Inside a lawmaker’s bid for Maine to seize control of its largest electric companies

Rep. Seth Berry, D-Bowdoinham, speaks to the Belfast Rotary Club Nov. 13 about his consumer-owned utility proposal. [Linda Coan O’Kresik | BDN]
By Josh Keefe, Maine Focus Reporter
December 23, 2019 6:00 am
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For nearly 140 years, politicians have been trying to wrestle control of power — both the kind that moves electrons and the kind that decides elections — from for-profit electric utilities. But the push has taken on a new focus as Maine and the world confront climate change.
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On an unusually cold November night, Rep. Seth Berry, D-Bowdoinham, co-chair of the legislative committee charged with regulating the state’s utilities, stood in the auditorium at Mt. Ararat High School in Topsham. Before a crowd of roughly 60 people, he explained his plan to seize control of the Maine electric grid from the state’s two largest electric companies and their foreign shareholders.

Berry introduced a bill earlier this year that would have the state form an independent agency called the Maine Power Delivery Authority. The authority would buy out investor-owned electric distribution companies Emera Maine and Central Maine Power. If the bill becomes law, Berry’s proposal would transform Maine’s energy industry and effectively banish CMP — one of Maine’s most controversial companies and most powerful political players — from the state.

The Maine Public Utilities Commission has hired an independent consultant to study the proposal, with a report due in February. Berry expects a vote on his bill shortly after, and he has been giving talks across much of the state to drum up support. The day before he spoke at Mt. Ararat, he presented his plan to 40 or so rotarians over a lunch of Teriyaki beef and scalloped potatoes in Belfast. The previous week he spoke to more than 100 credit union members in Lewiston.

“I’m trying to have as many conversations as possible,” Berry said. “Some nights I’m on and some not. But I like being on tour,” he said.

Rep. Seth Berry speaks to about 40 Belfast Rotary Club members on Nov. 13 about his proposal for a state takeover of Central Maine Power and Emera Maine. [Linda Coan O’Kresik | BDN]

While Berry’s exact plan is new, the battle he is fighting is nearly as old as the light bulb. For nearly 140 years, politicians like Berry have been trying to wrest control of power — both the kind that moves electrons and the kind that decides elections — from for-profit electric utilities. It’s a struggle that has long been about the cost and reliability of electricity, but has taken on a new focus and urgency as Maine and the world confront climate change.

Experts say fighting climate change will require trillions of dollars of investment in the U.S. electric grid as large parts of the economy, such as transportation and heating, move away from fossil fuels to clean energy.

“This is not a new issue,” Berry said. “But what is new is that never before has the electrical grid been of more profound importance to our future, to the very survival of our species.”

Berry told the crowd how consumer-owned utilities have cheaper rates, shorter outages and greater accountability to customers, the same sort of arguments public power advocates have been making — with various levels of success — for a century. But he also argued the transition to clean energy needed to avert the worst climate change scenarios requires public power, which frees utilities from paying investors and gives them access to low-interest financing.

To pay for the transition to a decarbonized grid, Maine needs consumer-owned utilities or “it won’t pencil out,” Berry said.

State leaders in California have advocated turning PG&E, currently in bankruptcy proceedings, into a public utility after its equipment started wildfires that killed nearly 100 people. Democratic presidential candidate Sen. Bernie Sanders has advocated for a national public power program as part of a Green New Deal. 

Despite those other examples, Berry’s takeover proposal is unprecedented, experts said. While some cities and towns across the country have taken ownership of their utilities in recent decades, no state in recent memory has taken over two investor utilities at once. The audacity of the plan would seem to doom it.

But the politics of the moment and CMP’s continued missteps have created a unique situation. Berry’s party controls Augusta. Senate President Troy Jackson, D-Allagash, is a co-sponsor of Berry’s bill, along with seven Democrats and two Republicans. And CMP is now the least popular utility in the entire country, according to a recent survey, even less popular than PG&E. CMP is currently under investigation and facing a potential class-action lawsuit related to the $57 million billing system it launched in late 2017.  

Maine Senate President Troy Jackson is pictured at a press conference in Orono in August. [Gabor Degre | BDN]

Last week, CMP announced a new initiative called Power On to institute “meaningful change inside the company” and also run new ads. The utility’s chief executive, Doug Herling, said he was “absolutely” afraid of losing the company, and he disagreed with Berry’s proposal.

“There’s a lot of very technical challenges that go along with this that I think, quite honestly, the public sector isn’t able to deal with,” Herling told CBS affiliate WGME.

