HomeMy WebLinkAboutGas Utility-1998 Feasability & Creation REPORT TO THE TOWN OF SOUTHOLD
ON THE FF~SIBILITY ~ CREATION OF A
TOWN OF SOUTHOLD MUNICIPAL GAS UTILITY
Suffolk County
New York
March 31, 1998
POWER ALTERNATIVES, INC. 175 ROUTE 25A, EAST SETAUKET NY 11733 Tel. 800. 548. 9938 Fax: 516. 751.7123
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
TABLE OF CONTENTS
I. Introduction Page 1
II. Background to Municipallzatlon
Dereuulation of the Gas Industry Page 6
III. Cost of Gas SuDDlv. Transportation
and Maintenance Page 11
IV. Savinqs to be Achieved by
Municipalization Page 15
V. operation of the Municipal Gas Utility
Costs and Overhead for the Town of
VI.
VII.
Southold
Formation and Implementation of the
Town of Southold Munlclpal Gas
Utility
S~mmar¥
Exhibit A:
Exhibit B;
Exhibit Ct
Exhibit D;
Notice of Public Hearing
Proposed Local Law
Notice of Adoption
Notice of Referendum
Page 18
Page 21
Page 24
Page 25
Page 26
Page 32
Page 33
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
I. Introduction
This study was prepared by Power Alternatives, Inc. in
accordance with an agreement between Power Alternatives and the
Town of Southold, Suffolk County, New York.
The purpose of the study is to determine the feasibility of
the Town of Southold creating a Town of Southold Municipal Gas
Utility as a means of providing savings in the cost of natural gas
supply to its residents, businesses, and the Town itself. The
report will also address whether the Town of Southold would
benefit from forming and operating its own municipal gas utility.
The study is intended to provide the Supervisor and Town
Board of the Town of Southold with sufficient information to
render a decision as to the municipalization of natural gas supply
within the Town, and to provide the Town with the series of steps
that are necessary to bring the Town to the stage of the formation
of a municipal gas utility, including the required local law and
the mandatory referendum.
The Town of Southold presently has gas supply to only a
portion of the Town. The benefits that are indicated in this
report would apply to those residents and businesses that are
presently gas customers. Power Alternatives has had a major gas
utility conduct an initial investigation as to the extension of
gas service to the remainder of the mainland portion of the Town,
Page 1
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
and it is possible that a utility would be interested in
completing that project. This can be further explored by Power
Alternatives once the Town has created a municipal gas utility.
There are presently many successfully operating municipal gas
utilities both on Long Island, in New York State, and across the
Country. Except for the several municipal gas utilities that were
formed by Power Alternatives, in general the other existing
municipal gas utilities were formed before the deregulation of the
gas and for that reason own and maintain their infrastructure and
distribution systems.
The manner of the deregulation of the gas industry has
enabled municipalities such as the Town of Southold to access the
benefits of deregulation without the burden of the ownership and
maintenance of the gas pipelines and distribution system.
Section 360 of the General Municipal Law of the State of New
York requires that the total maximum projected cost of the
formation and all of the possible costs of the implementation of
the municipal gas utility be stated in the local law which creates
the municipal gas utility.
Power Alternatives has reviewed the possible expected costs
and requirements of the creation of the municipal gas utility and
determined that the cost that should be stated in the local law as
the maximum cost of the formation of the municipal gas utility is
twenty-five thousand dollars ($25,000). The basis of the
Page 2
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
determination of this amount and the related costs will be
discussed in detail later in this report.
The savings that can be expected by the municipal gas
utility, and the costs that are stated in the local law have been
determined based on the design of a municipal gas utility without
any benefit or savings from joint efforts with future adjoining or
other municipal utilities.
In the event that a municipal gas utility at a municipality
that is adjacent or proximate to Southold is implemented, or if
there is cooperation received from the Long Island Lighting .
Company ("Lilco"), the cost of gas could be more substantially
reduced, and therefore the savings provided to the residents and
businesses of the Town could be substantially increased.
The results of this study also show that a reasonable
projection can be made that by forming a municipal gas utility the
Town can potentially reduce the retail cost of gas to gas
customers in the Town by as much as fifteen percent (15%) or more
(the amount of savings will differ by class of customer) below the
amount that those customers would pay as the cost of gas if the
Town continued to obtain its supply of gas from Lilco.
