Glens Falls, New York To Hold Municipalization Referendum

Voters in Glens Falls, New York will decide in November whether to secede from its investor- owned utility, Niagra Mohawk, to form a city-owned utility. The Glens Falls Common Council voted in June by a 4-1 margin to place a municipalization referendum on the ballot, and subsequently overrode the Mayor's veto July 18th.

The proposal, put forward by the city's Industrial Development Agency in conjunction with the City Treasurer and City Council leaders, would buy out the properties of the Niagara Mohawk Power Corporation for approximately $19 million (based on the utility's tax assessments) and create a not-for-profit municipal electric utility which would purchase power on behalf of Glens Falls residents and businesses (180 MW) on the wholesale market.

A recent proposal by the New York State Public Service Commission to deregulate electricity sales gave added impetus to the power project initiative. Under the State plan, businesses and consumers would be free to buy their power from any competing producer, and pay a service charge to the local utility for transmission. Industrial users would get first crack at all the available low cost electrical power in 1997 and be able to lock it up in long term contracts. By the time residential consumers enter the new deregulated marketplace in 1998, only the most expensive sources of power -- oil generated and nuclear, will likely remain, profiting power companies at the expense of stranded consumers. The buying power of a community-based utility would give it greater bargaining leverage with power generators to produce savings it could pass onto all customers, whether industrial, commercial or residential.

The City Treasurer estimates the total Debt Service Cost of the municipalization to be $33 million. The money will be paid off over 30 years at 5% to 7% through the rates. According to a study by R.W. Beck Inc., a leading international electrical industrial consulting firm, customers of the new municipal utility could expect savings of 50% on their electric rates. The average municipal utility power rate in New York State is approximately $.04 a kilowatt hour while the average Investor Owned Utility charges $.13 a kilowatt hour -- over three times as much.

Glens Falls' study triggered a wave of interest by other communities in upstate New York in studying the creation of municipal utilities. Voters in 11 communities successfully passed such initiatives last November. None are as large as Glens Falls and are taking a less direct approach by signing with a commercial group to manage the take-over. This is the first effort in New York State to create a municipal utility since the Town of Messena evicted Niagara Mohawk 15 years ago.It is widely believed to be the largest such municipal effort since the 1930's.