PORTLAND, Maine — Maine’s top court has upheld a decision to let Bangor Gas Co. continue using a rate structure based not on its service costs but on a policy goal of encouraging expansion of natural gas service in the state.
The Maine Supreme Judicial Court on Thursday issued its decision that the Maine Public Utilities Commission did not abuse its authority in allowing Bangor Gas to extend use of an alternative rate structure intended to help start-up utilities compete.
The Maine Public Utilities Commission in September 2014 approved a plan to continue Bangor Gas’ alternative rate plan for another seven years, which they determined would continue to support natural gas expansion in the company’s service area.
The Maine Office of the Public Advocate argued that the value regulators used to determine the alternative rate plan was incorrectly high, allowing for higher revenue requirements to make up that cost.
The utility assets changed hands multiple times since it began providing service in 1998. It was purchased in 2007 by Energy West for approximately $500,000, according to court records.
The court ruled that regulators had the ability to use the $38 million valuation rather than the $500,000 acquisition cost by Energy West as the basis for determining the alternative rate plan.
“Consistent with its statutory authority, the commission rejected the acquisition cost factor and accepted the original cost factor as the more reasonable value on which to base Bangor Gas’ base rates and resulting return on equity,” the decision states. “In so concluding, the commission gave careful consideration to Bangor Gas’ productivity and its ability to attract capital and realize a fair return on equity, and to policy concerns for rate stability.”
The public advocate was joined by Verso Paper Corp. and its formerly affiliated energy production facility, Bucksport Energy.
Both corporate entities had expressed concern about the valuation, arguing that Bangor Gas had already recovered the cost of a transmission line to the mill over the term of a 15-year contract.
The appeal in the case was filed before Verso decided to close its Bucksport mill and sold it to a Canadian scrap metal dealer. The buyer, American Iron and Metal, also acquired the related natural gas-fired power generator, which it continues to operate.
The PUC in its decision declined to state just how those rates should be established, as the supply contract for the mill expires in January 2016.
Bangor Gas serves about 4,300 residential, commercial and industrial customers in Bangor, Brewer, Old Town, Veazie, Bucksport and Orono.