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.
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.
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