I spent four years in the House of Representatives, where I served on the Energy, Utilities, and Technology (EUT) Committee. I worked for two years on the legislation to convert our existing investor-owned electric utilities (IOUs), Central Maine Power and Versant, into a consumer-owned utility (COU). There are many examples of COUs in Maine and across the nation, providing us with lots of anecdotal props for any given position, but there are few situations that match the scale of the transition that would be brought about by LD 1708.
This COU would be governed by a board that would be elected by its customers. That stands in sharp contrast to the stack of global corporations that currently own our utilities and it certainly has appeal. The mechanics of LD 17081 are sensible, setting up a board that will direct the purchase and oversight of the utilities while retaining much of its workforce. This is a “government takeover,” as its naysayers like to describe it, only in the sense that it would require the power of eminent domain. Other than that, it’s no more a government operation than the local credit union or water district.
I’m suspicious of the idea that a large corporation is adequately motivated to be responsive to its customers’ needs when its earnings are based on building and upgrading tangible infrastructure. Dr. Rich Silkman’s testimony2 on LD 1708 and Governor Mills’s veto3, while aimed in opposite directions, both give us the highlights of Central Maine Power’s failure to live up to the expectations of the people it is supposed to serve. Mainers are right to be furious with CMP, and exploring the possibility of ousting them makes perfect sense to me.
But there are problems in this proposal that just aren’t sitting right.
The organization backing this bill sent out an email on May 26th that said, “One important thing to understand is how HUGE the savings for Mainers will really be, starting on day one.” On June 1st, PUC Chair Phil Bartlett, speaking to the EUT Committee, indicated that not only do we not know what the purchase price will be, we don’t even know how much it will cost for us to figure that out. He testified that he expects that a small team at the PUC will likely spend several years working on that, and that the court will undoubtedly determine the purchase price. Phil Bartlett tends to be reserved, not prone to overstating anything, so when I heard him say, “This is what keeps me up at night,” I paid attention. How can we know what the rates will be when the factors that determine them cannot be predicted?
The bill does not require the elected board to adhere to any particular path forward. Perhaps there will be huge savings from day one. Perhaps the elected board will decide to make substantial investments in grid reliability and security, causing rates to increase. There is simply no basis for predicting what might happen because there is no mechanism that requires the COU’s board to take any particular course of action. The elected board members will feel enormous pressure to keep rates low, especially given the claims being made by proponents. How will they balance that with the need for ongoing capital investment? The question is purely rhetorical because there is no way to know and the PUC will have virtually no leverage to affect their decisions.
With technology evolving quickly in our response to climate change and electronic vandalism, we need to make significant changes in our electricity delivery systems. The way we produce and use electricity is shifting and more change is inevitable. We need to be sure that the utilities take an active role in this evolution, but their history is far from reassuring. The price and emphasis of many of CMP’s capital projects have come under fire as being driven more by profit than by customer need, while COUs often under-invest in capital improvements that are needed to build resiliency and keep up with rapidly advancing technology, leading to failures in their infrastructure.
For years, the PUC seemed to take a lackadaisical approach to its oversight responsibility. The public became annoyed when CMP rolled out its smart meters with a dismally vague public information campaign. Our outrage was justified when their poorly implemented new billing system failed to meet even the most basic expectations for accuracy, clarity, and predictability. Investigations revealed that unacceptable shortcuts had played a part in the problems that customers across the territory experienced. CMP attempted to fix the problem with tone-deaf platitudes that did little but feed the fire.
The legislature - the most powerful voice the people have - roared loudly, clarifying ratepayers’ demands and strengthening the PUC’s oversight role. Taking advantage of new laws, the PUC has hit back at Central Maine Power, including, for the first time, holding them responsible for the cost of an audit that revealed deficits. Understanding that a well-regulated utility is essential to its customers’ health, welfare, and security, the PUC and the legislature have embraced their ability to push for improvements that the utility has long felt empowered to sidestep. Some of the front-and-center details involve strategies to ensure that we align the utilities’ efforts with ratepayers’ best interest, thwarting the utilities’ excessive devotion to the most profitable capital investments.
The effort to convert our existing investor-owned electric utilities to consumer-owned utilities has strong appeal. I like the idea of consumer ownership in general and particularly for fundamental services. If we had been ready to take advantage of the opportunity when Emera Maine decided to sell, it could have been an excellent opportunity to put this concept to the test. I regret that we missed out. But we moved in another direction and have begun shaping the coming reform of our energy economy. We’ve broken inertia and we are moving forward, though the strategy has barely had time to begin to work. For many years, CMP served the needs of its customers very well and there is reason to believe that with strengthened oversight, including strong public pressure to evolve to meet our changing needs, they can again.