The study projects that the rate per decotherm that will be
charged by the municipal gas utility for gas supply will be
approximately eight to twelve percent lower than the rate that is
presently charged.
Page 3
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
There are a number of other benefits to be anticipated in
addition to the economic benefits provided by the creation of a
municipal gas utility. The ownership and control of the municipal
gas utility by the Town can actually improve service to its rate-
payers and residents.
This is because the utility, at the local level, will work
with the existing gas utility to determine and address service,
maintenance and repair priorities.
Southold may also elect to staff some of the non-maintenance
operations (Lilco will continue to do all maintenance and repairs)
of the municipal gas utility itself, such as billing or
management, providing employment opportunities for qualified
residents of the Town of Southold.
The creation of the municipal gas utility is done by the
adoption of a local law. The local law must be approved at a
subsequent mandatory public referendum. The referendum will be
held either not less than ninety days after the adoption of the
local law at a general election, or possibly sooner at a special
election.
A proposed Local Law which can be used for the creation of a
municipal gas utility is annexed as Exhibit B to this study. The
notices for the public hearings (Exhibit A) as well as the
required Notice of Adoption of Local Law (Exhibit C) and Notice of
Referendum (Exhibit D) are also annexed to this study.
Page 4
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
The adoption of the Local Law and the passing of the
referendum does not commit the Town to the expenditure of any
additional monies or incurring any debt. The actions do allow the
Town of Southold, and its newly formed municipal gas utility, to
go out, with the assistance of Power Alternatives, and confirm the
cost and availability of gas supply, and the cost of the
implementation and operation of the municipal gas utility.
The Town of Southold, after that process of confirming the
numbers that result in the savings, without any further
expenditure of monies, can then make the decision as whether to
implement the municipal gas utility.
The reason why many municipalities are presently studying or
proceeding with plans for the implementation of their gas utility
service is that it is a relatively risk free way to bring economic
relief to the community. The municipalization of gas utility
service is a means by which the Town of Southold can bring the
benefits that were intended by deregulation not just to the larger
gas consumers, but to all of the residents and gas customers of
the Town.
Page 5
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
II. Baokground to Munioipalization;
Deregulation of the Gas Industry
The ability of the Town of Southold to consider and undertake
this project is due to the deregulation of the gas industry at
both the Federal and State levels. Since the options of
deregulation became legally possible, the benefits of the
deregulation of the gas industry have been available from a
practical basis almost exclusively to the large consumers of gas.
The purpose of forming a municipal gas utility in the Town of
Southold will be for the Town to provide economic relief and the
benefits of deregulation of the gas industry to all of the
residents and businesses of the Town of Southold.
The ability of the Town of Southold to form a municipal gas
utility which will then purchase and sell gas supply to the gas
customers in the Town is a result of the enactment of Federal
legislation by Congress in the early 1990~s and the corresponding
regulations that were promulgated under that leglslation by the
Federal Energy Regulatory Commission.
The Federal legislation and regulations were followed by
deregulation at the State level, which in New York State included
legislation and regulations issued by the State of New York and
the Public Service Commission.
The enabling statute for forming a municipal utility in the
Page 6
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
State of New York is pursuant to General Municipal Law Section
360. That statute permits a Town or other municipality to
municipalize its gas service by a process which is outlined in
that statute.
The deregulation of gas has enabled gas customers to have
options available to them with respect to their gas supply and
service. Among these options is the ability to select their gas
supplier. The option of selecting a gas supplier enables a
customer to maintain their current service, including emergency
service and routine maintenance, with their existing utility, and
to choose the provider of their gas supply from the least
expensive alternative.
Although these options were meant to legally have been
available to all gas customers, gas suppliers and utility
companies have only made the options available on an individual
basis to larger gas customers. This is largely due to the fact
that the marketing and overhead expenditures that are necessary
for gas suppliers to market and maintain supply to smaller
customers has made those customers unattractive.
By forming a municipal gas utility the Town of Southold can
enable its residents and businesses to access the benefits of
deregulation directly on an individual basis. The Town municipal
gas utility will become the purchaser of gas supply and by
aggregating and changing the structure of the load can provide the
Page 7
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
benefit of lower costs to the homeowners and smaller business gas
customers that would otherwise not have these benefits available
to them.
The deregulation of the gas industry has meant the
"unbundling" of the costs and services that are the components of
the cost of gas to retail gas customers. The manner of the
deregulation of gas is of particular benefit to the creation and
implementation of the Town municipal gas utility, because it
enables the Town to combine the benefits of municipalization and
deregulation for its residents.
