Forming a Municipal Power Company

Newton residents are currently paying significantly more for electricity than is necessary. State law allows municipalities to form their own power companies and 41 cities in Massachusetts have done so. Residents in Massachusetts municipalities that have municipal power companies pay on average 24 percent less for their power than residents in municipalities that rely on private utilities.

The users of municipal power companies also report that they receive better service than those who use standard providers.

The residents of the city of Newton would likely see reduced electricity costs on the order of 20 percent while business would see a reduction of around 10 percent because of their preexisting lower rates. The establishment of a municipal power company would also reduce power outages and other problems because the city would be in charge of its own electricity infrastructure and can upgrade more quickly than if the standard providers are responsible for upgrades. The city government would likely reduce its electricity costs by 15 percent under a municipal power company.

Having a municipal power company would also give Newton a great deal of flexibility in generating clean energy.

Summary of Proposed Solution

Newton should establish a municipal power company.

Implementation Plan

Before beginning the process of establishing a municipal power company (muni), Newton should work with other cities and towns to support legislation that will simplify the process, which is currently very complex and uncertain. In order to establish a muni, Newton will need to purchase the infrastructure from the existing owner (NSTAR). In this process, the state Department of Telecommunications and Energy would set an arbitrated price for the value of the infrastructure after both the city and the owner provide estimates. The City would have to hire an expert to asses the value of the infrastructure prior to asking for the state arbitration. Under current law, the owner does not have to accept the state’s determination and the city might have to negotiate for a fair market price.

In addition to supporting the proposed state law revisions that would address these problems, Newton might consider filing a home rule petition with the legislature, as was done in Lexington.

Once a purchase price is agreed to, the municipal power company issues bonds to pay for the purchase and any upgrading of the infrastructure system and uses the revenue from customers to pay for off the bonds. The City would need to hire the necessary employees to run the muni and to repair and upgrade the electrical system. This will be a long term process and may take several years before any cost savings or new revenue for the city is generated.

While this is a long-term project, the potential benefits to the city and its residents are enormous. The average resident could see a 20 percent reduction in electricity rates, while the city would likely experience a 15 percent reduction and business would save about 10 percent. A municipal power company would also result in improved service and increased availability of green energy.

A reasonable goal would be to file an application to create a muni by January 1, 2015.