For the second time in two years, Gov. Paul LePage is interfering with energy contracts. This time, he has pushed the Maine Public Utilities Commission to reopen the bidding process for two long-term contracts the PUC already approved and is in the process of finalizing.
LePage may have valid concerns the PUC has too much authority to enter into long-term power agreements, but reopening the bidding process just weeks after contracts were finalized sets a dangerous precedent and adds regulatory uncertainty that could drive needed investment away from the state.
In 2006, the Legislature gave the PUC the authority to order transmission and distribution utilities, such as Central Maine Power Co. and Emera Maine, to enter into long-term contracts with electricity generators as a way to hedge against electricity price volatility and encourage renewable energy development. Contracts have been struck with wind energy companies and the Verso paper mill in Bucksport for a biomass project.
Last month, the PUC approved long-term contracts with two wind energy projects to provide electricity to Maine’s power grid. Under an order the PUC approved on Feb. 6, a proposed wind project in Hancock County, Weaver Wind, essentially would sell power to CMP and Emera for 5.3 cents per kilowatt hour for 25 years and the other, Highland Wind in Somerset County, would sell its power for 4.7 cents per kilowatt hour for 20 years. Neither project has yet been built.
These prices are below current rates for electricity supply for many customers. The standard offer rate for residential and small commercial customers beginning March 1 will be 6.5 cents per kilowatt hour, down from 7.5 cents for the previous year. Rates for medium and large industrial users are more volatile, but they often have been above the roughly 5-cents-per-kilowatt-hour rate of the new long-term wind contracts.
In its Feb. 6 order, the PUC estimates the Weaver project will save ratepayers between $17 million and $39 million over the 25-year life of the contract. The total savings from Highland Wind was projected to be between $15 million and $34 million for the 20-year contract.
In a Dec. 8 letter to the commission the PUC since has made confidential, LePage raised concerns that long-term contracts did not include nonrenewable, existing sources of electricity. “Accordingly, I request that you expand your current request for proposals to include any clean energy resource, including existing hydropower and nuclear, and review whether these potential contracts could have benefits for the ratepayers in Maine and our broader economy,” the governor wrote.
These are fine points, but not when the PUC is nearing completion of a year-long process that began in February 2014 with a request for proposals and included many opportunities for comments. Plus, the PUC on Feb. 2 put out a different RFP for long-term contracts that could include the type of generation the governor asked about.
The timing also is questionable because former commission Chairman Tom Welch, who voted for the contract terms through an order on Jan. 8, left the PUC and was replaced by the governor’s former legal counsel, Carlisle McLean. Current Chairman Mark Vannoy voted against the contracts. The term of the other commissioner who voted for the contracts, David Littell, ends next month; he likely will be replaced by a LePage appointee.
On Jan. 18, the commission issued an order seeking comments — only until Monday — on whether it should reconsider the long-term contracts based on current energy prices, which have dropped in recent months. Rates were expected to skyrocket this winter because of natural gas pipeline capacity constraints.
The response has been swift and consistent. As of Friday afternoon, 11 entities had filed comments with the PUC. All warned that reopening negotiations would put the state’s business reputation at risk.
“Companies looking to invest in Maine should be able to count on a predictable regulatory environment,” Rod Stevens of Aerial Survey & Photo, Inc. of Norridgewock, wrote.
“If the PUC re-opens these contracts, then it will be sending a clear signal to the business community that Maine does not negotiate in good faith. Such a message will put at risk future investment,” Stevens added.
Jackson Parker, president and CEO of Reed & Reed, a Woolwich-based company that has built a national reputation as a wind farm developer, said the signal the PUC would send by reconsidering the contracts is “all negative” and that it would send the message to the “world-wide investment community” that Maine would “cavalierly abdicate its duty to follow through on a contract.”
“Remember, uncertainty is the enemy of investment and the PUC should not be creating a shroud of uncertainty around this and future energy RFPs,” Parker wrote. “Quite simply, it would be bad public policy. It’s not easy attracting investment dollars to Maine and creating a practice of reneging on commitments will only make it more difficult.”
Such uncertainty is what pushed Statoil to abandon its proposed a $120 million offshore project off the coast of Maine. The PUC in January 2013 finalized a term sheet with Statoil, though no formal contract had been signed.
Then, in June 2013, the Legislature, at the behest of LePage, who long opposed the project, passed a law that forced the PUC to delay negotiations on a contract with Statoil and reopen the RFP process it closed in 2011.
“Changes in the framework conditions in the state, uncertainty around the commercial framework and the schedule implications of project delays made the project outlook too uncertain to proceed,” Statoil said in an October 2013 press release, announcing it was abandoning its project. Its investment went to Scotland instead.
Maine can’t afford to make this mistake again.