Maine regulators are considering whether to hand out up to $13.4 million in tax dollars to prop up the state’s biomass generators. The plants, which generate electricity by burning low-grade wood, have buoyed the logging industry but struggle to compete in the face of falling oil prices.
Regulators have refused to say which generators want the bailout while negotiations continue.
Multiple signs suggest only one Maine-based company submitted a bid. That would leave regulators in the position of either justifying that the process was fair or scrapping the contract altogether.
Under the bailout bill passed into law in April, the Maine Public Utilities Commission offered biomass generators a deal. The winning bidder would get a two-year contract for the electricity it produces, at prices more generous than on the open market.
Regulators would order one or more power utilities to enter contracts to buy up to 80 megawatts of electricity. The above-market payments would come from $13.4 million that the Legislature transferred to the PUC from the state’s rainy day fund.
Many loggers testified before the Legislature’s energy committee, delivering heartfelt pleas to help sustain a market that helps them get more from each tree they harvest.
Opponents derided it as “corporate welfare.”
The bidders identities were kept secret in the name of taxpayers.
The Bangor Daily News asked regulators to disclose the identities or number of bidders in the case. But Maine PUC staff denied the request, a position supported by one bidder.
Regulators agreed that releasing the information before commissioners deliberated and voted could result in a worse deal for taxpayers.
“If the number of bidders involved was revealed, the Commission would be disclosing information that could be used to the disadvantage of taxpayers,” wrote Mitchell Tannenbaum, general counsel for the PUC. “For example, a low number of bids would provide additional leverage to the bidders involved that could be used to inflate contract prices.”
In other cases, such as when regulators solicit bids for standard offer electricity service, bidder identities also remain secret until the deals come before the commission. But this case is different, both because the PUC is awarding taxpayer money and because it must ensure that this doesn’t amount to a handout to one company.
The three-member commission will disclose the identity of the bidders and other details when it votes on any proposed terms with biomass generators.
In the ruling, Tannenbaum added that divulging the identities of the bidders could “diminish the competitiveness of the process.” That could result in spending more tax money on the contracts, Tannenbaum wrote.
It also could result in no contract being awarded at all. If regulators decide the process wasn’t “competitive,” they could scrap the whole bailout.
The PUC anticipated the possibility of attracting just one bidder.
Parties involved in the case in June suggested various ways regulators could put pressure on even a lone bidder, to ensure the process met the requirement of being “competitive” under the law.
That left ReEnergy, in the interest of keeping the contract alive, in the unlikely position of arguing for stricter oversight by regulators. The company, backed by the private equity firm Riverstone Holdings, said that the PUC should require assurances against price fixing and solicit out-of-state bids to broaden the pool of potential bidders. The company was the only generator to offer comment on the suggestion.
A trade group that represents large energy users, the Industrial Energy Consumers Group, disagreed with those suggestions. It argued that “the basic premise of competition in bidding is to have more than one bidder.”
ReEnergy stands out as a bailout prospect.
Recent electricity generation patterns and involvement so far in the case points to the New York-based ReEnergy as the primary and perhaps sole bidder for the biomass contract.
Paper mills burn biomass, but most of the energy they produce powers their own operations. That makes them unlikely bidders for the contract.
Generators from out of state could bid, though they have a tough route to proving they would provide in-state economic benefits, one important criteria of the contract.
The law setting aside $13.4 million to support the biomass contracts requires the winning bidder to have operated at least at half capacity for 60 days before the PUC’s solicitation, issued July 17.
ReEnergy appears to be the only generator that meets that requirement.
Covanta closed its plants in West Enfield and Jonesboro in March. The company apparently has continued interest in operating the West Enfield plant — requesting that regulators certify it to sell renewable energy credits — but it did not generate any electricity in June, meaning it falls short of the 60-day requirement.
Of the other eligible biomass facilities operating in June, ReEnergy’s generators were the only facilities dependent entirely on wood and wood waste. No generators in June were using landfill gas, which is the other type of biomass fuel allowed under the bailout law.
ReEnergy also appears to have boosted production to make sure it met the half-capacity threshold. Similar to past years, ReEnergy’s plants produced their lowest amount of power in April, when the bill to assist biomass generators passed into law. Production increased at all of its facilities by June, with some boosting generation in May.
ReEnergy’s two Aroostook County plants — in Ashland and Fort Fairfield — were a focus of the bill.
ReEnergy officials did not respond to a request for comment.