The Town will be able to address the components of the cost
of gas that it has the ability to lower the cost of gas supply and
taxes, and reduce or eliminate those costs through competitive
bidding and the tax exempt status that are characteristic of the
municipal utility.
Because of deregulation, the existing utility, Lilco, will
continue to be responsible for the transportation of the gas as
well as the ownership, maintenance, and repairs of the gas
pipelines and distribution system.
The deregulation of gas has also made the formation of a
municipal gas utility a relatively risk free project for the Town
of Southold and its residents. This is because after the
municipal gas utility is formed, it will be optional for each
residential and commercial gas customer in the Town to participate
Page 8
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
in the municipal gas utility, and to purchase their gas from the
Town.
Any residential or commercial customer in the Town that
wishes to stay with Lilco for the purchase of their gas supply
after the formation of the municipal gas utility, can continue
with Lilco without any interruption or change.
Any residential or commercial gas customer that decides to
change to the municipal gas utility for the purchase of their gas,
and then decides at a later date to return to Lilco for their gas
supply will be able to do so after only an easy notification
process.
All gas customers in the Town of Southold, whether purchasing
their gas supply from the new municipal gas utility or remaining
with Lilco, will continue to have their service, including
emergency and regular repairs and service, provided by Lilco.
The only change for the residential and commercial gas
customers of the Town after the formation of the municipal gas
utility will be the optional choices available to them of changing
to the Town municipal gas utility, and then whether to stay with
the Town municipal utility, or of staying with or returning to
Lilco.
The formation of a municipal gas utility by the Town of
Southold is therefor a relatively risk free means, both for the
Town and its residents and businesses, of providing the benefits
Page 9
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
of deregulation on an optional basis to the residents
and businesses of Southold.
Page 10
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
III. Cost of Gas SuDDlv, Transportation and Maintena~-~
The cost of gas to retail customers has several components.
The components that are relevant to this report and which are
charged in the service territory of the Town of Southold are the
cost of the gas supply, the transportation cost, the cost of the
ownership and maintenance of the gas pipelines, taxes, and fees
and surcharges which utility companies are allowed to add on to
the cost of gas.
The costs of the gas supply, distribution, and
transportation, as well as the cost of the ownership and
maintenance of the gas pipelines and equipment are presently
combined in a per decotherm charge to retail gas customers by
their utility.
The surcharges that are added are typically added either
seasonally or for finite periods of time. The surcharges are for
items such as severe environmental or weather events, large
commodity price changes, and similar events. These charges are
approved by applications to the Public Service Commission by the
investor owned utility.
The municipal gas utility will likely not have any such
surcharges imposed on its customers. Surcharges, price changes,
or other similar changes would have to be approved at a public
hearing within the Town rather than at unnoticed proceedings
Page 11
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
hundreds of miles from the Town at which the gas customers
affected by the hearings have practically no representation or
voice.
The deregulation of gas has enabled what is referred to as
the "unbundling', of the cost of gas to retail customers. What
this means is that the costs of various components have been
separated on a retail basis, for the retail customer.
A municipal gas utility, in taking advantage of the
"unbundling" and the intended benefits of deregulation, is able to
provide the opportunity to gas customers to reduce the total cost
of their gas by reducing the cost of the supply and tax components
individually, while continuing to have the other components, the
maintenance, ownership and repairs of the gas pipelines, equipment
and distribution equipment and system continue to be provided by
Lilco.
The cost of the transportation of gas, and of the maintenance
and repairs of the pipelines and distribution system, is generally
about sixty percent (60%) of the cost of gas to retail gas
customers, although this percentage varies by customer, season,
and utility. The remaining forty percent (40%) of the retail cost
is comprised of the cost of the gas supply, and also of taxes and
other items that are charged for.
The taxes include the gross receipts tax (4.25%), and
possibly also sales tax (up to 4%). However, an exact value of
Page 12
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
these numbers can only be determined after the referendum is
passed and the response to competitive bids is received by the
Town, in conjunction with an analysis of the then effective tariff
and rates.
The municipal gas utility will also be able to achieve
savings for the customers of the municipal gas utility by a
reduction of the cost of the gas supply component to those
customers. This will be accomplished in part because by
aggregating the many gas customers in the Town into a large demand
for gas, a better or lower price will be available from a gas
supplier.
