Holyoke utility to pour $2 million from land sale into operating budget

2 Jun

HOLYOKE — Rising transmission and other costs mean that the $2 million the Holyoke Gas and Electric Department gets in selling Whiting Farms Road property will help in keeping rates lower than most utilities but won’t reduce rate-payers’ bills, an official said.

“Although the $2 million proceeds from the land sale would be a significant influx of cash flow, it is only a one time infusion of cash, as opposed to the increases to operating expenses, which are recurring,” department Manager James M. Lavelle said Friday (May 29).

The Holyoke Gas and Electric Department (HGE) is set to receive $2,050,000 from Gary Rome Hyundai for nearly 19 acres on Whiting Farms Road across from Autumn and Lynch drives. Rome plans to build a $10 million dealership on the site and the sale of the land was contingent on approval of a zone change, which the City Council granted May 19.

The HGE has an operating budget of $70 million and 140 full-time employees, Lavelle said.

Electricity rates charged to homeowners haven’t increased since 2008, he said.

Transmission and capacity costs are projected to increase by more than $3 million by 2017. Capacity costs are expenses HGE must pay as part of ISO-New England market rules. ISO New England, based here, is the federally-regulated, independent organization which dispatches power over six states, administers wholesale energy markets and works to ensure power grid reliability. ISO stands for “Independent System Operator.”

The $2 million from the Whiting Farms Road property sale will help deal with such increases. If it instead were used to cut rates, the average homeowner’s bill would drop by $2 a month for a short term and then HGE would have to raise rates to a level higher than before the reduction to off-set fixed-cost increases, he said.

Pouring funds like the money from the Whiting Farms Road sale into the operating budget works to keep rates low, he said.

“Our rate-setting philosophy is to keep rates competitive and stable. You may recall this past winter when most utilities raised electric rates by over 30 percent, HGE did not raise electric rates at all,” he said.

According to Lavelle, in May, the average homeowner’s electricity bill here was $60.06 compared to Chicopee’s $66.18, Westfield’s $66.56, South Hadley’s $72.81 and Eversource Energey’s $120.44.

Among expenses for which HGE must pay its share are nearly $8 billion in infrastructure improvements such as large transmission poles installed on Interstate 91 and the Massachusetts Turnpike by Eversource Energy (formerly known as Northeast Utilities. That’s in addition to $3 billion more in upgrades planned in New England by 2023, he said.

“These many billions of dollars of infrastructure upgrades are paid for by the New England ratepayers through transmission costs that are paid by HG&E and other local distribution companies,” Lavelle said.