By Carol Britton Meyer

After a study by a statewide municipal power association, the Hull Municipal Light Board is considering whether to raise rates.

The Massachusetts Municipal Wholesale Electric Company recently performed a financial review of Hull’s light plant to assess its overall financial health, with a specific focus on financial and operational indicators.

As a result, MMWEC is recommending that the light board consider a rate increase, due in part to the need for the light plant to replenish its cash reserves, and also recommends that the plant not pursue more debt in the meantime.

Click here for the MMWEC presentation to the light board

The proposed rate increase would amount to about an additional $6.51 a month, or a $78.12 annual increase, for the average residential ratepayer. The potential 4.2% increase to electricity rates and its impacts on ratepayers will be discussed at upcoming light board meetings.

MMWEC assists Massachusetts municipal light departments such as Hull’s with their needs to contract for energy. A presentation by MMWEC to the light board last week indicates that the light plant “had a relatively strong cash position prior to 2022.”

However, power and operating costs “became more challenging in 2021 – with base rates remaining static while overall costs appreciated,” the report states. “Recent power costs have somewhat improved, but cash on hand replenishment needs [to be prioritized].”

The report further states that “debt opportunities should not be pursued until cash on hand is replenished” and recommends regular financial reviews.

Operating budget considered in rate study

A rate study has been under way for a number of months that takes into consideration the light plant’s operating budget for the next three to five years, the cost of electricity, and the costs associated with the line crews, office staff, equipment, and other expenses, light board chair Patrick Cannon told The Hull Times when the study was in the beginning stages last June.

Following the January 16 light board meeting, during which MMWEC presented a rate study update, Town Manager Jennifer Constable, who also serves as light plant manager, told the Times in response to a follow-up email that indicators were derived from financial statements – including income statements, balance sheets, cash flow statement, capital expenditure budget, and Department of Public Utilities reports.

“Objectives of the review included assessment of cash reserves, operating income, and debt ratio,” Constable said.

Goal: increase cash reserves

Based on MMWEC’s findings, “HMLP financial goals should be to increase its ‘cash on hand’ (i.e. reserves) and establish a stronger financial rating to better position itself for borrowing,” she explained.

Currently, Hull Light has approximately 135 days’ cash on hand, “but should strive for 250-plus days’ cash on hand, which would achieve an Aaa Moody’s rating,” according to Constable.

The MMWEC report outlined two sets of revenue projections: one instituting rate changes, which would increase reserves and establish a Aaa rating by 2026, and the other without a rate increase, demonstrating a Aaa rating and a lesser reserve by 2027.

The light board took the report under advisement and will discuss it further during its February 20 meeting.

Rate card comparison

MMWEC also presented a rate comparison, which showed HMLP’s current rates versus rates with recommended increases, showing that the adjustment would amount to about an additional $6.51 a month, or a $78.12 annually, for the average residential customer.

In addition, MMWEC presented recommended options related to the HMLP’s net metering policy – which allows electricity customers with their own generation capacity to be financially compensated for the energy they produce, including a $2.05 per installed kilowatt-hour per month increase, minimum monthly billing, and changes to its net metering credit policy, with credits expiring at the end of 2025.

“The light board will further discuss MMWEC’s recommendations and next steps at upcoming meetings,” Constable said.

Discussions will include potential increases to fixed rates (including residential, small power, and municipal) or variable rate charges related to kilowatt hour usage, as well as the potential impacts to ratepayers across the rate classes, anticipated and scheduled capital projects, and HMLP’s need for borrowing in the upcoming years, according to Constable.

“The board will also consider whether or not to continue instituting the prompt-pay discount,” she said.

“We have begun the process of a rate study, trying to figure out whether a rate adjustment is needed or not,” Cannon told The Hull Times following the meeting. “Over the next couple of months, we'll be making that decision. It’s an open and public process, so anyone wishing to come to our meetings is welcome.”

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