Our electric service is fundamental to our way of life and we have seen, over the past several years, the damage that a poorly-run utility can do. With climate change initiatives and technological saboteurs creating an urgent need for change, utility oversight requires a strong overarching strategy and a thoughtfully detailed plan to ensure it serves the public need. Stakeholder groups across the state4 and the region5 have created plans that could serve us well, with a vastly reduced level of risk.
The reports linked in the previous paragraph are just two examples of how hundreds of people and organizations representing every aspect of the energy universe are working diligently to realign our utilities with society’s current and future needs. We could derail that process by transitioning to a COU that is governed by a board that is under pressure from voters who expect them, first and foremost, to dramatically lower prices.
We need, instead, to continue to pressure the existing utilities. The legislature, the executive branch, and the Public Utilities Commission are well aware of the distress of ratepayers and the need to implement changes that will make good use of evolving technology to save money, mitigate climate change, and keep our electric grid secure. The bright minds of people who are deeply invested in this problem continue to find creative ways to move the needle in the ratepayers’ direction. Now is not the time to pull the rug out from under that with no way to ensure that the change we create will be beneficial to the people of Maine.
http://www.mainelegislature.org/legis/bills/display_ps.asp?ld=1708&PID=1456&snum=130
http://www.mainelegislature.org/legis/bills/getTestimonyDoc.asp?id=165545
https://www.maine.gov/governor/mills/sites/maine.gov.governor.mills/files/inline-files/LD%201708%20Veto%20Letter.pdf
https://www.betterenergy.org/wp-content/uploads/2021/04/MURRDI-Stakeholder-Process-Summary.pdf
https://newenglandenergyvision.files.wordpress.com/2021/06/advancing-the-vision-report-to-governors-2.pdf
Hi Tina,
Thanks for sharing this. It is always great to hear from you. I do wish we had communicated more prior to this post.
Unfortunately, key assertions here are simply untrue, while other key ideas are inaccurate in context.
First, you say “the PUC will have virtually no leverage to affect their (the Board’s) decisions.” Second, you say “there is no mechanism that requires the COU’s board to take any particular course of action.”
With due respect, these readings are profoundly inaccurate, for at least four reasons:
A) The PUC fully regulates the Company and under the committee amendment, may also approve or disapprove its contracts. Phil has been clear that they will use the regulatory power to ensure proactive grid modernization and investment, to avoid exactly the concern you voice.
B) If reliability, rates and customer service (at least two of three) don’t get out of the bottom decile and stay out, the Pine Tree Power Company is found unfit and must be sold. In other words, the fitness test in the bill applies indefinitely to ALL large T&Ds, not just our current ones. If that’s not a mechanism, I don’t know what is...
C) Board members serve six-year terms. This means they will take the longer view. If they are at all worried about reelection (unlikely... these are not lucrative roles...) they will focus on investing to avoid massive outages, since outages, not rates, are what most often lead to turnover on elected COU boards.
And,
D) The Company is required to report on progress towards statutory goals annually to the Legislature.
Third, you express concern around the potential acquisition cost. As you know, LEI was clear that this is not actually the key driver of savings. It could be 2x NBV, the high end of their range, and we would still be better off — especially once you factor in the capital reserves and transmission savings that LEI omitted.
Fourth: As for MURRDI and the New England Energy Vision, I do not agree that these can be called “plans.” They are planning processes, which may bear fruit and we hope they do. We have recently given several million — unprecedented funding — to the Governor’s Energy Office to participate in this kind of work. These efforts will only benefit from a utility that is a true partner, whose incentives and objectives are fully aligned with climate, connectivity, security, reliability and cost rather than profit. Indeed in many areas, such as NYPA in New York, COUs perform an important and trusted planning function.
As for savings from day one, I don’t think there can be any debate that ending the outflow of hundreds of millions in guaranteed, double-digit profits — due to ancient Supreme Court decisions that Maine regulators and policymakers are powerless to avoid within an IOU business model — does in fact represent certain savings. LEI didn’t count cash reserves or equity value as “savings,” but it is certainly value that stays here in Maine. So too are transmission savings and FEMA assistance.
We can pay a low interest mortgage, not a monopoly rent, and properly align incentives. We can pay for the human world of performance, not the impersonal galaxy of capex, and save billions.
More later, perhaps -
Seth