Maine considers consumer-owned electric utility

Published on May 10, 2021 by Jaclyn Brandt

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Maine lawmakers have again proposed creating a new nonprofit, consumer-owned electric utility to replace two investor-owned utilities in the state, a move the electric companies say would cost billions of dollars to implement and delay the state reaching its clean energy goals.

Central Maine Power Co. (CMP) and Versant Power are the two investor-owned utilities that currently serve the state.

A bipartisan group of lawmakers, including state Rep. Seth Berry (D-Bowdoinham), House chair of the Energy, Utilities and Technology Committee and sponsor of the bill, say a consumer-owned utility would improve service and lower rates. Berry introduced a similar bill in 2020 that died in the legislature.

The new bill calls for the creation of the Pine Tree Power Co., an independent, not-for-profit entity that would be run by seven elected board members and four expert advisory members. The legislation, if enacted, would require the consumer-owned utility to purchase the assets of CMP and Versant for fair market value through the issuance of its own bonds.

CMP, a subsidiary of Avangrid, is Maine’s largest electricity transmission and distribution utility, serving 620,000 customers and representing about 80 percent of Maine’s customer base.

Catharine Hartnett, manager of corporate communications at Avangrid, said, “A government takeover of CMP and Versant is an expensive, risky and political move that will put Maine’s energy future at risk, and cost the people of Maine, potentially $13.5 billion just to acquire the utility assets and infrastructure, with none of that money being put toward climate solutions, improved reliability or high-quality customer service.”

Both supporters of a public utility and the investor-owned utilities have prioritized clean energy initiatives, but have different views on who can help Maine reach its renewable energy goals faster.

Hartnett said CMP has more than 500 distributed generation projects in process, mostly solar, and “we have the resources to bring to the challenge including hiring nearly 100 contractors to assist with the studies and engineering to move projects forward.”

Versant Power, the state’s second largest electric utility, delivers electricity to more than 159,000 customers in Maine.

“Maine is working hard to make progress on renewable energy goals and mitigation of climate change, and Versant Power strives to be a trusted partner in those efforts,” Judy Long, manager of communications and brand with Versant Power, said. “A government power takeover will threaten our state’s ability to do the work our citizens demand to keep pace with an evolving energy landscape.”

“When discussing the costs of this proposal, we can debate the dollar amount – which certainly would stretch into the billions – but the societal and environmental costs of delay and inaction it would cause are unlimited,” Long added.

A coalition of Maine ratepayers, business leaders, energy experts and conservationists called Our Power is supporting the new bill.

Maine is not new to consumer-owned utilities. Kennebunk Light and Power, Madison Electric Works, and Eastern Maine Electric Cooperative are all operating in Maine.

“Consumer-owned utilities like the proposed Pine Tree Power Company are a tried-and-true way to deliver locally-controlled, reliable power at a lower cost to utility customers” said Sharon Staz, general manager of Kennebunk Light and Power District from 1998-2015.

The sale of an electric company’s private assets to a public utility is a lengthy, complex and expensive process that typically takes many years.

A report, the Emera Maine Municipalization Review, written in 2019 by Concentric Energy Advisors, said that only 10 of the 63 electric utility municipalization efforts since 2000 have been completed. “These recent efforts have largely failed for a variety of reasons, including abandonment by the municipal government after consideration of a feasibility study or rejection by the voters after the government officials bring the decision to a vote,” the report said.

The report found that with utility municipalization efforts that have advanced, often the acquisition and initial operating costs were understated, resulting in higher than expected annual operating costs for the municipal utility and weakening savings opportunities, at least in the early years.

Our Power states that on average, COUs like the proposed Pine Tree Power charge customers 13 percent less than IOUs. However, Concentric Energy Advisors, in a separate report titled Electric Utility Privatization: An Analysis of Why Municipalization Efforts Fail, said it’s not always the case that the creation of public utilities leads to lower customer bills. “The operation of a newly formed municipal electric utility faces significant challenges and incremental risks that can result in higher costs for customers,” the report said.

Hartnett said the utility rates from Maine’s nonprofit utilities vary, with some lower than CMP and some higher. “Regional transmission and supply rates are more volatile than delivery rates, and will not be different in a government-controlled model,” she said.

COUs operate under a different set of rules than investor-owned utilities, including exemptions from state and local taxes. According to Hartnett, creating a COU would result in displaced income to the state. The state would miss out on the $99.2 million in tax revenue that CMP paid in 2020. And unlike with IOUs, a consumer-owned utility does not have to enter into long-term renewable energy capacity contracts, which can create stranded costs, offer net energy billing, or create arrearage management programs for low-income customers.

Whether creating a consumer-owned utility would result in improved reliability is another issue that is being debated. Critics of the investor-owned utilities are frustrated with power outages in the state. But Hartnett said often reliability has more to do with the state of Maine than any one individual utility.

“Approximately 77 percent of outages in Maine are related to trees and at CMP the vast majority of tree-related outages are due to trees outside our regulated trimming right-of-way,” she explained. “A government-controlled utility will have the same conditions and work with the same contractors.”