LePage should make unbiased analysis of energy standards before changing policy

By Stacey Fitts, Special to the BDN
Posted Oct. 09, 2012, at 4:13 p.m.

A question was posed in the online comments section of the Bangor Daily News on a recent article by Bob Cleaves titled: “Discontinuing Maine’s renewable energy standards is a mistake.” A commenter asked, “Why does Canada and our North West have low electricity costs?” The person also asked, “Creating new jobs in a favored energy sector seems noble, but what of the jobs lost to too high energy costs?”

The answers to these questions are key to understanding where Maine is in comparison to other regional electricity markets. It’s important to uncover some of the bias that is being applied to the energy discussion here, as we approach another legislative session with a new Legislature.

The Canadians operate under a different energy model than we do here in the Northeastern U.S. Those provinces that profess to have lower energy costs, specifically electricity costs, have government-owned power systems. They are supported by taxpayers in Canada, and their prices reflect the ownership structure that exists.

The annual reports of Hydro Quebec express the value that is returned to the people of Quebec from their exports to the U.S. In fact, profits from exports are used to lower rates for their residents and industries. Beyond that, those profits go to subsidizing their industries such as pulp and papermaking, which compete with our own industrial base here in Maine. So, when we buy Canadian power, their government makes money. That money, in the form of subsidies, is used to directly compete with our industries. It stops looking like such a good deal when our industries begin to shut down because of our short-term thinking.

The Northwest U.S. has an entity called the Bonneville Power Administration, funded by the federal government, which has developed significant hydro resources. Those projects were built years ago when issues that now plague hydro development — like expensive fish passage requirements — were not included in their capital or operating costs. These items are required of modern projects, and the addition of such requirements to legacy projects is making them more expensive.

A federal project will have fewer burdens than a development by a nongovernmental entity, though today these compliance costs are now being included in their cost of production, raising their pricing. It is questionable whether the projects that exist now could be developed in today’s regulatory structure. One thing is for sure: It is not an apples-to-apples comparison when putting Maine’s or New England’s electricity market next to that of the Northwest.

Few projects are developed outside of a “favored energy sector” environment, as the investment dollars will follow the path of least resistance. That is a reality of any market or any industry. Maine’s hydro assets have essentially been tapped, and any further development is improbable without price supports. In fact, there is a likelihood of further losses in hydro capacity in Maine because of the current low prices in the electricity market.

The biomass industry is facing significant pressure from other uses of its fuel resources, and, like the hydro industry, these projects truly rely on the limited price supports that come from the state’s renewable portfolio standard. If we were to abandon the standard, or dilute it with other resources that are supported by governments to our north, we will certainly lose some of the projects that are part of our industrial base and are vitally important to many rural communities in Maine.

The Beacon Hill Institute “report,” referenced by Gov. Paul LePage in his weekly radio address, may appear reputable, but it is contradicted by a separate report commissioned by the Maine Public Utilities Commission during the past legislative session. This vetted analysis of Maine’s renewable portfolio standard was performed by London Economics International, and it did not come to the same conclusions.

The London Economics report showed the gains from the renewable energy standards significantly overshadowed the costs. It showed that the jobs that might be lost from the modest increases in electricity costs paled when compared to the direct and indirect jobs created from the development of renewable projects in Maine. The groups that paid for the Beacon Hill report are certainly political and, to be fair, one should consider the findings biased for making political hay, rather than an independent view of Maine’s electricity marketplace, as the London Economics study certainly is.

The governor’s use of the Beacon Hill report over the London Economics report certainly is a political and calculated move. One report was designed to give a desired answer that would be useful in the political realm, where the other was an unbiased analysis of the marketplace by a group that stresses no political ties. Which is the best source to use in making our energy policy choices?

Stacey Fitts, R-Pittsfield, is a four-term member of the Maine House of Representatives and co-chairs the Joint Standing Committee on Energy Utilities and Technology.

http://bangordailynews.com/2012/10/09/opinion/lepage-should-make-unbiased-analysis-of-energy-standards-before-changing-policy/ printed on August 23, 2014