Emera Maine’s proposed sale to a western Canada utility continues to raise concerns for regulators and Maine’s top consumer advocate.
The $1.3 billion sale remains controversial largely because ENMAX of Calgary plans to pay for it by borrowing the entire amount. That brings into question how ENMAX, which is owned by the city of Calgary, will pay for needed Emera Maine infrastructure improvements without raising customer rates.
The commission’s staff on Tuesday released a 21-page report called a bench memorandum in which it expressed its concerns over the proposed sale and how it would affect customers. Proving net benefits to Emera Maine ratepayers is one key condition for approving the sale.
“This overarching concern [of paying with 100 percent debt] leads to a subsidiary concern that ENMAX may try to ‘mine’ earnings from Emera Maine by cutting back on infrastructure-related investments and operations and maintenance budgets in order to satisfy its purchase related debt requirements,” the commission staff wrote.
That could result in increased dividends paid by Emera Maine to ENMAX and erosion to Emera Maine’s credit quality, the staff said.
“ENMAX is committed to working collaboratively with the Maine Public Utilities Commission and other stakeholders as the regulatory review of the Emera Maine transaction continues,” said ENMAX spokesperson Diana Stephenson. ”We appreciate the constructive comments and suggestions advanced by the commission staff, and we will continue to listen to and respect their input.”
Emera Maine spokesperson Judy Long said the report is one of a number of steps in the regulatory review, and Emera Maine is committed to full participation in the process.
Emera Maine is currently owned by Emera Inc. of Nova Scotia, which last December told financial analysts that is was selling assets like Emera Maine to pay for new projects.
The sale of Emera Maine, which serves five counties including Penobscot, was announced in late March. The sale and reorganization is now under review by the Maine Public Utilities Commission.
Others have expressed concerns, including members of the International Brotherhood of Electrical Workers Local 1837, who held a news conference last month to say the sale might force Maine’s second-largest electric utility to cut jobs, raise rates and lower service.
The commission staff said it is taking no position as to whether or not the sale should be approved It said it is addressing the extent to which the conditions of the sale proposed by ENMAX may not be enough to ensure benefits to ratepayers and protect against risks.
Another concern they cited is ENMAX has committed to not seeking a rate increase that would be effective before Jan. 1, 2021. That would mean it would not file a rate case with the commission before April 1, 2020.
However, the commission’s staff said it may be challenging for ENMAX to support operating costs and investments needed to ensure that Emera Maine customers receive safe, adequate and reliable service without raising rates. The staff recommended instead that it not increase transmission rates before June 1, 2021 to strengthen the proposed sale conditions.
The staff also raised concerns that the city of Calgary, which owns ENMAX, might exert undue influence over Emera Maine’s management and operations. The staff proposed prohibiting independent members of the Emera Maine board from serving on the board of directors of ENMAX, any affiliate or having any material relationship with the city of Calgary.
David Brevitz, a consultant to the Maine Office of the Public Advocate, filed testimony with the commission on Wednesday saying the proposed transaction currently does not provide net benefits to Emera Maine’s ratepayers.
“Unless there are significant further protections or conditions put in place to provide tangible measures to address the financial risks created by the proposed transaction and the Emera Maine operational concerns partially illuminated by ENMAX’s due diligence, it is not clear that there would be a net benefit to ratepayers,” he wrote.
Still, he said that if the ENMAX meets the additional protections, the public advocate’s office could support the commission’s approval of the sale.