Energy Year of Decision
Small Town Finds Its Little Utility Quite Empowering
Thursday, September 25, 2008
EASTON, Md. -- This is one in a series of occasional reports about regional energy issues.
Residents of this Colonial town on the Chesapeake Bay get a live voice on the phone when they call their local power company. If their electricity dies in a storm, customers call the chief executive at home to complain. And he picks up.
Easton Utilities customers also receive lower electricity bills than most Maryland residents, and the town-owned utility is being portrayed by the governor as a model for other communities as the state updates its electric infrastructure. Part of Easton's secret is a power plant that sits unobtrusively in the middle of town, across the street from a Chico's clothing store.
The plant, built in 1923, and a companion generator near the municipal airport don't fire up their diesel engines very often -- about 1,000 hours a year, about four hours at a time. But during those periods, they make electricity the utility sells on very hot and very cold days on the thirsty mid-Atlantic power grid.
After the cost of fuel, an annual $1.5 million payment to the town and other expenses are taken care of, the power plant's profit from producing energy -- $4 million in each of the past three years -- is returned to the utility's 10,000 customers, who live in Easton and surrounding Talbot County. On average, they pay 10 percent less than residential customers of Pepco and Baltimore Gas and Electric Co., Maryland's largest private power companies.
"There can be a classic tension in our industry of: Are you going to do right by your customers or your stockholders?" said Hugh E. Grunden, Easton Utilities' president and chief executive and the former town engineer. "In our case, they're one and the same."
Gov. Martin O'Malley (D) pointed to Easton as a prototype last month as he laid out a plan to overhaul the state's energy policy. Electricity bills in Maryland and the District have soared with deregulation because promised competition has not materialized. And the Washington region's demand for power will probably outpace supply, which could prompt rolling blackouts in Maryland by 2011, officials say.
It has been two decades since the last power plant was built in Maryland, which has to import about 30 percent of its electricity from other states, along congested transmission lines, when demand is high. This has caused some of the steepest residential rates in the country.
The municipally owned plant in Easton, 35 miles east of the Chesapeake Bay Bridge, is one of a handful of public power companies in Maryland and Virginia that serve local customers at lower rates. Few generate their own power. In Northern Virginia, Manassas joined with six small jurisdictions to run a public utility that buys most of its electricity from Dominion Virginia Power but makes some of its own. Residential rates are about 12 percent below surrounding rates.
To increase supply and reduce prices, O'Malley pledged state assistance to help local governments finance power plants such as Easton's. "The governor's theme is we're going to keep the lights on in any way possible," said Malcolm Woolf, the state's energy administrator. But a similar 70-megwatt plant would cost more than $50 million to build today, Woolf said.
In Frederick County, the Thurmont Municipal Light Co. is weighing whether to build a plant fueled by ground-up tree trimmings to lower costs for its 6,000 customers.
Easton is a niche market on the electricity grid that supplies the Washington region and other parts of the mid-Atlantic region. The plant's engines turn on only when demand for air conditioning and home heating jumps. The grid operator, Pennsylvania-based PJM Interconnection, notifies Easton to fire up the generators.