But technical challenges with CMP’s billing and metering system have gone unresolved for more than two years, according to the Office of the Public Advocate, which represents the interests of ratepayers before regulators.

Just last month, the office said in a regulatory filing that the company’s billing system still has “significant problems.” Those lingering problems have led a grassroots group representing ratepayers to start petitioning regulators to end CMP’s ability to do business in the state. And the company’s proposed $1 billion transmission line through western Maine has prompted a movement to put the matter to a statewide vote next year.

“The reality is CMP has done enough harm to their brand that there are people on both sides of the aisle in the House and Senate that are seriously considering [Berry’s proposal],” Jackson said.

Rep. Phil Curtis, R-Madison, is a former superintendent of consumer-owned Madison Electric Works. He opposes Berry’s bill, citing a belief in “letting business do what business does best” without interference. But despite the bill proposing a government takeover of a private company — something Republicans are typically against — Curtis said many of his GOP colleagues have “mixed feelings” about the proposal due to CMP’s “screwups.”

Doug Herling, president and CEO of Central Maine Power Co. [Courtesy of Central Maine Power]

Sen. David Woodsome, R-York, is the bill’s sole Republican co-sponsor in the Senate. He isn’t necessarily in favor of a government takeover of electric utilities, he said, but he signed onto the bill to “get a conversation going” and “put some heat to CMP’s feet.”

Berry’s bill would amount to seizure of private property, even if the state compensated the utilities accordingly.

“CMP is not aware of any involuntary, permanent seizure of private property on the scale contemplated in [Berry’s bill] in Maine history,” CMP’s attorneys said in a legal brief filed with regulators last month.

However, utilities are not like other businesses. The state has granted CMP and Emera the right to operate monopolies in their service areas. Legally speaking, it can revoke that right. While the state-created authority would have to buy out both utilities, under Berry’s plan that purchase would not be done with taxpayer money but with bonds backed by ratepayers.

Berry said the legislation is about more than recent billing and customer service problems. “Even if CMP was doing things correctly, this would still be the right thing to do,” Berry said.

CMP spokeswoman Catharine Hartnett said proponents are underestimating how much a consumer-owned utility would cost and how difficult it would be to create.

“It is also doubtful that such an entity would have the technical expertise or financial ability to undertake important public policy initiatives such as the fight against climate change as does CMP — a subsidiary of a national leader in renewable energy,” Hartnett said.

‘A duty to shareholders’

Despite the seemingly radical nature of his proposal, Berry, a former school teacher, is far more professorial than populist in his presentation. He said he “has nothing against Spain,” home of CMP parent company Iberdrola, a fact that has led angry CMP customers to dub the company “Central Spain Power.” He switches to speaking in Spanish to express his love for Spanish wine and tapas. Berry is bilingual, and his wife is Colombian.

He gave everyone in the Mt. Ararat auditorium a four-page printout of facts and figures. For instance, Maine had the longest and most frequent outages in the country in 2017, and Maine has some of the highest electricity prices in the country, although those prices are cheaper than most other New England states.

But the numbers that matter most to Berry are those that relate to the investments experts believe would be required to decarbonize the grid and electrify the economy.

In this May 28, 2019, photo, power lines converge on a Central Maine Power substation in Pownal, Maine. [Robert F. Bukaty | AP]

To reduce carbon emissions enough to stave off the worst climate change scenarios, two things must happen, experts say. The first is large parts of the economy currently powered by combustion, such as cars and heating, must be moved onto the electric grid. Electric vehicles and heat pumps are good examples of technologies that run on electricity and promote this transition. Second, the electric grid must be powered by renewable sources, such as solar and wind, as opposed to natural gas and coal.

The Maine grid would need to grow by roughly 3.5 times its current size to handle the increased load, according to Richard Silkman, an energy consultant and expert who recently presented his research to the Maine Climate Council.

That growth would require huge amounts of capital. Silkman calculated that Maine would need $56 billion worth of investment in generation, storage and other improvements to transition to a clean grid. Of that total, $10 billion to $15 billion would need to be invested in Maine’s transmission and distribution — essentially the poles and wires owned by utilities like CMP and Emera.

While that money would be borrowed from different sources depending on who owns the grid, it would be up to Maine ratepayers to pay that money back through their electric bills.

Investor-owned utilities would be able to finance the investment at around 9 percent, Silkman said, because investors need a return. Consumer-owned utilities could finance that same investment for as low as 3 percent.

Over the course of a few decades, the consumer-owned utility would spend about half as much, due to compound interest, Silkman said.