The other reason for the reduction of the cost of the gas
supply is because of the fact that the contracts for gas supply
will be obtained by competitive bidding. This is a substantial
benefit of having a municipal gas utility operating pursuant to
the requirements of the General Municipal Law. A published notice
of request for proposals will be issued by the Town of Southold
which will likely be responded to by several gas supply companies.
The public bidding will result in a competitive reduction in the
cost of the supply of gas.
The municipal gas utility will be expected to also reduce the
tax components of the retail cost of gas. It is believed that the
municipal gas utility may be established so as to eliminate a
portion of the gross receipts tax, and possibly also the sales tax
Page 13
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
applicable to the purchases of gas for the municipal gas utility
and its customers. This will result in a savings of an additional
several percent for the customers of the municipal gas utility.
The gas customers of the Town municipal gas utility will
continue to pay Lilco for the cost of the ownership, repairs and
maintenance of the gas pipelines, and of the transportation of the
gas to the Town gas customers. These costs will be paid either
through the municipal gas utility or directly to Lilco, which will
be decided by the Town in the future.
Lilco will continue to be responsible for the maintenance and
repairs of the gas pipelines and distribution system, including
all emergency calls and repairs, and any required maintenance.
The charge for transportation is the cost of actually transporting
the gas to the Town gas customers, which will also be done by
Lilco, and for which that company will continue to be paid. The
cost to be charged by Lilco for these services is a published cost
contained in a public tariff. The costs, as stated above, are
generally about sixty percent (60%) of the total retail price of
gas, and the percentage fluctuates depending on the type of
customer and season of the year.
Page 14
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
IV. Savings to be Achieved by Municimalization
Municipalization will enable the Town to reduce the costs of
several components of the cost of the gas supply, including the
taxes that are charged. In addition it is believed that when a
substantial number of customers are combined, as will be the case
upon the formation of the municipal gas utility for the Town of
Southold, that it may be possible also to reduce the cost of the
transportation of the gas.
The gas supply of the municipal gas utility will be obtained
by competitive bidding by the Town. This can be expected to
reduce the cost of the gas supply itself from between five to
possibly as much as twenty percent (5-20%), depending on the type
of customer and the market factors, as well as the type of
contract that is sought by the Town.
The Town will try to structure the gas supply contract so
that rather than having the Town be obligated to purchase a
specific amount of gas from a gas supply company, the gas supply
company will be required to provide gas supply to the customers in
the Town that desire to purchase that supply.
The result of the structuring of both the retail and
wholesale sectors of the gas industry is that the Town may be
offered different costs of gas for different types of gas
customers in the Town. This will give the Town the opportunity to
Page 15
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
have different prices of gas for different types of gas customers
such as different types of commercial and industrial, and
residential customers, if desired. Power Alternatives will assist
the Town in the considerations for this pricing, and the
determination of the pricing to the new municipal gas utility
customers.
After the implementation of the municipal utility, it is
expected that the Town will be able to eliminate some of the taxes
that are now included in the retail price of gas for additional
savings for the residential and commercial gas customers. This
includes a portion the gross receipts tax, which can be eliminated
or reduced on some or all of the gas payments, as municipal
utilities are believed to enjoy an exemption from the gross
receipts tax.
In addition to the elimination of a portion of the gross
receipts tax, it is also believed that depending on the manner of
the implementation of the municipal gas utility, and the
structuring of the gas supply contract, that the some or all of
the sales tax that is presently charged may also be eliminated
from the cost of gas to the gas customers of the Town.
There are also revenues that can be generated for the Town by
the municipal gas utility which can be used to either provide
revenues to the Town general budget or to reduce the cost of gas
for the customers of the municipal gas utility.
Page 16
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
The municipal gas utility can sell gas to the residential and
commercial gas customers that are contiguous property owners to
the Town of Southold. One of the roles of Power Alternatives will
be to work with the Town to identify these customers an establish
the necessary arrangements with them.
The sale to these customers is believed to be permitted to
produce a small profit for the Town which can be used to reduce
the cost of gas to the customers of the municipal gas utility, or
to provide revenues to the general budget of the Town.
Page 17
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
V. Operation of the Municipal Gas Utility
Costs and Overhead for the Town of Southold
The operation of the municipal gas utility can be done for
virtually no additional costs or overhead for the Town of
Southold. This is because the repairs and maintenance of the
system will continue to be done by Lilco.
