Residential power rates are set to drop 14 percent in March for about 108,000 former Bangor Hydro Electric customers who now receive service from Emera Maine.
State regulators approved a rate of 6.5 cents per kilowatt-hour for those customers Wednesday afternoon, following a similar decline for Central Maine Power Co. customers Tuesday. The current standard offer price is 7.57 cents per kilowatt-hour.
In addition to putting more money in the pockets of electricity customers, the lower prices will provide a challenge to competitive electricity providers, who compete with the standard offer price to provide customers their power supply.
The low bids came as something of a surprise, driven by plummeting oil prices, but the latest bids for both Emera and Central Maine Power Co. are for 10 months and do not include months of winter peak demand in 2016.
Tim Schneider, public advocate for the Maine Public Utilities Commission, said that could mean prices will rise again when they are bid this fall.
“It buys us some time but there’s a risk we could see a dramatic increase,” Schneider said.
Mark Vannoy, chairman of the Public Utilities Commission, said Tuesday that the state bid a 10-month period to begin a shift from the spring to the fall for future bids. Vannoy said that’s because the winter has become the new peak time for power prices in New England.
Moving the bidding window closer to the peak allows bidders to have a better idea what that peak will look like and reduces the “risk premium” or additional cost bidders might add to a bid further removed from that peak period.
State officials earlier in the winter expected that residential power rates would rise in line with bids in other New England states where power prices for some utilities rose by double-digit percentages.
The bids also resulted in a 17.4 percent decrease in power prices for medium-sized customers, a use category that covers most small businesses. The price will be set at an average of 6.66 cents per kilowatt-hour, also starting in March and ending in December.
A standard offer bid was not approved for large customers, most of whom buy power on the wholesale market. The Maine Public Utilities Commission directed Emera to submit a proposal for providing a standard offer option for those customers. As of November, about 10 of 44 large customers in the former Bangor Hydro coverage area were getting their power through the standard offer.
Power supply costs are separate from transmission and distribution costs. Those are the two primary components of a residential power customer’s bill.
The combined Emera Maine still sets rates separately for former Bangor Hydro customers and former Maine Public Service customers in Aroostook and a small portion of Penobscot counties.
The standard offer prices for power went up about 15 percent last year for residential customers in the Maine Public Service district, to about 8.5 cents per kilowatt-hour from 7.3 cents per kilowatt-hour. That price applies through March 2017.