New Munis Must Provide Choice

By Cynthia A. Arcate 9 February, 2012

Every few years, the idea of taking electric distribution service public through municipalization of the low voltage poles and wires gets some traction and stirs debate about who can provide better service at lower rates – the investor-owned electric company or a publicly owned municipal light plant (MLPs).

There are several dozen MLPs, or as they are commonly known, “munis” in Massachusetts – all created many decades ago. As a group, they have a long history of providing good service at reasonable rates to their communities. So when prices spike or when local utilities fail to restore service quickly after bad storms, the old debate resurfaces about how the munis always seem to be doing a better job.

As someone who spent 15 years working for an electric utility (including five years in the field working to restore service after bad storms), it’s tempting for me to opine on the current debate raging about whether the state’s utilities performed so badly that either their shareholders should pay a penalty or their territory should be sold off to new MLPs. But I’m not going to go there. The utilities can take care of themselves in this regard.

I think there is a more important dimension to remember in this post-electric industry restructured world. All current customers with choice of electric supplier should continue to have that choice. The Electric Utility Restructuring Act of 1997 gave all customers choice except customers of existing MLPs. Over the years, the fact that MLPs were also exempt from contributing to the cost of developing energy efficiency programs and renewable energy under the law has created complexities.

Pending legislation which would make municipalization easier addresses those inequities by requiring new MLPs to be subject to the Renewable Energy Portfolio Standard and energy efficiency three-year plan requirements, as well as contribute to the statewide renewable energy surcharge. What’s glaringly missing is the requirement to allow customer choice of electric supplier.

Part of the reason MLPs were exempt from restructuring was that, just like utilities, they would have had to unwind long term contracts and, in many cases, financial investments in power plants in order to provide customer choice. In essence, the MLPs had above-market electric supply costs or so-called “stranded costs” just like the utilities did. At one time, some MLPs had higher rates than the utilities because they had invested heavily in nuclear plants.

So, in the haste of putting pressure on the investor owned utilities to shape up or lose the business, let’s make sure new MLPs enter the electricity world on the same playing field in all respects. New MLPs should have to deal with all of the requirements of local distribution companies, including choice. That means all of the electronic transfer requirements to provide usage data to suppliers and the Independent System Operator, Basic Service for customers not on competitive supply and allowing customers to participate in demand response (something else the MLPs don’t currently do). I say all of this not to put a wet blanket on the idea of new MLPs but because customer choice must be defended to have a thriving, successful marketplace of competition.

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