HomeMy WebLinkAbout2004-03-18-UTIL-rpt.pdf 2004 Town Meeting—Articles 26 & 27
Request for$150,000 in FY05 for engineering, economic and legal studies
regarding the feasibility of a Lexington Municipal Electric Utility
The engineering and economic study regarding the feasibility of establishing a Lexington
Municipal Electric Utility ("Muni") to take over from NStar and operate the electricity
distribution system in Lexington would include the following tasks:
1 Determine of which NStar assets in Lexington the Muni would acquire, which would stay
with NStar (e.g., which substations would be NStar, which Muni, and which split; whether
the Muni would need to acquire any rights of way).
2. Review the condition and cost of NStar's assets (mostly poles, wires, transformers, and
substations) that the Muni would acquire. Determine whether the age and condition of the
equipment would pose any special problems or risks for the Muni.
3 Determine whether other costs are likely to be incurred by the Muni for leaving the NStar
system.
4 Review the interfaces between the Lexington Muni and NStar's transmission system (at
substations) and NStar's distribution system at the borders with Lincoln, Bedford,
Winchester, Woburn, Arlington, and Waltham. Determine where reconfiguration or new
metering would be necessary, and estimate the costs.
5 Project approximate capital investments necessary to improve delivery reliability in
Lexington.
6. Estimate Lexington's load profile from the mix of customers.
7 Investigate whether the Lexington Muni would be likely to purchase power to meet its load
at prices below (or above) the costs of NStar's standard offer service, and estimate the
potential magnitude of the difference.
8. Establish time line and costs for pre-operational start-up activities (hiring, training,
purchasing trucks and equipment, establishing offices and garage facilities, etc.) for the
Muni.
9 Project annual costs of the Muni, including staffing, infrastructure and equipment needs,
repayment of the initial bonds for acquiring NStar's assets, start-up costs, capital
improvements, paying off Lexington's remaining share of NStar's stranded costs, and
maintaining funding for energy efficiency and renewable energy
10 Develop a representative set of Muni rates to cover the Muni's annual costs, and compare to
NStar's rates expected for the next several years.
An example of an engineering and economic feasibility study for a Muni is available at
help /www ci.winter-park.fl.us:20021new-srprsreleases;Black 'Veatch�study pdf.
Based on an estimate provided by RW Beck in 2001, we estimate the cost of such a
feasibility study to be $120,000-130,000
In addition, legal work would be conducted around the following issues, as necessary-
1 Outline options for the Muni's governance structure (e.g., number of light commissioners;
whether the light commissioners are the Selectmen, are elected or appointed, or some
combination, the length of light commissioner terms; the relationship of the light-plant
manager to the Town administration).
2. Determine procedural requirements in the formation of the Muni, and the order of those
steps. giving NStar notice of our interest in negotiating a buyout, filing with DTE, obtaining
other licenses, registrations and permits (FERC, ISO-NE, DTE, state and federal licenses for
hazardous materials, employee safety, vehicle ownership, etc.); providing for employee
benefits, payroll tax payments, etc.
3 Set out order of authorization steps within Lexington. establishing legal structure, getting
TM and BOS votes (and a debt-exclusion vote, if required), selecting first Board and
Manager, etc.
4 List and describe documents and agreements that will be necessary• contracts for delivery
from NStar of power at substations, and both to and from NStar at borders; agreements with
neighboring Munis for mutual aid, transfer of ownership and rights, contracts with other
users of the poles, rates, contracts or tariffs for marketers selling power to customers in
Lexington
5 Identify NStar's potential challenges to municipalization, and advise on Lexington's
potential responses and (as necessary) preparations.
We estimate legal costs to be in the order of$20,000—$30,000
If forming a Lexington Muni appears to be advantageous, and the Town proceeds with that
option, additional expenses (legal, more detailed start-up support studies, etc) will be necessary
during the roughly five years before a Muni can be operational in Lexington. If a Lexington Muni
is established, the Muni would reimburse the Town for the $150,000 study costs and any
subsequent development costs.
The feasibility study will be undertaken only after bill H1468 is enacted.
Prepared by Paul Chernick, Chair Electric Utility Ad-hoc Committee March 18, 2004