Hingham Municipal Light Defends Its Budget And Spending
By Kristen Arute, Hingham Current Staff; October 4, 2020
Hingham Current News File Photo / Greg Lane
The Advisory Committee (AdCom) invited Paul Heanue, General Manager of the Hingham Municipal Light Plant (HMLP) to their meeting on Wednesday to discuss HMLP's financials. "The purpose of having Paul here is primarily to inform ourselves of the financial status of the Hingham Municipal Light Plant," said AdCom Chair Bob Curley, "and whatever potential opportunities for revenues might exist in the operations of the light plant in this year of the pandemic."
Heanue said that as soon as he received the invitation, he hired the company that had conducted the most recent cost of services study for HMLP. "What I believe has caught your attention in terms of how the light plant is doing financially is some of our cash accounts,'" he said. "It's pretty well all spoken for." He then went on to describe the sizable balances in the depreciation, stranded costs and operating cash accounts and described their use.
According to Heanue, the depreciation fund has $13.6M in it. It contains money that is set aside for system upgrades and physical improvements. The stranded cost account, which is where HMLP keeps money to cover costs for sudden increases in service so that ratepayers do not have to incur them, is at about $7.3M, and the cash operating fund is at about $6.9M. "It's considered a good utility practice to have three months' worth of expenses in your operating cash fund just in case something like what we're experiencing right now happens," explained Heanue. "We'll have money to be able to pay our bills in case the customers just stop paying us." He noted that there are "serious financial implications" if bills from their suppliers are not paid within 30 days.
HMLP is two years into a permitting process to bring a third transmission line and another substation to town. Currently there are only two transmission lines that feed the entire town, and they are all on the same set of structures. "If there's ever a catastrophic failure on any one of those structures," said Heanue, "both feeds would go out, and the town would be without electricity."
Proposed development in South Hingham would impact HMLP's daily load. Just the fleet of electric cars that Amazon has said it would be relying upon at its hub in South Shore Park alone would increase usage by about 22% each day. "The transmission line and substation, when we started looking at this was a reliability project," Heanue explained. "With Amazon and some other commercial development potentially going to happen up at that end of town, it's rapidly becoming a reliability and capacity (issue)."
This expansion of service is expected to cost $30M; however, that does not include money for unexpected expenses, permitting costs or land acquisition. The thinking is that the more money HMLP is able to pay out of pocket, the less the Town would have to bond on their behalf. "The light plant has been able to operate without having to have the town bond anything for us," Heanue continued. "We've been salting money away and saving money to make our improvements so that we haven't had to put that kind of burden on the town."