Rate Rage
Fitchburg area energy costs pinch local businesses
When Massachusetts residents talk about rising costs, one of the first things they mention is often the price of electricity.
That's especially true in Fitchburg and three surrounding towns, where, for decades, the small power company that supplies local homes and businesses has charged significantly more than suppliers of other nearby communities.
Now, the company's current incarnation, New Hampshire-based Unitil, is asking the state for permission to raise its rates, and many are questioning whether the company is simply too small to offer them a fair deal.
John Karamasios, the owner of City Hall Café on Main Street in Fitchburg, said he sees Unitil as a serious burden for an area that is struggling economically, and for his own business.
"This company drives away all business from Fitchburg," he said. "I've got my eyes open. If I find another place, I'm going to move myself away from Fitchburg."
Indeed, state Rep. Stephen DiNatale, who represents Fitchburg, said the cost of electricity is one of the biggest issues he hears about from both homeowners and businesses.
"My sense is it's about neck and neck with public safety," he said.
Cost Of Doing Business
George Gantz, a senior vice president of customer service and communication at Unitil, said the company filed papers with the Department of Public Utilities last month seeking a $3.3 million increase in operating revenue. To reach that number, the company is proposing changes that would increase residential customer's bills by 7.7 percent. The proposed hike for businesses is much more variable, ranging from a less than 1 percent hike for some large companies to 9.9 percent for small- or medium-sized businesses that use little energy, according to company public relations executive Stephanye Schuyler.
For those who live or do business in Unitil's Massachusetts coverage area - Fitchburg, Townsend, Lunenburg and Ashby - the hike seems especially onerous because their costs are already significantly higher than what National Grid customers pay in Leominster and other nearby communities.
Still, the Fitchburg area is far from the hardest-hit in the state. Of the six electric companies operating in Massachusetts, the figures show Unitil charging the third lowest total rate.
Gantz said this is the first time since 2002 that the company has applied to raise the rates it charges for distributing electricity, and it simply needs to charge more because its expenses have increased. Even though customers have taken an increasing hit on energy costs during that time, he said, the rising prices have simply reflected the costs of electricity itself, which the company just passes along. The only way Unitil can increase its own revenues, he said, is to raise its distribution charges.
But Unitil is not doing badly for itself financially. The publicly traded company reported a net income of $4.3 million for the first half of 2007 compared with $3.4 million in the same period last year. But Gantz says the company's success reflects hikes it made last year in its New Hampshire electric rates and its gas prices.
"The other parts of our system are more up to date," he said.
Gap Narrows
Thomas Szocik, the executive director of Fitchburg's Economic Development Office, said Unitil's predecessor company, Fitchburg Gas & Electric, once had such high rates that it was a major factor in many companies' decisions to locate in Leominster instead of Fitchburg. Today, he said, the contrast is not so stark.
"Unitil is certainly higher because they're small," he said. "But the gap has narrowed quite a bit from what it once was."
Gantz argues that the company's current rates have less to do with its size than with its ongoing recovery from the effects of mistakes made 30 years ago. For example, he said, FG&E made a major blunder in investing in the inefficient Seabrook Nuclear Power Plant in New Hampshire.
"Some of those struggles meant that some of the infrastructure didn't get the investment it needed," Gantz said. "That situation is now much improved, many decades later. So it's sort of a long history that takes a long time to change."
Some customers have been doing their best to speed up that change. Karamasios said he organized a demonstration last year to protest the high utility rates, drawing about 40 people. Last month, local residents and business owners met with a consulting group to discuss the possibility of buying electricity from other suppliers. That strategy, which leaves existing distribution charges in place but tries to reduce supply costs, is one that many large businesses have taken since the state deregulated the electricity market in 1998. But few third-party electric companies market their products to smaller customers, and the experience of the few communities that have formed buyers' pools to purchase energy in bulk suggests they offer little savings.
That leaves some hoping that Unitil, which serves just 99,400 electricity customers in New Hampshire and Massa-chusetts compared to National Grid's 3.4 million U.S. customers, will eventually be absorbed into a larger company. Szocik said he expects that will happen eventually, but it may take a while since few large companies are likely to have an interest in picking up Unitil's tiny, mostly residential customer base.
"The trouble is Unitil is a small player," Szocik said. "I don't know if they're attractive to a large company right now."
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