Power contract imperils economy of northern Maine

Posted March 01, 2009, at 5:54 p.m.

Northern Maine faces a serious economic blow and potentially significant electricity supply problems based on a recent decision by the Maine Public Utilities Commission.

The PUC has awarded a contract to New Brunswick Power to supply the standard offer, or default electricity supply service, for most northern Maine customers for a two-year term beginning March 1.

While New Brunswick Power’s bid may have been the lowest, the contract award has negative implication for the northern Maine economy and the reliability of the electrical grid. By choosing a foreign energy supplier, the PUC’s award strands a critical local generating facility in Fort Fairfield. That plant will be forced to close in March.

A series of appeals is under way requesting a reversal of the PUC decision. While the PUC, by its interpretation of the law, must select the lowest bidder, the negative impact on northern Maine merits further review. The decision exposes a short-sighted approach to the best and most cost-effective way to supply electric power.

The closure of the Fort Fairfield power plant will have a devastating impact on the local economy. In the long run, the PUC’s decision may lead to higher costs and a less reliable supply of electricity in northern Maine.

Northern Maine is unique in that it has no electrical connection with the remainder of Maine and is not part of the larger New England power grid. Instead, northern Maine is part of the Maritimes control area and is directly connected to the electrical grid operated by New Brunswick Power.

Traditionally, customers in northern Maine have obtained their electrical supply from generation plants located in northern Maine. These include local hydro-electric facilities and three wood-fired generators now owned by Boralex and located in Ashland, Fort Fairfield and Sherman Station. These biomass plants burn wood chips, waste wood and sawdust to generate a reliable, “green” source of electricity for the region.

The plants also play a vital role in the struggling northern Maine economy. For example, the Boralex Fort Fairfield plant employs 28 people and provides $2 million in direct salaries. The plant supports dozens of other jobs, including the workers who harvest and produce the wood fuel and deliver it to the plant. This one plant alone injects more than $13 million per year into the local economy and is the largest taxpayer in Fort Fairfield.

The PUC’s decision to award the standard offer supply to New Brunswick leaves the Fort Fairfield plant without a customer. Its amount of transmission is currently insufficient to allow the plant to export its power through New Brunswick to customers in southern New England, and the New Brunswick market is not fully open to competition. Without a place to sell its power, the Fort Fairfield plant has announced it must close in March, taking with it its jobs, taxes and other direct and indirect economic impacts.

In addition to the economic consequence of this decision, the closure of the Fort Fairfield plant leaves northern Maine’s electrical system dangerously low in generating capacity. Because only a limited amount of power can be imported from New Brunswick, northern Maine needs local generating plants to keep the lights on. With the closure of the Fort Fairfield plant, northern Maine customers could face power outages or brownouts during critical periods, such as the peak winter season.

The PUC’s choice of New Brunswick Power as a supplier is also troubling. First, New Brunswick Power has not obtained the federal authorization to supply customers in northern Maine. Second, New Brunswick Power is the largest utility in the Maritimes; it controls most of the generation and the transmission paths in the re-gion. If New Brunswick uses this market power aggressively, it could result in the failure of additional northern Maine generation plants, leaving New Brunswick free from any local competition. This could lead to unchecked increases in the cost of electricity to ratepayers.

The PUC is right to be concerned about the costs of electricity. But the lowest bid is not always the best deal for the people of Maine. The PUC should consider the job losses and other economic implications of shutting down a local, renewable industry in order to buy power from a foreign utility.

It also should consider the impact of the closure of the Fort Fairfield biomass plant on the reliability of the electrical system in northern Maine. Finally, it should carefully consider the long-term impact on the competitive generation market of allowing New Brunswick Power to undercut and ultimately force the closure of com-petitive generation in the northern Maine market, allowing New Brunswick to raise its prices at will.

The lowest price today may prove to be the most costly down the road.

Stacey Fitts, a Republican from Pittsfield, represents District 29 in the Maine House of Representatives and is a member of the Utilities and Energy Committee.

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