In addition, the proposals that will be solicited by the Town
for gas supply contracts will require the company to which the
contract is awarded to do the billing for the municipal gas
utility, including the meter reading, billing, and collection.
The means and process of billing, including budgeting, collection,
deposits, and other routines of that process will be processed by
the gas supply company.
The requirement by the Town in the proposals that the gas
supply company perform these services for the Town of Southold
will enable the Town to form and operate the municipal gas utility
at virtually no cost to the Town. The Town will then not be
required to employ any additional staff or to purchase any
additional equipment or capital in order to form and operate the
municipal gas utility if it does not choose to do so.
In the future, if the Town decides to assume some of the
metering or billing functions, the Town can have the revenues of
the municipal gas utility support some employment positions in the
Town as a further benefit or the municipal gas utility.
Page 18
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
Ail decisions by the municipal gas utility for items such as price
changes and expenditures must be made at public hearings conducted
in the Town, where the residents of the Town can attend and
participate.
At this time, it is likely that the municipal gas utility can
be formed and operated without the purchase of any equipment or
metering, both retail and for the purchase of the gas supply
itself, and therefore this will be done at little or no cost to
the Town.
New York State law requires that the enabling statue of the
municipal gas utility, Section 360 of the General Municipal Law,
state the means of the acquisition of any equipment to be
purchased by the municipal gas utility, including the expected
maximum costs thereof.
It is not expected that the Town will have to acquire any
equipment to form or operate the municipal gas utility. However,
in the event that at a future time the municipal gas utility
should have to acquire any meter, metering, pipeline, or
equipment, to continue operation, it would not be able to spend
any money for that purpose unless the language providing for that
acquisition is stated in the original enabling statute, including
the maximum cost of the purchase.
For that reason, the local law that was adopted by the Town
contains language enabling the municipal gas utility to purchase
Page 19
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
or acquire equipment if it is ever necessary. The maximum amount
that could ever be spent on that purchase or acquisition is stated
in the local law as twenty-five thousand dollars ($25,000).
This amount has been determined to be the amount that could
be required to purchase basic metering, or some equipment by the
municipal gas utility, should the purchase become necessary at a
later date due to an event such as legislative or regulation
changes. It is very unlikely that the Town will have any
substantial expenditure in the creation of the municipal gas
utility,
The formation and operation of the municipal gas utility,
including the amount that is stated in the local law, will not
have any effect on the general budget or taxes of the Town the
Town. This is because any such expenses will be paid by the
municipal gas utility, from the revenues of the gas utility.
Any capital purchases such as metering and equipment, if ever
required, can be financed by the municipal gas utility in long
term financing at low municipal interest rates, so that there will
be only a negligible effect on the cost of gas to the customers of
the municipal gas utility by any such required expenditure.
Page 20
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
VI. Formation and Implementation of the
Town of Southold Munlcipal Gas Utility
The initial step of the formation of a municipal gas utility
is the adoption of a local pursuant to Town Law and the Local Home
Rule Law with which meets the technical requirements of Section
360 of the General Municipal Law. The local law is adopted at a
public hearing, which is noticed and conducted pursuant to the
Local Home Rule Law, and the Town Law of the State of New York.
The local law must follow the requirements of Section 360 of
the General Municipal Law, which among other items, mandates that
the local law state the manner of the acquisition of the supply
and the obtaining of or the use of the infrastructure. The
proposed Local Law for the Town of Southold, including the maximum
stated cost of the municipal utility, twenty-five thousand dollars
($25,000) is annexed as ~xhibit A hereto.
The Town is then mandated to conduct a referendum on the
local law which should be held not less than ninety days after the
local law is adopted, at a special or general election. The
ninety day period may be shortened under certain circumstances.
After the passing of the referendum, the Town Clerk must file
the local law at the office of the Secretary of State with twenty
days after the date of the referendum. The municipal gas utility
becomes a legal municipal entity or department of the Town on the
filing of the local law with the Secretary of State.
The process of the adoption of the local law and the
Page 21
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
conducting of the referendum also has many procedural requirements
of the Town Law and Election Law which must be followed. Power
Alternatives is available to advise the staff of the Town of
Southold as to these requirements, and will advise and work with
the Town and its staff as those requirements as the process
continues.
Upon the municipal gas utility becoming formally created, the
implementation process may commence. An initial step in that
process is for the Town to send inquiry letters to their residents
asking about their interest in the utility.
