utility
Attachments
letter to DTE on customer data
letter to utilities on double poles
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