Dear Customer/Owner:
The Town of Groton is now 350 years old and the Groton Electric Light Department is proud to have been a part of that history for the last 96 years. The big birthday celebration for Groton began on November 27, 2004 with the lighting of the Celebration Tree, which we were honored to sponsor. The anniversary festivities continued throughout 2005 and the Celebration Tree remained lit an appropriate 350 minutes each night, as our community’s tribute to the rich heritage that Groton’s founding fathers and committed citizens through the year have left. On September 10, for the Town’s birthday parade, we let our town spirit shine with a float showing how the distribution of electricity changed over the last century. The revelry came to a close with the burial of a time capsule and the extinguishing of the Celebration Tree on New Year’s Eve.
Through all these years, the mission of the Light Department has been steadfast - to provide power at the highest degree of reliability at the lowest cost that fiscal prudence dictates.
In keeping with our mission, we developed a solid capital improvement program for the next few years. Plans include building new facilities for our office and garage, automating our meter reading, upgrading the substation relays and meters, implementing a geographical information system, and upgrading select areas of the distribution system. All of these projects provide benefit to our customers by either lowering costs or enhancing service.
No Grotonian is unaware of the growth pressures on the Town. As the Town has grown, we have used advances in technology to provide superior service while keeping costs as low as possible. The installation of an automated meter reading system is a perfect example of this strategy. We scrutinized a pilot program this year, which demonstrated the advantages and feasibility of a two-way fixed radio network to communicate with our meters. Based on the success of this pilot, we will be installing a two-way fixed radio network throughout the town in the fall of 2006.
For both the Town and the Light Department, the most noticeable growth in 2005 was from the commercial sector. The commercial growth at Four Corners brought with it the first traffic light in Town. We had a major role in the Boston Road construction project because the widened roadway forced the relocation of the utility lines. We required that the relocated lines be put underground for both operational and aesthetic reasons. Overhead to underground conversions are more complex than new installations and this required careful engineering because it is the only feed to that section of town. We completed our tasks ahead of schedule, which allowed for the fall opening of the new Shaw’s Supermarket. The new market contributed to our 16% increase in commercial sales.
Continued growth has intensified our need for new facilities. This handicap will soon be rectified thanks to the Special Town Meeting vote this fall to use eminent domain to acquire the parcel next to our substation. There are still some challenges to overcome, but we are confident that construction of our new office and garage facilities on the Lowell Road site is the best interest of the Light Department and the Town. To fund this move, it is necessary to sell our current location. To this end we completed an Environmental Site Assessment and jointly issued a request for proposals for the sale and redevelopment with the Selectmen.
Power Supply
Because fuel prices can be volatile and market conditions unpredictable, Groton Electric Light has a goal of diversifying our generation sources to pass along the best possible price to our customers. The goal of diversification is getting harder and harder to meet as all of the new generation facilities being built in New England are fueled by natural gas.
One cause of fuel price volatility we have experienced stems from the deregulated market. Several of the major upsets over the last couple of years include one of our suppliers filing for bankruptcy and discontinuing energy sales; a second withdrawing from the wholesale electric business, requiring us to reach a settlement for the remaining term of the contract; and a third forcing us into litigation because they did not perform according to the terms of the contract, thereby increasing our cost of power. The only power contracts that are continuing to perform as stipulated are our hydroelectric and nuclear power contracts. These changes have driven our market exposure up from our goal of 20% to an expected 56% in 2006.
As our market exposure has increased, our reliance on the natural gas market has unfortunately increased along with it. Generating units burning primarily natural gas, or capable of burning natural gas and oil, now constitute over half of the electric generating capacity in the region. Because of this, the market price for electricity is strongly affected by changing prices for natural gas as natural gas generators set the market price 85% of the time. The only times when natural gas generators are not setting the price in New England is during the night hours when the demand is low enough that none of them are running.
The recent difficulties with natural gas have done more than just drive up the price of electricity. After America’s primary natural gas center was battered by two hurricanes this year, the natural gas supply tightened to the point there was a concern that no matter what the price, natural gas would have limited availability during extreme cold spells. This tight supply is a problem for the whole country, but since New England is the farthest from the natural gas supply, the trouble is more severe for us.