A state takeover funded by bonds isn’t purely theoretical. In late February, representatives from Goldman Sachs, which handles the issuance of bonds, came to Maine and met with Berry, other lawmakers and representatives from the governor’s office.

Broadly speaking, Silkman finds Berry correct. “His math works,” Silkman said. But, like all things, he added, “you have to be careful.”

That’s because while the arithmetic may work, the risk associated with those investments would fall to ratepayers if the state went ahead with Berry’s proposal.

And experts noted that publicly owned utilities are not substantially better than investor-owned utilities when it comes to the environment.

For example, Nebraska, the one state that is completely serviced by public power, generates 60 percent of its electricity from coal. Meanwhile, investor-owned Iberdrola Group, the parent company of CMP and Avangrid, has stated its goal is to be carbon neutral by 2050.

Electric utilities, be they owned by consumers or investors, react to the regulations and laws enacted by the states they operate in, said Jim Lazar, a longtime energy consultant who has written guides to electricity regulation in the United States.

“The direction the Legislature gives is more important than who they give it to,” Lazar said.

Maine has been a leader in tackling climate change: It was the first state to adopt specific greenhouse gas reduction targets in 2003. Since then, 13 states have enacted similar legislation. Earlier this year, Gov. Janet Mills signed into law more stringent targets that mandate a 45 percent reduction below 1990 levels by 2030, and 80 percent by 2050.

Wind turbines are bathed in the first rays of sunlight at the Saddleback Ridge Wind Project, Wednesday, March 20, 2019, in Carthage, Maine. [Robert F. Bukaty | AP]

CMP said it will be an ally in those efforts. But Berry and others said the company’s track record indicates otherwise.

While many environmental groups have not yet taken a position on Berry’s bill, those that have are in favor of the legislation. Sierra Club Maine, Maine Climate Action and the Natural Resources Council of Maine all testified in favor of the bill before a legislative committee in the spring. The testimonies pointed out that Emera and CMP, but especially CMP, have been resistant to clean energy policies that weren’t profitable to them.

“For the last two decades, CMP fought investment in cost-effective energy efficiency programs, opposed renewable energy policies of almost every kind, and blocked smart grid policies and institutions,” Natural Resources Council of Maine attorney Sue Ely testified.

CMP’s Hartnett disagreed, noting that CMP has advocated for a balance between promoting renewable energy and protecting customers.

“CMP has supported energy policies that offer the greatest opportunity to reduce carbon at the lowest cost for Maine consumers,” Hartnett said.

Perhaps no one in the U.S. has more experience in public power than David Freeman. Freeman has run some of the largest public utilities in the country, including the Tennessee Valley Authority, the New York Power Authority, the Sacramento Municipal Utility District and the L.A. Department of Water & Power.

Investor-owned utilities have “a duty to shareholders that will inhibit them from taking the kind of risk that we need to take to save the environment,” Freeman said.

“I think the real issue is: Can you look your children in the eye and tell them you didn’t even try? I think everybody in Maine needs to ask themselves that question,” Freeman said. “Maine has an opportunity to show the way.”

Seth Berry speaks at the Belfast Rotary Club on Nov. 13. [Linda Coan O’Kresik | BDN]

‘What really got me thinking’

A native of Bowdoinham and graduate of Brown and Columbia universities, Berry came to the Legislature after serving as a public school teacher in both New York City and Maine for more than a decade. While others in Maine have advocated for public power for decades, Berry traces the origin of his proposal to his first legislative session, when CMP tried to kill a bill to allow people living in part of Kennebunk served by CMP to switch to Kennebunk Light and Power, the town’s public utility. The public utility had lower rates than CMP and, as Berry put it, “was doing great things with solar energy.”

The residents of Kennebunk had overwhelmingly voted for the change. As a freshman lawmaker on the committee charged with regulating utilities, Berry said he was “astonished that anyone could argue with a straight face that the people of Kennebunk should not be able to choose their own destiny.”

CMP argued in its testimony to the committee that the proposal would set a dangerous precedent that would make it impossible for long-term planning and investment in the electric grid, since utilities wouldn’t know when “public whims or political expediency” would result in the taking of their territory. But CMP’s argument amounted to the company saying “we own you” to its Kennebunk customers, Berry said.

“That’s what really got me thinking,” Berry said.

Over the course of a decade at the Legislature — absent the years 2014 and 2015 due to term limits — Berry has become the most vocal critic of CMP in the State House. After dealing with CMP across three gubernatorial administrations, Berry said it’s clear to him that the profit motive of an investor-owned utility is “antithetical” to Maine’s long-term climate goals.

