GELD's New $4 Million Facility Won't Require Rate Increase Thanks To 20 Years of Saving
Over the last two years, most Massachusetts towns have been confronted with huge increases in electric rates, while Groton's rates remain dramatically below most towns. "Neighboring towns, towns serviced by national providers, have seen electric rates increase 40 percent over the last two years," GELD Manager Kevin Kelly said recently, reporting that "Groton's rates for the previous 12 months are 84.4 percent below Unitil and 55.2 percent below National Grid."
Despite enjoying very attractive rates, some Groton ratepayers have expressed concern that completion of GELD's new $4 million office and garage facility on Station Avenue could require rate increases to cover construction debt. Asked about the possibility of such a need, Manager Kelly said, "The old facilities were antiquated, inefficient and inadequate." But, he said that farsighted GELD commissioners had anticipated the eventual need for replacing the garages and offices, explaining. "About 20 years ago, a building fund was set up, with an average of $100,000 deposited in the fund each year. This prudent plan resulted in a $2 million pool of money we used as the down payment for our new facilities."
Kevin Kelly explained that GELD borrowed the remaining $2 million, with a debt service cost over the next 20 years of about $140,000 per year. "So, in rough terms" he said, "we paid for half the building over the past 20 years, and now we'll pay for the other half over the next 20 years." Because of this prudent long-rage planning, there will be, "a minimal impact on our cash flow," said Kelly, thus leaving rates stable.
Talking about GELD's longer-term financial outlook, Kelly said, "Our long-term outlook is very favorable, especially compared to our neighbors; our nuclear debt will drop substantially at the end of 2016 and disappear in 2017. As this occurs there will be even greater discrepancy in rates between us and surrounding towns."
Kelly said that some components of GELD's costs - costs reflected in customer rates - are expected to rise over the next several years. In particular, transmission costs - costs to transport electricity from generators to GELD's substation - are expected to continue their steady rise. He explained, "These costs have increased four-fold over the last 10 years, going from approximately ½ cent to over two cents per kilowatt-hour, with additional increases expected over the next five years. Capacity costs, too, are expected to increase three-fold over the next four years. So-called 'Capacity Costs,' are the costs for GELD's contribution to New England's one peak hour each year, resulting in an additional $1 million per year in costs for GELD ratepayers. These unavoidable expenses represent about a 12 percent increase in GELD's total costs.
Even though Groton's electric rates are stable and lower than most Massachusetts communities, the long-term outlook for the New England region is not so good. Kelly says, "The restricted ability to transport natural gas into the region during the winter months makes us dependent on world oil and LNG markets to determine our cost of power during the colder part of the year. While the rest of the United States is seeing an energy renaissance," he said, "electric costs in New England will be subject to world oil market prices."
Summarizing his view of future electric rates in Groton, GELD Manager Kelly said, "Groton ratepayers will probably see rates increase slightly over the next five years, but due to many prudent decisions made over the last decade and more, that rate of increase will be substantially below that of our neighbors."