During the fall of 2005, ISO-NE, the operator of the New England electric grid, believed that the risk of not having enough natural gas was significant enough that they created a Demand Response Program to limit the possibility of rolling blackouts. These blackouts would have resulted because of a lack of fuel for natural gas generating plants. We solicited some of our largest customers to enroll in this program to help avoid these potential blackouts.
We are proud to say that Groton Electric Light was the first municipal light department in Massachusetts to enroll one of its large users in ISO-NE’s Winter Demand Response Program. The Groton School was an enthusiastic participant in the program and agreed to turn off a significant portion of their electric load whenever called upon by ISO-NE. Their committed load reduction is equivalent to a subdivision of 76 homes turning off 100% of their power.
All of you can also help in this effort. Energy conservation lowers your bill directly by reducing your consumption, but it also lowers power costs for everyone. That’s because in today’s deregulated energy markets lower demand tends to lower wholesale prices. Shifting power use away from peak-use times also minimizes the amount of electricity we need to buy in the volatile and expensive spot energy market, which translates to lower rates for everyone. That is why we reactivated Groton’s Peak Alert program during 2005. If we all do a little, the results can be substantial.
Trends
For 2005 our kilowatthour sales increased by 8.3% over 2004. Residential use accounted for 60% of our sales, commercial use 32%, municipal use 7% and other use 1%. Historically Groton’s cold winters have accounted for our peak usage, with the Town setting a new record every year. However, this trend has changed towards a summer peak because of high air conditioning use. This year our summer peak increased by 20% and the winter peak increased by only 3%. With the addition of all of the refrigeration at the new Shaw’s market that will be running for the first time this summer, we expect the summer peak to increase significantly again this year. The net result is that we should remain a summer peaking utility for the foreseeable future.
Growth Trends
Over the last 30 years Groton has seen its population double, but even more significant to us is the fact that the average customer is using twice as much electricity as 30 years ago. Add in the fact that Groton's newest developments are typically very large homes with large air conditioning demand and you can see why our peak demand has quadrupled over the same period of time.
As expected, our customer count continues to grow. We activated 52 new services, and mailed out 4395 bills at the end of the year. If the present growth rates continue, our recent substation upgrade will meet our needs for 15 years.
Reliability
We take great pride in our high level of service and commitment to reliability. It is always our highest priority to respond promptly to interruptions in service and restore power in the most expeditious and safe manner, no matter the weather or the hour.
Our constant struggle against squirrels paid off in 2005 as the percentage of outages caused by squirrels and birds dropped from 41% in 2004 to 13% of all outages in 2005. For the year, the total number of outages decreased by 29% and our average customer was without power for only 1.6 hours. Our goal is to have as few outages as possible while balancing the need for fiscal prudence. By continually attacking the top causes of outages, we hope to succeed at lowering the amount of time that our customers are without power.
To maintain the level of service Groton has come to expect, we rely significantly on training. We are in the process of training two apprentice linemen to fill the vacancies caused by early retirements over the last few years. Our training is so rigorous that it takes an apprentice three years before he is ready to work on the energized system.
Financial Highlights
During 2005 we improved on our standing relative to our peers and averaged the 4th lowest rates out of 42 Massachusetts electric utilities for a 500 kilowatthour residential bill. The top residential rates in Massachusetts were 70% higher than Groton Electric’s in 2005. After the January 1, 2006 rate increase, our rates moved to the 6th lowest for a 500 kilowatt-hour residential bill and the top residential rates are now 93% higher than ours.
I am gratified with the solid financial footing that the Light Department has established over the years. This foundation enabled us to operate with a $700,000 shortfall in operations for the last three months of 2005 as explained in detail in the Management Discussion and Analysis which follows.
No one knows what the wholesale electric markets will bring in 2006, but Groton Electric Light will continue to provide great service, the highest degree of reliability and the lowest possible cost, all of which Groton residents have come to know and expect. We appreciate the confidence and trust you place in us and we are proud to be one of only 40 community-owned and operated electric utilities in Massachusetts.
Sincerely,
Doris A. Chojnowski
Manager
350 Float
The Groton Electric Light Department float in the 350th parade shows how pole construction and safety gear has changed over the last 100 years. Truck Foreman Jay Willets is dressed as a Lineman from the early 1900’s and Groundman Ryan Andrews is dressed in modern safety gear.
Photo by Dr. John M.R. Bruner.
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