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Average Homeowner Gets Nearly $700 'Dividend' from Electric Utility

Millions in surplus ease property tax burden and would be difficult to replace, according to a special presentation Monday.

Madison's electric utility generates millions of dollars in surplus every year—about $3.5 million in 2011, which is historically low—that is used in the municipal operating budget, Mayor Bob Conley said Monday in a special presentation about the borough electric utility.

Conley compared the surplus to the money that typically would be used to pay a dividend to stockholders of for-profit electric companies.

Taking away Madison's 2011 surplus from the 2012 operating budget would mean the owner of a home with an average market value of $691,000 would have paid $693.80 more in property taxes to make up the difference.

"That is an impressive dividend payout," Conley said.

Monday's town hall meeting was the first of planned informal presentations and Q-and-A sessions on various aspects of the borough, with the next, scheduled for October, about the borough's capital budget.

Madison's electric rates are comparable to the market rate, though slightly higher lately, and by running its own utility, Madison ensures borough residents are the first, and only, customers to be taken care of in the event of outages after a storm, officials said.

Councilman Dr. Vincent Esposito, the liaison to the electric utility, said during Monday's presentation that by running its own utility, Madison has more control of the infrastructure, which allows it to keep its downtown utility wiring underground.

Conley said even though taxpayers also pay electric bills, the electric bills not comparable to another tax as long as Madison charges the market rate for electricity. He said residents have control over how much electricity they use.

"You don't have that choice when you pay property taxes. You certainly have that choice when you play with the thermostat," he said.

Officials said the borough's current contract for purchasing electricity is almost up and it already has started purchasing electricity at significantly lower rates for the future, which is expected to increase the utility's profitability.

According to the presentation:

  • Madison still has old-fashioned meter readers who use a pencil and a booklet.
  • The system serves over 6,500 customers, ranging from small homes to large corporations.
  • The system is comprised of two substations and nearly 300 miles of underground and overhead cables, and is maintained by an eight-member crew.
  • The crew members have more than 150 years experience among them.
  • Replacing the entire system is estimated to cost $40 million, possibly much more.
  • The electric utility budget is $19,333,042, compared to the municipal budget of $25,150,936
  • Among the challenges of running a utility is uncertainty of the right time to buy electricity due to changing market conditions.

Future goals include a full review of all the utility's assets and their importance, and installation of a planned advanced metering system. One goal includes the ability to see and manage consumption from a computer, home display or smart phone. Madison also could consider building its own generation plant, though there weren't any specific plans for that.

Thomas Bintinger raised the possibility of Madison selling its utility.

"Personally, I don't think that a good idea," the mayor said, adding that it's "certainly a worthwhile question — at least you have to have research behind to it to say, yes, we want to keep the utility."

Some of the discussion involved the merits of installing solar panels on the roofs of public property or over parking lots. Questions also were brought up about aspects of the planned new metering system, including whether individual usage information would be public information, are there guarantees or tests to be done to show some customers currently are underpaying and Madison will see the projected increase in revenue, and how many residents are expected oppose usage information being transmitted by radio frequencies.

Officials said it would be important to find ways to protect individual usage information, past experience shows primarily water meters do slow down, and that new metering systems in California that use radio frequencies typically are opposed by less than 1 percent of the population. Madison residents would have the ability to opt out and use a meter that needs to be read by a meter reader, though opting out is expected to result in a surcharge to have the meters read.

Madison Station August 07, 2012 at 12:44 PM
The borough should seriously consider solar panels as a way to generate supplement electricity on its own, rather than solely rely on a variable market. Solar panels would help to offset the "peak usage surcharge" incurred during the hot, sunny, days of the summer. After the initial investment of the solar panels are paid off, the rest is gravy for the borough until the panels need replacement. Serious consideration is needed.
Aladdin Sarsippius Sulemenagic Jackson III August 07, 2012 at 06:59 PM
Wait a minute. If I'm overpaying for electric (and I guess we all are if there is a surplus), then how exactly does this result in any actual savings for me? Last time I checked electric bills aren't tax deductible, but my property taxes are. So it would actually be better for me that the town raise property taxes and allow me to deduct that, and to cut the electric bill. Someone smart on this board - please explain what I'm missing here.
Madison Station August 08, 2012 at 12:46 PM
Aladdin - The idea is electricity is a variable tax - and one that you have control over. Large corporations and heavy users of electricity pay a significant amount more into the "tax." If they lowered your electric bill to a "break-even" revenue for the utility, your savings may only be $80 for the year. But, because other users pay a larger portion of the electric "tax," thus generating a surplus that is used to lower property taxes, your dividend is greater that the amount you would save on a lower electric bill for your individual usage. Drew University does not pay property taxes, but they do pay electric! Look at the big picture, not individual pieces.
mark herman October 02, 2012 at 11:15 AM
Dear Madison Station. WHAT??? Your logic is justification after the fact. It is completely made up logic based on premises that cannot last one question? How is this not redistribution? And for a second question. Is it really your premise that the people of Madison get more than $700 per household from Drew and a few companies in an office park? Seriously? Your the Mayor right??
Madison Station October 02, 2012 at 11:46 AM
Mark - There are many other large users of electricity in the borough than just Drew and the office park crowd. I only used those users as an example of a much larger group of electric customers who use significantly more electricity than the average homeowner, thus paying a larger "share" of the electric surplus that can be used to offset taxes. My logic makes sense, and it currently works in reality - when electric rates are favorable.
Madison Station October 22, 2012 at 03:12 AM
Vineland (another NJ municipal electric utility) is leading the way: http://www.communityenergysolar.com/featuredprojects/vineland

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