Report will explore creation of municipal utilities

As published in the Record Journal Tuesday November 27, 2012

By Russell Blair
Record-Journal staff
rblair@record-journal.com
(203) 317-2225
Twitter:@RussellBlairRJ

WALLINGFORD — Time and again the town-owned Electric Division has outperformed larger utility companies when it comes to limiting outages during storms and restoring power afterward, and state legislators have taken notice.

At the request of lawmakers, the Public Utilities Regulatory Authority will issue a report by Jan. 1 examining the procedures for creating and expanding municipal electric utilities in the state. In addition to Wallingford, six other cities and towns run their own electric companies.

“We will put everything on the table, what communities would need if they want to start their own utility,” said Rep. Laura Hoydick, the ranking House Republican on the legislature’s Energy and Technology Committee.

Wallingford and other municipal utilities have developed a reputation for keeping the lights on during storms that knock power out in neighboring towns for days. Democratic state Rep. Mary G. Fritz, who represents the 90th House District, said the Cheshire portion of her district loses power at a higher clip than the part of Wallingford she represents.

“I think it’s a good idea,” she said of the report. “I think people feel a strong support for their electric division when they are working directly for them.”

Public Utilities Director George Adair attributes the Electric Division’s success to a consistent tree-trimming program and the type of wires the department has in place. The division uses a wire that is “more tolerant of incidental contact,” he said.

“Having said that, we’re not infallible,” Adair said in an interview earlier this year. “I don’t ever want to create a sense of infallibility. A major storm will produce power outages,” he said. A serious hurricane that brings down trees would be an issue, he said.

The state’s two largest electric utilities, Connecticut Light & Power and United Illuminating, have concerns about expanding or creating new municipal electric divisions. UI representatives said expansion would be costly and complex.

“Municipalities would need to raise billions of dollars, in aggregate, to pay fair market value to acquire electric distribution company systems,” the company said in testimony before the Energy and Technology Committee. “This would burden, or overburden, the available bonding authority of municipalities and mean tax increases to the resident-customers.”

Costs were substantially lower when the Wallingford Electric Division was launched in 1899. Startup costs were $50,000, or about $1.3 million in today’s dollars. While the major utility companies pay taxes on the infrastructure they own in towns, municipal utilities return a portion of their proceeds to town budgets.

Stephen Gilbelli — associate general counsel of Northeast Utilities, CL&P’s parent company — said a municipality acquiring the electrical infrastructure within its borders could disrupt service to other towns.

“Utility facilities do not end at each municipality’s border,” he said in testimony. “A distribution system is composed of an elaborate, intertwined electric grid that serves the entire state. Facilities in one town often are a critical piece of another town’s electric supply system.”

State Rep. Vincent J. Candelora, a Republican representing the 86th House District, said he hasn’t received a complaint about Wallingford Electric in his six years representing the district, which includes southeastern Wallingford, North Branford and portions of Durham and Guilford, but has had constituent concerns about other utilities. The district is serviced by Wallingford Electric, UI and CL&P.

Candelora admitted that it would take “significant capital investment” for new municipality utilities to be formed, but thinks it’s possible the current ones could expand their service areas. Regardless, Candelora said legislators want to learn more about the municipality utilities. “They did so well in storm response, it certainly made it easy for us to take a look at what they are doing and what the for-profit utilities are not doing,” he said.

Information from the Associated Press is included in this report.

State regulators look into expanding municipal utilities

As published in the Record Journal Friday November 23, 2012

By Stephen Singer

Associated Press

HARTFORD — For decades, conventional wisdom has held that when it comes to electric utilities, bigger is better. But after the widely criticized response to two major storms last year, Connecticut is exploring whether small, municipal utilities should take on more of the work done by investor- owned companies.

Regulators are drafting a report as required by the legislature to find out how towns and cities can establish or expand municipal utilities. The state’s largest utility, Connecticut Light & Power, was harshly criticized for restoring power too slowly after Hurricane Irene and the October 2011 snowstorm.

In the aftermath of Superstorm Sandy, CL&P and United Illuminating won approval from state officials for responding more quickly than last year. Still, a review of how to expand or establish municipal utilities is part of a broad response by the legislature and Gov. Dannel P. Malloy demanding greater oversight of utilities, better storm planning, quicker response and fines for performance failures.

“We will put everything on the table, what communities would need if they want to start their own utility,” said Rep. Laura Hoydick, the ranking House Republican on the legislature’s Energy and Technology Committee.

Seven municipal utilities operate in Connecticut: Bozrah, East Norwalk, Groton, Jewett, Norwich, South Norwalk and Wallingford. After last year’s storms, municipal utilities say power outages in their service areas were brief and limited. Their rates are comparable to the larger utilities.

The largest difference between the two sources of power, say supporters of municipal utilities, is that the local companies respond more quickly because they operate close to home and work with hometown emergency workers to keep systems running and restore power quickly.

The debate is the most recent in a fight over public vs. private ownership of power reaching back to the days of Thomas Edison, said Ashley Brown, executive director of the Harvard Electricity Policy Group, a think tank for electricity issues.

Investor-owned utilities began with Edison and municipal power was established as an alternative in the first decade of the 20th century, followed by New Deal public power projects to electrify rural America, he said.

“The fact is the debate has been there since the beginning of the industry,” Brown said.

In Connecticut, the intent now is to improve response time in emergencies.

At the peak of the outages last year’s autumn snowstorm, 830,000 CL&P customers — two-thirds of its customers — were without electricity. Many were in the dark for a week to 11 days.

During Hurricane Irene, 11,500 customers of Norwich Public Utilities — about half of the utility’s base — lost power at the peak of the outages, said spokesman Mike Hughes. The utility restored power to all its customers in three days, and half got it back on in one day, he said.

Hughes said quick restoration is the result of aggressive tree-trimming every four years and strong cooperation among all workers at Norwich’s gas, electric, water and wastewater departments.

“In an emergency, we’re kind of cross-trained,” he said. Hoydick credited a unified municipal approach to quick restoration of power.

“Police, fire and public works are in sync,” she said. “It’s part of the town infrastructure.”

Connecticut’s two large utilities see their industry differently. CL&P told utility regulators that big can be better.

“CL&P believes that there are certain ‘economies of scale’ present when a system is large enough to leverage the experience of its employees and employ sophisticated equipment to operate and maintain its system and spread the costs of operations among customers so that each customer’s share is smaller than it might otherwise be,” the utility said in comments to state regulators.

UI said municipalities would need to raise billions of dollars to pay fair market value for electric distribution systems, which could place too heavy a burden on a municipality’s bonding authority.

The utilities also say they pay state and local taxes and contribute to the state’s energy efficiency fund.

In response, municipal utilities note they return a portion of what they make to the town or city.

Brown said investor-owned utilities can advocate that large operations work more efficiently and municipal utilities can make the case that their operations are more nimble.

“There’s no pattern that defines them,” he said. “It’s a mixed bag.”

The high price for purchasing the assets of investor owned utilities such as equipment and property is among the biggest hurdles to municipal utilities seeking to expand.

“There’s a trend in the discussion,” he said. “Whether there’s a trend in doing anything is another issue.”