An additional step will be to identify the gas customers that
are outside of the Town, but who are on property that is
immediately adjacent to the Town, as they can become customers of
the municipal gas utility.
The Town will issue a Notice of Request for Proposals, which
will actually request that interested parties, usually large gas
supply companies, respond with a proposal for the supply of gas to
the retail gas customers in the Town.
Power Alternatives will provide these notices and contracts
to the Town as necessary, pursuant to its agreements with the Town
of Southold. In addition, gas suppliers will be qualified and the
supply contract awarded by the Town with the assistance of Power
Alternatives.
The necessary forms and compliance for the transfer of
Page 22
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
customers and other necessary requirements for the implementation
of the gas customers will be provided to Southold by either the
gas supply company or Power Alternatives.
The transportation of the gas and the maintenance and repairs
of the gas pipelines and equipment will continue with Lilco. The
logistics of the billing and payment for these items as well as
the continuing of the services and the beginning of the supply of
gas to the customers deciding to purchase from the municipal gas
utility will be arranged by the Town with the assistance of both
Power Alternatives and the gas supply company.
Page 23
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Re,ortho the Town of Southold
Formation of a Municipal Gas Utility
VII. S~mmary
The municipalization of gas is a means for municipalities
such as the Town of Southold to enable its residents and
businesses to access the benefits of deregulation that they were
intended to receive. Power Alternatives is still the only company
to have successfully formed a municipal gas utility in the State
of New York since the deregulation iof the gas industry. We are
believed to be the only company working with municipalities in
this process, and to a large extent Power Alternatives originated
this concept and process.
Southold can also be assured by the fact that there are
presently several other municipalitlies in Suffolk County, such as
the Villages of Lynbrook, Hempstead, and Farmingdale, and other
municipalities throughout New York State, which are at various
stages of the consideration, formation and implementation of the
municipalization of gas for their communities.
Page 24
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
EXHIBIT
TOWN OF SOUTHOLD
NOTICE OF PUBLIC HEARING ON PROPOSED LOCAL LAW
NOTICE IS HEREBY GIVEN that the Town Board of the Town of
Southold will conduct a public hearing on March , 1998, at 8:00
p.m., concerning a proposed new Local Law of 1998, of the Town of
Southold, entitled "A Local Law of the Town of Southold of the
year 1998, a Local Law Creating a Municipal Gas Utility of the
Town of Southold" for the purpose of receiving public comment, and
at the conclusion of the public comment period, considering for
voting and adoption the described local law.
The purpose and a summary of the proposed Local Law of 1997,
is to establish a Town of Southold Municipal Gas Utility pursuant
to Section 360 of the General Municipal Law for the Town of
Southold.
PLEASE TAKE FURTHER NOTICE that the public hearing will be
conducted at , located at ,
Southold, New York, and will commence at 8:00 p.m., on March ,
1998, at which time any public comment regarding the proposed
Local Law of 1998 will be heard, and at such time and place all
persons interested in the subject matter thereof will be heard
concerning same, and at the close of such public comments and
discussion by the Board, the Board shall conduct a vote on this
local law.
Dated:
Town of Southold
Suffolk County, New York
, 1998
By Order of the Town Board of the
Town of Southold
Page 25
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
EXHIBIT B
TOWN OF SOUTHOLD
LOCAL LAW NO. OF THE YEAR 1998
A LOCAL LAW CREATING THE MUNICIPAL GAS UTILITY OF THE TOWN OF
SOUTHOLD.
BE IT ENACTED by the Town Board of the Town of Southold as
follows:
Section 1; Title, Purpose and Definitions. 1.1(A). Enactment.
Pursuant to Section 10 of the Home Rule Law, and Section 360
of the General Municipal Law, the Town of Southold, County of
Suffolk and State of New York, hereby enacts this local law to
create the Town of Southold Municipal Gas Utility.
1.1(B). Effective Date.
The local law shall take effect on the filing of the approved
Local Law with the Secretary of State of New York, which shall be
within twenty (20) days after its approval by a simple majority of
the voters by mandatory referendum at an election or ~pecial
election to be held to approve this local law, pursuant to Section
360 of the General Municipal Law.
