Maine proposal to create public utility may result in higher rates for customers in near-term
The Maine legislature is considering a bill that would allow for a consumer-owned utility in the state that would replace investor-owned utilities Central Maine Power (CMP) and Emera Maine, a move that analysts say may have negative consequences for customers within the first 10 years.
The legislation, LD 1646, would create a consumer-owned public entity called Maine Power Delivery Authority (MPDA) that would operate the transmission and distribution assets of CMP and Emera.
Some of the key elements of LD 1646 include appointing stakeholders to the MBDA board; acquiring transmission and distribution assets either through negotiation or eminent domain; the hiring of a “for-profit” contractor to manage transmission and distribution (T&D); and the requirement by that contractor to hire union employees.
Central Maine Power pointed to an independent report presented to the legislature that analyzed the utility proposal. The report, “Evaluation of the Ownership of Maine’s Power Delivery System,” was prepared by London Economics International LLC (LEI) and commissioned by the Maine Public Utilities Commission (MPUC) and presented to the legislature in mid-February.
The report looked at the short-term and long-term benefits and costs if the law were to be passed.
Some of the short-term costs found during the research include the likelihood of an increase in rates for ratepayers. “Given the transaction costs for setting up the MPDA and the acquisition price for the T&D assets may be a premium over current [net book value] NBV, electric ratepayers may see an increase in electric rates for some period of time,” the report said.
Further, the evaluation showed LD 1646 does not guarantee that there will be improvements in reliability and customer service at no additional cost to ratepayers.
The report also highlights the potential for loss of tax revenue for local communities. CMP and Emera provided Maine’s municipalities with close to $70 million in tax revenue in 2018. The threat of that lost tax revenue was raised as a concern about the legislation in testimony provided by the Maine Municipal Association to state lawmakers last year.
The report also found that, because the MPDA board would be appointed by the governor, ratepayers would not have direct control over its members, and many of those members may not have the same interests as the ratepayers. And there is no guarantee of reduced rates over time or tax benefits to local communities.
“The independent experts commissioned by the MPUC to review public power raised a host of concerns,” said Catharine Hartnett, manager of corporate communications with Central Maine Power. “The report documents that until at least 2033, the cost of electricity provided by a public power authority is likely to be higher, not lower than CMP’s and Emera’s prices.”
LEI found one of the largest issues of implementing the bill would be the transfer of T&D, which would likely require Federal Energy Regulatory Commission approval. Therefore, the report recommends that the “legislation should include provisions to assist in resolving legal and regulatory obstacles to the transfer of assets from the IOUs to the MPDA.”
LEI found that the process of acquiring the assets is “likely to be controversial and complicated” and “unlikely to result in a smooth transition due to the possibility of litigation,” which may affect the timeline and budget proposed in the bill.
They found there is a precedent of eminent domain in Maine related to the water utilities, but recommended that LD 1646 be amended to “provide a clear process” for deciding upon an acquisition price before moving forward on any transfer negotiations.
“The report also raised concerns around the process and risks of attempting to acquire and transfer privately owned assets, and the complications and controversies associated with a seizure, along with potential impacts on critical infrastructure investment,” Hartnett added. “We are focused on showing customers and their representatives in government that our 120-year history of providing reliable service and our renewed commitment to service excellence makes us the best choice for Maine.”
The benefits of the law, the report said, include job security for union workers and potentially lower rates for ratepayers over the long term (after 10 years).
In a statement, LD 1646 sponsor Rep. Seth Berry (D-Bowdoinham) said, “the report did fail to examine significant additional savings and benefits. LEI does find that the more we invest, the more we will save. Yet it badly underestimates Maine’s need to invest in the grid, both to reach our ambitious climate goals and to improve our worst-in-nation reliability.”
However, a state takeover of CMP and Emera is not in the best interest of Maine consumers, wrote David Woodsome, a Republican state senator from Waterboro who is a member and former chair of the Legislature’s Energy, Utilities and Technology Committee, in a recent op-ed.
“First, CMP and Emera Maine are private companies. So, for the state to take them over, Maine would need to pay fair market value for these companies, which will run into the billions of dollars. Given recent sales of privately owned electric companies, the total price tag could be $7 billion to $9 billion.”
The bottom line: “The cost of this new debt would have to be paid for by all of us in our electric bills,” Woodsome wrote.
