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Do you want to create a new power company governed by an elected board to acquire and operate existing for-profit electricity transmission and distribution facilities in Maine?
Backers of Question 3, the referendum question that would take over Central Maine Power and Versant and turn them into a consumer-owned utility, are making a lot of promises. They say the new utility would lower costs, improve reliability and customer service, and speed Maine’s transition to renewable power, all while keeping more money in Maine.
The problem is that some of these pledges are likely contradictory while others are very speculative. This was a conclusion of an analysis conducted by the Office of the Public Advocate, which did not take a position on Question 3 but provided a seven-page assessment of the proposal. “It is not possible to predict with certainty whether the quality of utility service would improve or deteriorate following the acquisition,” the report said. The office said the same thing with regard to reliability and renewable energy, and something similar about whether rates would rise or drop.
Given so much uncertainty about what Pine Tree Power may or may not achieve, at a time when Maine needs large investments in its electric grid, this proposed utility takeover is a bad idea for Maine. That’s why we recommend a no vote on Question 3.
Let’s start with costs. Recent huge jumps in electricity prices were frustrating and, for some Mainers, downright dangerous. Those price increases were driven, largely, by rising costs for natural gas, a primary source of energy generation for Maine.
Since electric utilities are barred, by law in Maine, from generating electricity, they must buy it from other sources. A switch to Pine Tree Power won’t change that. Energy supply, which CMP and Versant don’t control, accounts for the bulk of the average customer’s electricity bill. The part that the companies can control – called transmission and distribution – accounts for about 40 percent of the bill.
In addition to likely having no impact on electricity supply rates, a switch to Pine Tree Power would bring a huge upfront cost – the cost of acquiring CMP and Versant, since they would have to be purchased. The price tag the companies have put on the acquisition – $13.5 billion – is probably inflated. But, even if the takeover cost is significantly lower, that is still a lot of debt that must be repaid. Repaying that debt would likely cancel out the possibility of rate cuts, at least in the short term.
The purchase price of the utilities is also likely to be contentious, resulting in litigation, which could drag on for as long as a decade. That brings another layer of uncertainty, costs and delays in investments in renewable energy and reliability.
Backers of Question 3 also say that Pine Tree Power will make more investments in reliability and renewable energy than CMP and Versant. Such investments are clearly needed and the utilities have been slow to make them, but it is hard to see how Pine Tree Power would make those investments while also reducing rates and paying off the acquisition of the two privately held utilities.
Further, backers tout the board that would run Pine Tree Power. Seven members would be elected and they would appoint the remaining six members. It isn’t hard to imagine that lowering costs would be a winning message for those seeking to be elected to this board. Again, this would prioritize low rates over investments in renewable energy and reliability. In addition, in a small state like Maine, it would not be difficult or particularly expensive for corporate interests to pour money into these elections in an attempt to control the makeup of the board.
There is a lot of ire (some of which is earned) directed at the current utilities, especially CMP, in part because of their foreign ownership. Backers of Pine Tree Power say that money that now flows to foreign investors would stay in Maine. There’s a major problem with this rationale. Under the Pine Tree Power mechanism, a company, or many companies, would have to be hired to run the new utility. There is currently no entity in Maine that could do this work (the legislation behind Question 3 in effect bars CMP and Versant from bidding to be the grid operator), and few companies in the world that do it. So, significant amounts of money (likely tens of millions of dollars a year) would most likely be sent to another state or country to pay the new utility operator.
All this uncertainty to create a new utility doesn’t make sense. We have long argued that CMP and Versant can – and should – be held to higher standards by the Public Utilities Commission. A new utility accountability law was an important move in this direction, but more can be done to require investments in customer service, reliability and improvements for renewable energy, and to try to minimize rate increases.
That’s a much better way forward than an expensive utility takeover that is not likely to deliver on its many promises. That’s why we urge a no vote on Question 3.
In addition to opposing Question 3, we also recommend a no vote on Question 1. This question asks: Do you want to bar some quasi-governmental entities and all consumer-owned electric utilities from taking on more than $1 billion in debt unless they get statewide voter approval?
Question 1 is a direct response to Question 3 and, we think, a fairly cynical one. CMP quickly got the question on the ballot in case the Pine Tree Power referendum passes. Essentially, the question would require a public vote to approve the borrowing necessary to acquire CMP and Versant if Question 3 passes. This basically would give CMP a second opportunity to stop a utility takeover in case voters support it this November.
We don’t have objections to a public vote on so much public borrowing – bonds to pay for transportation, water quality improvements and other large public works already require such votes. But, we do object to the reason this question is on the ballot.
Election notice: The BDN will stop accepting letters and columns related to the Nov. 7 election on Wednesday, Nov. 1. Not all submissions can be published.