1.2. Intent.
WHEREAS the Town of Southold is a Town duly incorporated
under the laws of the State of New York, and;
WHEREAS the Town Board of the Town of Southold is duly
empowered pursuant to Section 360 of the General Municipal Law of
Page 26
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
the State of New York to form a Municipal Gas Utility for the
Town, and;
WHEREAS it is essential for the well-being, livelihood and
safety of the residents and businesses of the Town, and of the
other consumers of gas power in the Town, including the Town
itself, and of their families and guests, for the economic climate
of the Town, and for the protection of private and public property
within the Town and the value of that property, that the supply
and distribution of gas to the residents, businesses and other
consumers of gas power in the Town, and the Town itself, be
provided in a reliable manner, and at a fair and reasonable cost,
and;
WHEREAS the Town Board has determined that the most reliable,
fair, and economical way for gas and gas supply to be provided to
the Town of Southold, its residents, businesses and institutions,
is by the creation of the Town of Southold Municipal Gas Utility,
the Town Board of the Town of Southold hereby enacts this local
law for the intent and purpose of establishing a Municipal Gas
Utility pursuant to Section 360 of the General Municipal Law, and
all of the powers and duties thereunder.
Section 2.; Plant and Facilities, Maintenance
and Service. and Supply
The Town of Southold Municipal Gas Utility shall acquire the
necessary facilities, and either establish necessary functions for
or procure contracts for the maintenance, service and billing of
Page 27
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
the gas energy system, and a supply of gas such as are necessary
for the creation of the Southold Municipal Gas Utility.
The proposed method of constructing, leasing, purchasing, or
acquiring, the facilities necessary for the operation of the
Southold Municipal Gas Utility, if any, together with both the
maximum and the estimated costs thereof, the method of furnishing
such service, and the method of obtaining gas supply shall be as
follows:
2.~.
A.
Plant and Facilities.
The Town of Southold Municipal Gas Utility will obtain
access to or acquire the portion of the gas distribution system
within the Town, if any, that it is necessary for the Town to
operate the Municipal Gas Utility, by purchase, lease, or
condemnation from that which is currently owned by the Long Island
Lighting Corporation ("Lilco"), or by obtaining other facilities
as necessary. The municipal gas utility will only acquire,
construct or obtain that equipment and facilities, if any, which
are necessary to provide gas supply, and segregate and operate the
municipal gas utility and as may be needed to separate itself from
the Lilco system or to meter the gas supplied to or used by the
Town of Southold Municipal Gas Utility.
B. The maximum and estimated cost of the items set forth in
subparagraph (A) hereof, is expected to be not more than twenty-
five thousand dollars ($25,000).
Page 28
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
C. The cost of the necessary facilities, if any, and
distribution and any other costs that are necessary for the
implementation of the Town of Southold Municipal Gas Utility and
the entire costs of the implementation and operation of the Town
of Southold Municipal Gas Utility will be paid in the first
instance from the revenues generated by the Town of Southold
Municipal Gas Utility only.
D. None of the costs of the implementation or operation of
the Town of Southold Municipal Gas Utility shall be included in or
have any affect on the Town general budget or the assessment of
Town property taxes.
2.2. Service and Maintenance of Plant,
Facilities, and Distribution System.
A. The Town of Southold Municipal Gas Utility will obtain
service and maintenance for the equipment and infrastructure of
the Southold Municipal Gas Utility, and the other remaining gas
distribution and other equipment that is within the Town from
Lilco, or the existing gas utility for the time that the utility
is mandated to provide those services, or it remains in the best
interests of the Town to receive the maintenance from that source,
and will otherwise contract out the service and maintenance to
other suitable contractors as necessary or when in the best
interests of the Town and the Municipal Gas Utility.
The Town of Southold Municipal Gas Utility will obtain
billing and management services by obtaining contracts with
Page 29
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
suitable and acceptable maintenance, service and billing
companies. The contracts will be supported wherever possible by a
performance bond of an amount acceptable to the Town.
B. The Town will also consider and retain the ability
and power to create its own maintenance and service and billing
department, including the equipment, materials, and supplies
required for that department, in order to provide billing, service
and maintenance to the Town of Southold Municipal Gas Utility if
the Town deems it to be in the best interests of the Town to do
so.
2.3.
A.
Gas Supply.
The Town of Southold Municipal Gas Utility will obtain
its supply of gas by contracting with another utility or supplier
to provide the supply of gas to the Municipal Gas Utility.
3.0. Mandatory Referendum.
This Local Law shall be subject to approval by a mandatory
referendum of the residents of the Town of Southold, pursuant to
and as set forth in Section 360 of the General Municipal Law of
the State of New York, the Election Law and Town Law of the State
of New York, at an Election or Special Election as may be
required, which shall be conducted on , 1998.
