HALLOWELL, Maine — Residential customers of Central Maine Power Co. and Emera Maine, formerly known as Bangor Hydro Electric, should expect to see an increase in their electricity bill come March.
The new standard offer price for Emera Maine’s residential and small business customers will be nearly 7.6 cents per kilowatt-hour, a nearly 13.2 percent increase from the last year’s standard offer price of 6.7 cents per kilowatt-hour, according to the Maine Public Utilities Commission. Those rates affect only customers in the former Bangor Hydro territory.
CMP’s residential and small business customers will have a new standard offer rate of 7.6 cents per kilowatt-hour, a 10.8 percent increase from last year’s standard offer price of 6.8 cents per kilowatt-hour.
The new prices are scheduled to go into effect on March 1.
The PUC approved the standard offer prices for CMP customers during a meeting Tuesday at its offices in Hallowell. It deliberated on the standard offer price for customers of Emera Maine on Wednesday afternoon.
The increase in retail electricity prices result from the rising wholesale cost of natural gas, which has over the past decade become the dominant fuel source used to generate electricity in New England, Thomas Welch, chairman of the PUC, told the Bangor Daily News on Wednesday afternoon.
In 2000, gas-fired plants were responsible for 15 percent of the electricity generated in New England, according to ISO New England, the organization that manages the region’s power grid. In 2011, gas-fired plants generated 52 percent of the region’s electricity.
“What drives the bids for standard offer are the wholesale prices and people’s expectations of wholesale prices are clearly related to the natural gas price,” Welch said.
The rising natural gas prices, he added, are tied to the lack of pipeline capacity into New England.
It is not CMP and Emera Maine that are raising the cost of electricity. Since deregulation of Maine’s electricity industry more than a decade ago, those companies handle only the transmission and delivery of electricity. The standard offer, which is a default option for consumers who don’t choose a competitive electricity provider, is created by taking a three-year average of the cost of electricity the Maine PUC sources through a competitive bid process among electricity suppliers, such as NB Power.
Using a three-year average protects Maine consumers from volatility in the wholesale market for electricity, said Welch. That system protects consumers when the price of electricity — and, therefore, natural gas — goes up, which is what is happening now.
However, if the wholesale price of natural gas continues to increase — again, because of a lack of pipeline capacity, not lack of supply — then customers can expect to see their electricity prices continue to increase over the next few years.
“It’s playing catch-up to the wholesale market,” Welch said. “A lot of things can change, but there’s certainly reason to be concerned that in the next couple years we’re going to be experiencing some higher prices.”
For medium-class commercial customers, the standard offer is set differently. It is done on a month-by-month basis, so there is no blended rate over three years. In CMP’s service territory, the new standard rate for medium-class customers will range from 5.7 cents per kilowatt-hour in May to 16.5 cents in January 2015. For Emera Maine’s medium-class customers, it will range from 6.2 cents per kilowatt-hour in September to more than 16 cents in January.