AUGUSTA, Maine - Maine’s business community, already reeling from the sky-high cost of fuel, will soon be zapped by higher electricity bills.
The Maine Public Utilities Commission on Tuesday approved a double-digit increase in the “standard offer” electric rates for medium and large business customers of Bangor Hydro-Electric Co. and Central Maine Power.
Residential and small commercial customers served by both utilities will not see an increase in their standard offer rates until February 2009. The PUC will seek bids for that power later this year.
“I think we all were expecting an increase,” said Maine State Chamber of Commerce President Dana Connors. “But I have to say these are shocking, these are more than I think anyone was expecting.”
The medium business customers of CMP that rely on the standard offer will see a rate increase of 23 percent starting Sept. 1, while large business customers will see an increase of 32 percent. Bangor Hydro’ s medium business customers will see a rate increase of 21 percent and large business customers will have an increase just under 20 percent.
The standard offer is set by the PUC based on bids it receives from companies that generate power. Businesses that use the standard offer account for about 25 percent of the power used by those classes of customers. Most of the remaining business customers negotiate with power generators directly.
Bangor Hydro and CMP distribute the electricity produced by various suppliers, but collect the total cost of the bill for both power supply and distribution. The power supplier that submitted the standard offer bid selected Tuesday by the PUC won’ t be identified publicly for another few weeks while details of the agreement are made final
“This is really bad news on so many fronts,” Connors said.
He said the large increase in rates announced by the PUC will ripple through the negotiations individual companies and businesses have with power suppliers. He expects it also will have an impact on the rates for residential and small commercial customers when they are negotiated because most power used in the state is generated from oil and natural gas.
“Wholesale electricity costs are rising, in large part, because of the increase in fuel costs for natural-gas fired power plants,” said Maine PUC chairman Sharon Reishus in announcing the new rates. “It’ s increasingly important for Maine businesses and residential consumers to do all they can to reduce energy use and to use electricity more efficiently.”
Chris Hall, vice president of the Greater Portland Chamber of Commerce, said the impact on many businesses and companies will be shocking. He said the impact will be felt far beyond those businesses that will see the increased rates in September.
“If the PUC, when bargaining for 25 percent of the market, can only get these rates, I am very concerned what companies negotiating on their own will get,” he said. “I worry what companies will have to do to deal with this.”
Hall said companies will have to look at a lot of unpleasant choices such as holding needed positions vacant, cutting or eliminating overtime or even layoffs as they are hit with the unexpected increases.
“Most businesses are 80 percent personnel costs,” he said, “That’ s where they will have to go to keep expenses in line.”
David Clough, Maine director of the National Federation of Independent Businesses, said many small businesses may be affected given that electricity rates are based on usage, not how many workers a company has.
“The increases are substantial on a percentage basis, but perhaps more importantly is when a business goes to their balance sheet and figures out how they are going to stay profitable for the rest of the year,” he said.
The utilities classify Maine businesses as small, medium or large depending on the maximum amount of electricity they demand at a given time, according to the PUC.
At Bangor Hydro, small-class customers are defined as those whose peak demand is up to 25 kilowatts. Medium-class customers have peak usage of between 25 and 500 kilowatts, and any businesses that use more are called large-class.
At CMP, small-class customers are defined as those whose peak demand is up to 20 kilowatts. Medium-class CMP customers have peak usage of between 20 and 400 kilowatts, and any businesses that use more are in the large class.
Connors said the business community in the state is already struggling from the increases in fuel for heating and manufacturing processes. He said gasoline and diesel fuel increases have already caused serious budget problems for many businesses and higher power bills are going to be “a bitter pill” for them.
“This is a fragile economy,” Hall said. “Certainly this kind of additional stress is going to put some companies right to the edge.”