The Town of Southold Municipal Gas Utility shall be effective
and granted the full powers entitled to it by law on the date of
the approval by a simple majority of the referendum, and the
Page 30
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
filing of the Local Law with the Secretary of State of New York.
Dated: , 1998
Town of Southold
Suffolk County, New York
Page 31
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
EXHIBIT C
LEGAL NOTICE
TOWN OF SOUTHOLD
NOTICE OF ADOPTION OF LOCAL LAW
SUBJECT TO REFERENDUM
AND OF
HEARINGS ON REFERENDUM
PLEASE TAKE NOTICE THAT the Town Board of the Town of
Southold, on , 1998, pursuant to Section 360 of the
General Municipal Law and the Home Rule Law of the State of New
York, adopted a Local Law of 1998, a Local Law Creating a
Municipal Gas Utility for the Town of Southold.
PLEASE TAKE FURTHER NOTICE that a public referendum will be
conducted by the Town of Southold on , 1998, on the Local
Law of 1998 creating the Town of Southold Municipal Gas Utility,
at such times and places within the Town as will be announced by
further public notice.
PUBLIC HEARINGS will be conducted on the Local Law of 1998
creating a Town of Southold Municipal Gas Utility, and the public
referendum, at the Town Hall of the Town of Southold, located at
, Southold, NY , on , 1998, at 7:00 p.m., and on ,
1998, at 7:00 p.m.
FURTHER PUBLIC NOTICE including the publication of the
referendum and the Local Law will be made by the Town of Southold
as required.
Dated: , 1998
Town Clerk
Town of Southold
Suffolk County, New York
Page 32
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
EXHIBIT D
TOWN OF SOUTHOLD
NOTICE OF MANDATORY PUBLIC REFERENDUM;SPECIAL ELECTION
PLEASE TAKE NOTICE that on , 1998, the Town of
Southold will conduct a mandatory public referendum pursuant to
Section 360 of the General Municipal and the Town Law of the State
of New York, for the approval of a Local Law adopted on
, 1998 by the Town Board of the Town of Southold, Creating a Town
of Southold Municipal Gas Utility.
PLEASE TAKE FURTHER NOTICE that the voting on the mandatory
referendum will be conducted on , 1998 between the
hours of twelve noon (12:00 p.m.) and nine o'clock (9:00 p.m.),
and that all residents of the Town registered to vote at local
elections will be entitled to vote at the referendum, and that
voting will take place as follows:
Election Districts:
voting place will be in the Town Hall.
Election Districts:
voting place will be in
The referendum proposition shall be submitted for mandatory
public referendum ballot by the Town of Southold at a special
election/referendum to be conducted for that purpose on ,
1998, and will be presented on a ballot on that date. The
following is the Referendum Proposition that will be submitted for
mandatory public referendum on , 1998.
Referendum Proposition
SHALL a Local Law of 1998, of the Town of Southold, New York,
adopted by the Town Board of the Town of Southold on , 1998,
creating a Town of Southold Municipal Gas Utility BE APPROVED?
WHICH LOCAL LAW provides for the creation of the Town of
Southold Municipal Gas Utility pursuant to Section 360 of the
General Municipal Law of the State of New York, for providing gas
supply to the Town and its residents and businesses, and further
provides that the equipment and facilities necessary for the
metering and operation of the municipal gas utility, if any, may
be acquired by purchase, construction, reconstruction and or
condemnation from the existing utility service company, if
necessary, and that the costs associated there with, if any, will
be not more than twenty-five thousand dollars ($25,000) that being
Page 33
Copyright 1998, Power Alternatives, Inc.
Power Alternatives, Inc. Report to the Town of Southold
Formation of a Municipal Gas Utility
the estimated and maximum cost thereof, and that the entire cost
thereof will be paid from the revenues of the Municipal Gas
Utility only, and shall not have any effect on the Town General
Budget, the purpose and intent of this Local Law being in order to
provide inexpensive and reliable gas supply to the residents,
businesses and institutions of the Town of Southold.
Town of Southold , 1998
The following is the text of the Local Law which is submitted for
mandatory public referendum, and which is published herein in
accordance with Section 360 of the General Municipal Law.
Page 34
Copyright 1998, Power Alternatives, Inc.