EUTG recommends 'standby' role for BIPCo

Fri, 05/20/2016 - 11:30am
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As the Block Island Power Company continues to seek a waiver from the state Public Utilities Commission that will allow it to be both an energy generator and distributor, The Electric Utilities Task Group is recommending that the town support the waiver so that BIPCo can provide “emergency standby generation for Block Island.”

A lengthier discussion was had on the distinction between electrical co-ops and a municipal utility on Thursday, May 12. EUTG Chair Barbara MacMullan said she had spoken with Bill Collet, a consultant with expertise on electrical cooperatives, who she said thought that there isn’t much difference between the two, given the situation on Block Island. He did however feel that a co-op might have an easier time getting financing through the Rural Utilities Service. (Co-ops may be supported by the National Rural Electric Cooperative Association.) 

Although the town is in negotiations with BIPCo to buy the company for $2.7 million, member Bill Penn said he had concerns about municipal financing. “I would like to see the co-op stand on its own.” After a bit more discussion, Penn suggested asking Collet if any co-ops had failed, and, if so, how the default was handled. 

Resident John Warfel said “It could be argued that the co-op model is removed from politics.”

EUTG Member Everett Shorey said that the Pascoag Utility District, as a municipal entity, was “exempted from all state taxes.” 

For either type of entity, enabling legislation needs to be filed with the state legislature, and Shorey said “If it’s to be done this year, it needs to be done in the next three weeks.” One of the problems is that, unlike some of the other New England states, Rhode Island has no electric co-ops. “The Division doesn’t know anything about co-ops. We need to find out if they would be treated the same.”

While neither a co-op nor a municipal entity would operate for profit, BIPCo Co-owner Cliff McGinnes said: “You may not be entitled to a rate of return, but you do need to set up a reserve.” 

MacMullan said the town has a proposal to purchase BIPCo that would be funded by bonding that could then be transferred to a utility association that could be either a co-op or municipal. “In either case the board would be controlled by the ratepayers. The end-goal has always been to create a ratepayer controlled organization.” She also said that she felt that the majority of people didn’t want the town itself to run it. 

Town Manager Nancy Dodge told the EUTG that a resolution for filing legislation was on the Town Council’s agenda for May 18, and later in the meeting Dodge, the EUTG, and Town Finance Director Amy Land went through the wording of a draft. Due to time constraints, they decided that the legislation should allow the town to go with either scenario. 

Penn said that they would still need a “definitive answer on default.” He cited the case of 38 Studios, where the taxpayers of Rhode Island were left holding the bag for $75 million when the company defaulted on its debt. 

“In case of default, there’s a legal answer, and there’s a practical answer,” said Dodge. “There’s no practicality to 38 Studios.” 

Town Facilities Manager Sam Bird questioned what impact bonding for a municipal power company would have on the town’s overall capacity for bonding. Land answered “The town’s total bonding capacity is based on assessed value. We’re nowhere near the cap.”

As far as just who would govern the new entity, Shorey said it should be the ratepayers, not people registered to vote, acknowledging that there was a big difference, with many ratepayers not actually being residents. “One meter, one vote,” he said. 

The draft legislation, called the “New Shoreham Utility Association Act of 2016,” was drafted by Cynthia Wilson-Frias, deputy legal counsel to the PUC.  It was modeled on the enabling legislation used by the Pascoag Utility District. Since Pascoag is an electric and water district, the draft for New Shoreham included both utilities. 

MacMullan explained that the discussion was “very theoretical,” as there are no plans at this time to actually combine the water and sewer departments with an electrical utility. 

Dodge said: “The purpose of the legislation is to keep things as open as possible.”

“There’s a lot of tinkering to go on this draft,” said Shorey, and tinker away they did.

When they were done, Penn asked: “Now how do we get this through the legislature?”

“That’s easy,” said McGinnes. “You put it in at the last second — everyone wants to go home.”