Insource Renewables installs solar panels on an Orono home in this Oct. 22, 2017, file photo. [Gabor Degre | BDN]

Broadly speaking, under the current regulatory framework, investor-owned utilities have financial incentive to transport power over large distances, since that means more poles, wires and equipment. Those costs are then passed onto customers. For example, Berry and others have argued that a consumer-owned utility wouldn’t be trying to build CMP’s proposed $1 billion transmission line through western Maine.

CMP’s Hartnett said those kinds of projects are needed to bring renewable energy to consumers, and “CMP has a proven track record in delivering such major grid investments efficiently and in a timely manner.”

Hartnett added that CMP has invested $3.5 billion in its infrastructure over the past 10 years, “about three times what the company earned.”

Critics charge that investor-owned utilities have less incentive to increase energy efficiency or help support localized power because they would sell less electricity and build less infrastructure.

For instance, CMP lobbied in support of LePage-backed rules that made it harder for Mainers to sell their own solar energy back to the grid. After years of fighting, Berry introduced a bill to undo the rules. Mills signed the bill into law earlier this year.

‘What they are really worth’

While some environmental groups are supporting Berry’s proposal, many of the most important stakeholders, including large industrial electric consumers and the Maine Public Advocate, haven’t yet taken sides. Much remains unknown about how a buyout of CMP and Emera would work and what the consequences would be. But the most obvious problem is that CMP is not for sale, and Canadian-based Emera is in the process of being bought by ENMAX, a utility owned by the Canadian city of Calgary.

Technicians with Emera Maine work in Presque Isle in May 2018. [Paula Brewer | Presque Isle Star-Herald]

Both utilities have promised to fight any takeover attempt, which could lead to years of costly litigation. Similar attempts have dragged on for a decade or more. Boulder, Colorado, is seven years into its effort to take over its power from investor-owned Xcel Energy. Long Island took 13 years to transition to public power between 1985 and 1998, and a 2013 government report on corruption found the utility that emerged from that effort showed a “blatant disrespect” for ratepayers.

“You are talking years and years and years,” said Jim Cohen, an attorney at Verrill Dana who represents Emera. Cohen added that if the goal is to transition the grid to clean energy, Maine should not create uncertainty for potential investors. “Every year that is spent sorting out issues of who owns the grid is potentially a year when necessary investments might not get made. That delays Maine’s progress on climate goals.”

But Berry argued that Cohen’s point, which CMP has also made in testimony to legislators, essentially amounts to a threat to sabotage the state’s grid if it doesn’t get its way. The fact that private companies could essentially hold the state’s climate goals hostage is precisely why they need to go, Berry said.

Part of any litigation would be about what the utilities actually cost and how much the newly created authority would have to pay to acquire their infrastructure. That’s where the savings promised by lower finance rates could disappear, the utilities have argued. Berry’s bill calls for the consumer-owned agency to pay book value for the assets. But the utilities said the law is clear that they must be compensated for fair market value — what the utilities could get on the open market.

Last month, CMP told regulators that the takeover of its company alone could require $7 billion in debt financing. In that scenario, the initial savings from the lower interest rate would vanish, CMP said.

But the company has a $57 million ratepayer-funded billing system that essentially doesn’t work, Berry said. CMP also used another $100 million in taxpayer money to install smart meters that haven’t delivered promised savings.

“I would love to go to court to talk about what they are really worth,” Berry said.

Of course, getting that far requires Berry’s bill to pass. The politics of the issue are complicated.

House Speaker Sara Gideon, D-Freeport, appears to be the frontrunner to take on Republican U.S. Sen. Susan Collins in the fall, and she may not want to throw her weight behind a proposal her opponent could brand as a government takeover of private industry. (Gideon is pleased the proposal is being studied by the Public Utilities Commission, her spokeswoman said, and “looks forward to reviewing their conclusions.”)

Putting her at odds with some of her fellow Democrats, Mills has supported CMP’s proposed transmission line through western Maine. One of the early backers of her gubernatorial campaign was Jim Mitchell, the state’s highest paid lobbyist who represents a number of clients, including CMP.

Mills believes utilities “should be consistent and reliable in their delivery of services, transparent in their billing practices” and embrace renewable energy, a spokeswoman said, but the governor has not taken a position on Berry’s bill.

Maine Focus is a journalism and community engagement initiative at the Bangor Daily News. Questions? Write to mainefocus@bangordailynews.com.

 

Correction: A previous version of this story did not clearly distinguish between the state government and the proposed Maine Power Delivery Authority in three instances. We have added language to make this distinction clearer.

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