The Maine Legislature came together on energy reform over the last few months, crafting a behemoth piece of legislation that addresses everything from funding for energy efficiency programs to trying to promote electric grid reliability. Most of the legislation offers reasonable measures for reducing Maine’s fuel and electricity costs. And the version that passed late Wednesday when the Maine Senate voted to override Gov. Paul LePage’s veto of the bill is an improvement over original drafts.
We still have concerns, however, about a few parts of the law. The provision allowing the state to enter into a contract to buy natural gas pipeline capacity — with a goal of increasing the flow of natural gas into the Northeast in order to reduce electricity rates — could expose electricity ratepayers in Maine to the fluctuations of a complicated energy market. The legislation has been promoted as a way to reduce electric bills in Maine by $100 million to $200 million per year after implementation, but those savings are speculative.
The Northeast could benefit from expanding its interstate pipeline capacity. By increasing the flow of natural gas from places such as New York and Pennsylvania to exceed demand, electricity prices could decrease, as natural gas is the preferred fuel for generating electricity in the Northeast. To expand pipeline capacity, however, developers need financing, and to get financing they need long-term commitments. Now they may get that commitment from Maine. The challenge in allowing this small state to purchase pipeline capacity in Connecticut or Massachusetts will be in determining how to actually contribute to — and spur others to contribute to — a meaningful expansion of infrastructure and reduce electricity prices in a way that offsets the state’s initial investment. Maine does not have a strong record of predicting energy futures, and no other Northeast state has committed itself to a similar arrangement.
The law will sunset in five years, and it limits spending for a contract for pipeline capacity to no more than $75 million per year, which offers some protection. But the law also allows Maine’s utilities regulator, the Public Utilities Commission, wide authority: to assess, analyze, negotiate, implement and monitor compliance with the contracts for new capacity. And it allows the PUC to collect funds from ratepayers to pay for the contracts; typically expansion costs are borne by the private sector. Before the state enters into an agreement, the law requires a consultant to make recommendations, but the consultant is hired by the PUC. We are worried about the PUC acting as both judge and jury. The law then adds politics into the mix by requiring the governor’s approval on any agreement.
It’s possible the state’s new authority will not be used. The law requires the PUC to explore “all reasonable opportunities” for private ventures to do the work before injecting the state into a pipeline capacity purchase agreement. But interest from private companies was apparent before the bill became law and was expected to only increase. Now, Maine residents should watch the PUC to see how it handles the business interest. If it determines whether an expansion project is appropriate to pursue, Maine residents should pay attention to the reasons why. They should also watch to see whether the state’s participation does catalyze the energy market. If the law doesn’t show expected results, lawmakers should not be afraid of amending it. Until then, the PUC must wield its new power with caution.