Presentation to Energy & Technology/Planning & Development Committees

Considerations on Establishing Municipal Utilities

Joint Informational ForumLegislative Office BuildingMarch 13, 2012

Carlos M. VazquezSenior Director -

Government Relations

The United Illuminating Company• A New Haven-based electric distribution company

established in 1899.

• UI is engaged in the purchase, transmission, distribution and sale of electricity and related services to 325,000 residential, commercial and industrial customers in the Greater New Haven and Bridgeport areas.

• UI's parent company, UIL Holdings Corporation, is traded on the New York Stock Exchange under the symbol UIL.

Key Points about Forming a Municipal Utility

• Acquisition would be expensive and complex• Ongoing costs are significant• Potential loss of tax revenue• Other complexities: transmission assets• Impact on state public policies• Oversight of regulatory bodies• Labor implications

Expensive and Complex• Billions $$$ will be needed, in aggregate, to pay fair market value to

acquire all or parts of an electric distribution company’s infrastructure .– Ongoing infrastructure maintenance, repair, and upgrade– Municipalities need to take on additional costs for other capabilities

currently done by EDC and cannot be separated (i.e., meter reading, customer billing)

• Electric utility circuits don’t follow municipal boundaries. – See map on next slide– The costs of reconfiguring the EDC’s system to accommodate town

borders must be considered and would be included in the overall acquisition cost.

– Also address system performance issues (i.e. voltage concerns) as well as manage system with overall regional requirements.

Electric utility circuits don’t follow municipal boundaries.

Ongoing Costs are Significant

• EDCs have large transmission and distribution capital programs (plan, construct, pay) for infrastructure replacements and upgrades to maintain system reliability.– Municipalities would need ability to finance – Skilled resources and coordination needed

Potential Loss of Revenue

• Shareowner-owned electric companies pay millions of dollars in state taxes and property taxes associated with real and personal property located in municipalities.– A municipality purchase of an EDC may result in a

loss of some or all tax revenue.

Other Complexities

• Would municipalities seek to acquire transmission assets? – Subject to Federal jurisdiction• Planning and upgrades is a federally supervised process• Separating the transmission system into small pieces

could complicate the task of maintaining overall reliability

– Cyber security requirements and other Federal compliance costs would need to be addressed as well

State Public Policy Impact• Public policy initiatives enacted in Electric

Restructuring Act (Public Act 98-28)

• Public policy charges (i.e., promoting energy efficiency, renewables, etc.)– Municipal utility customers currently pay lower charges for

energy efficiency and no charges for renewable energy support.

• Significant investment to perform customer service functions– Metering, billing, collections, overall account management– Ability to procure power and function in ISO-New England

marketplace

Regulatory Oversight• Shareowner-owned electric companies have

ongoing oversight and review of all aspects of utility operations.

Labor Implications• Municipalization has labor implications.– Loss of jobs could increase unemployment

• If municipality wanted to negotiate with

workers who were union employees at EDCs, it would have to enter into new collective agreements

Summary• Existing law adequately sets forth the means

by which a municipality is able to establish and operated a municipal utility.

• There are many practical complexities needed to carefully think through before making the very substantial expenditure and the ongoing and future commitments in the business of power supply and delivery.

Q & A