I-TEAM: How do municipal owned electric utilities keep prices down?
(WFSB) - Channel 3 Eyewitness News continues to ask questions about why your electric bills will be skyrocketing this winter.
Last week, Eversource and United Illuminating announced electric rates would be going up by 48% because of high fuel costs.
But how do other utility companies in the state manage to keep costs down?
Across the state, there are around 5 municipal utility companies, companies like Wallingford Electric and Norwich Public Utilities.
While their prices have gone up as well, they’re nowhere near as high as companies like Eversource and UI.
DIFFERENT COMPANIES, DIFFERENT STRATEGIES:
It all comes down to strategy.
“It’s just a different way to operate and it’s proven to be very effective for our customers,” says Riley with Norwich Public Utilities.
Riley says because the utility is not for profit, and owned by the city, their business model allows them to keep rates lower.
Norwich public utilities provides 4 utilities to the City of Norwich: natural gas, electric, water and wastewater collection.
“It’s localized, it’s very responsive to customers’ needs. We don’t have shareholders,” says Riley.
This winter, customers who receive all four services will see a 10% increase.
If you’re just electric, 12% or 17 dollars a month.
“It comes down to our business model. We purchase our electricity through the CT Municipal Electric Energy Cooperative,” says Riley.
HOW IT WORKS:
Dave Meisinger is the CEO of the CT Municipal Electric Energy Cooperative.
The Cooperative purchases the electricity for all its members (which includes all but one of the municipal owned utilities in the state) wholesale, and then sells it to the municipalities, at cost.
The cooperative is buying from the same energy generators, traders and brokers in the wholesale market, as UI and Eversource, but follow a different, self-created strategy.
They have the flexibility to buy power when they want, for periods that are further out in time, whereas Eversource and UI are buying it on predetermined dates and for closer periods in time, which they have to do because of regulations.
“We basically follow a strategy where we go out from time and time, and we’ll typically look as much as five years out at what our forecasted load is, and we will procure energy as far out as 5 years,” says Meisinger.
This strategy allowed them to get somewhat ahead of the whole sale market volatility by hedging short-, medium- and long-term contracts to supply power to member municipalities.
Riley explains how it works: “If you were to buy electricity, just today, just for your home, by yourself, the cost would be enormously expensive through the roof. But if you buy a contract that buys a little bit of it today, a little bit of it 6 months ago and a little bit based on what the price may be in 2 years, you hedge a bit, that moderates, you won’t see as big as increase or as big a decrease, it stabilizes it a bit.”
The Cooperative also holds reserve funds for each municipal utility, which the municipalities can then use those to offset costs that would otherwise be directly passed through to retail customers in real time.
In Norwich’s case, their business model also has them returning 10% of their revenues to the city each year.
“That helps us keep our rates lower and also helps them to provide a bit of tax relief for the residents of Norwich,” says Riley.
Now you can only use municipal utilities if you live in the municipality, but if you want to look into other options than Eversource or UI, you can visit energizect.com for third party options.
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