POLITICS

Advisory Committee Addresses Budget Woes

By Kristen Arute, Hingham Current Staff; October 8, 2020
Courtesy of Plymouth County Commissioners

I told them I was going to be speaking with you folks tonight and that I would ask so what are you looking for.

I heard that you were tasked with finding out what the ask was tonight. It's to early to put any parameters around that. At this point in time, we're looking at all the revenue and expense streams the tools and resources that are open to the town.

Municipal light plants in Massachusetts are not required to make Payment In Lieu Of Taxes (PILOT) payments to their towns; however, Hingham adopted a PILOT formula in 2008. "The size of the PILOT payment is tied to our kilowatt hour sales," explained Heanue. Kilowatt hour sales have been slowly declining over the years from $113M at the end of July 2018 to $106M through the end of July 2020, so the PILOT payment has also declined. "You've seen that number drop from $505,00 to $480,000," Heanue continued. He attributed the drop in sales to "weather-dependent" factors and "energy efficiency initiatives" on the part of both commercial and residential customers.. "We probably have somewhere around 80 or so customers who have solar arrays on their house," he explained. "Whatever they're producing, they're not buying from us."

PILOT programs are designed to help relieve the tax burden on residents, but light plants are not allowed to enable a town to circumvent a Proposition 2-1/2 override. Recently, HMLP netted $660K from the sale of high-price Renewable Energy Credits. Heanue informed to the Hingham Light Plant Board that since the income was unexpected, it could be considered excess which would align with the mandate from the Department of Public Utilities that PILOT payments be made from excess cash. "The Board preferred that the money be earmarked for renewables," said Heanue, "but given the town's situation they would be possibly amendable to a single contribution to help the town get through this."

While HMLP revenues have remained relatively flat over the past few years after a dramatic uptick due to large-scale development, two initiatives could mean more money for the town through the PILOT program. The first is from a distribution center Amazon has proposed in South Hingham and plans to have their delivery vans be electric. "If Amazon comes in with the fleet that they're telling us," said Heanue, "they're going to be increasing our daily load by about 22%."

The second is through "green" goals. HMLP currently receives 52% of its supply from non-carbon-producing sources, which means it is "going green" in a manner similar to investor-owned utilities. Investor-owned utilities are required to be 18%, but light plants are not subject to these requirements. The light plant works with a community group led by former Selectman Laura Burns called Hingham Net Zero. "They've prevailed to the extent that we've changed some of our policies," said Heanue. "If people go to electric cars and eliminate fossil fuels, it would be a significant jump in our load."

Hingham receives income from HMLP in the form of Payment In Lieu Of Taxes (PILOT) payments. Municipal light plants in Massachusetts are not required to make PILOT payments to their towns; however, Hingham adopted a PILOT formula in 2008. "The size of the PILOT payment is tied to our kilowatt hour sales," explained Heanue. Kilowatt hour sales have been slowly declining over the years from $113M at the end of July 2018 to $106M through the end of July 2020, so the PILOT payment has also declined. "You've seen that number drop from $505,00 to $480,000," Heanue continued. He attributed the drop in sales to "weather-dependent" factors and "energy efficiency initiatives" on the part of both commercial and residential customers.. "We probably have somewhere around 80 or so customers who have solar arrays on their house," he explained. "Whatever they're producing, they're not buying from us."

PILOT programs are designed to help relieve the tax burden on residents, but light plants are not allowed to enable a town to circumvent a Proposition 2-1/2 override. Recently, HMLP netted $660K from the sale of high-price Renewable Energy Credits. Heanue informed to the Hingham Light Plant Board that since the income was unexpected, it could be considered excess which would align with the mandate from the Department of Public Utilities that PILOT payments be made from excess cash. "The Board preferred that the money be earmarked for renewables," said Heanue, "but given the town's situation they would be possibly amendable to a single contribution to help the town get through this."

While HMLP revenues have remained relatively flat over the past few years after a dramatic uptick due to large-scale development, two initiatives could mean more money for the town through the PILOT program. The first is from a distribution center Amazon has proposed in South Hingham and plans to have their delivery vans be electric. "If Amazon comes in with the fleet that they're telling us," said Heanue, "they're going to be increasing our daily load by about 22%."

The second is through "green" goals. HMLP currently receives 52% of its supply from non-carbon-producing sources, which means it is "going green" in a manner similar to investor-owned utilities. Investor-owned utilities are required to be 18%, but light plants are not subject to these requirements. The light plant works with a community group led by former Selectman Laura Burns called Hingham Net Zero. "They've prevailed to the extent that we've changed some of our policies," said Heanue. "If people go to electric cars and eliminate fossil fuels, it would be a significant jump in our load."

Committee member Dave Anderson drew attention to the HMLP demand charge and asked about its purpose. Heanue explained that the cost of service study recommended that the town have that as part of the rate to address the need to have equipment that is sized correctly to handle any brief influx in use. "If all AC units come on at the same time," said Heanue, "the demand on the system is going to be higher than if they came on at different times. He explained that this generally applied to larger customers that have big loads that come on all at once. "The person who did our cost of services study was pretty surprised that Hingham wasn't (paying the demand charge)," he added, "because the customer that is using that equipment is supposed to be paying for it."

"We appreciate you're keeping an open mind about the overall town situation and your willingness to play a role," said Curley. "I think we probably need to have a little discussion about the PILOT formula." However a Committee member disagreed saying that "having a pot of money" should not automatically mean recalculating a PILOT formula.

Curley reiterated the purpose of the meeting. "At this point in time, we're looking at all the revenue streams and the expense streams in the town to see what the tools and resources are that may be open to the town to ultimately produce a balanced budget that is going to provide the level of services that we want," he said.

Recently HMLP received income from the sale of Renewable Energy Credits (RECs). "When you take energy from renewable sources, RECs are generated," explained Heanue. "HMLP is currently receiving almost 52% of its supply from non-carbon-producing sources." Investor-owned utilities are required by law to have 18% of their supply be carbon free. A REC can be traded like a commodity. The light plant sold high-priced RECs and bought low-priced RECs. "At the end of that process, we netted out $660,000. "I had suggested to the Board that since we weren't expecting that $600 grand, that could easily be considered excess. "At our June meeting, the Board directed me to work with a community group to try and figure out how best we could spend that 660 grand to help build additional renewable. I posed the question to them today, do you want to use that 660 as excess for the Town, and the three Board members said that they would prefer that that money be earmarked for some renewable type projects but taht given the town's situation as it relates to what I expect is a revenue shortfall because of COVID they would be possibly amenable to a single contribution to help the town get through this. There were no numbers thrown out there.

AdCom's budget season has not yet started. "Often it's in the last few weeks that we get down to crunch time when we need to use what some people refer to as the secret sauce to come up with a budget balance," said Curley. "Maybe this year a few electrons will be part of the secret sauce."

Kristen Arute can be reached at kristen@hinghamcurrent.com.