June 04, 2020
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Energy regulators gave $500K contract to company that should have been ineligible

Troy R. Bennett | BDN
Troy R. Bennett | BDN
Philip Bartlett, chairman of the Maine Public Utilities Commission, speaks with reporters at the University of Southern Maine in Portland in July 2019.

The Maine Public Utilities Commission paid a company $500,000 to study Maine’s electric grid, but the company should have been ineligible for the contract based on the commission’s own rules, according to interviews and a review of documents.

The electric grid study, which is scheduled to be delivered to the Maine Legislature by Saturday, is expected to help shape the debate over a proposal to banish Central Maine Power and Emera Maine from the state.

The $500,000 contract required the winning bidder to evaluate the pros and cons of converting Maine’s two investor-owned electric utilities to consumer ownership. In its request for proposals last summer, the commission wrote that any firm that had worked for Central Maine Power or Emera Maine in the past five years was ineligible, to avoid any conflicts of interest.

But the winning bidder, London Economics International, did work for Emera Maine in 2018, for which it received nearly $37,000. It should have disqualified London Economics from getting the contract.

Commission chair Phil Bartlett said London Economics International failed to disclose its work for Emera Maine to the commission.

But, he added, the “limited scope of work” the firm did for Emera Maine “does not appear to create the kind of conflict of interest that would jeopardize [London Economics International’s] independence.”

“Nonetheless, we will thoroughly review the matter,” Bartlett said.

London Economics International did not respond to a request for comment.

Linda Coan O'Kresik | BDN
Linda Coan O'Kresik | BDN
Rep. Seth Berry, D-Bowdoinham, speaks to the Belfast Rotary Club about his consumer-owned utility proposal in November 2019.

Rep. Seth Berry, D-Bowdoinham, introduced a bill with bipartisan support last year that would create a consumer-owned Maine Power Delivery Authority. The authority would then buy out the state’s two investor-owned electric utilities and take over their service areas.

Proponents of the plan say local control of Maine’s power grid would improve services and costs for ratepayers. Opponents believe those arguments are based on faulty assumptions.

To try and resolve uncertainty around the plan, Gov. Janet Mills signed a bill in July directing the commission to hire an independent consultant to study the costs and benefits of Berry’s bill. In September, the commission selected London Economics International to conduct the study, which is required to be delivered to the Legislature no later than Feb. 15.

Berry, who is co-chair of the legislative committee tasked with utility regulation, said he expects his bill to be voted on in the spring.

“I’ve been well aware that [London Economics International] does most of their work for the investor-owned utility community and has their origins in privatization,” Berry said. “But I trusted the PUC to choose a qualified bidder.”

The firm traces its roots back to the privatization of United Kingdom utilities in the 1980s, according to its website.

Lawmakers are hoping to use the results of the study to evaluate Berry’s proposal, said Rep. Nicole Grohoski, D-Ellsworth, who co-sponsored the bill.

“It’s my hope that the results will be clearly impartial, but it’s unnerving to find this undisclosed potential conflict at this time in the process,” Grohoski said.

After learning of the potential conflict, she read the commission’s request for proposals to see if the prohibition on doing recent business with the two utilities was easy to miss. “No, it’s the second sentence in the eligibility section, and it’s underlined,” Grohoski said.

London Economics International was one of only two consultants to bid for the contract. The other was NewGen Strategies and Solutions, based in Texas.

NewGen submitted the lower of the two bids, proposing to deliver the study for $455,000, or roughly $40,000 less than London Economics International’s winning bid of $494,545.

But commission staff deemed London Economics International’s proposal superior based on an evaluation metric that gave it a score of 93. NewGen’s proposal got a score of 70, according to documents reviewed by the Bangor Daily News.

In explaining why they found NewGen’s proposal lacking, commission staff said that NewGen’s submitted plan appeared to be a “roadmap” for transitioning Maine to consumer-owned power, rather than a plan to evaluate the costs and benefits of both consumer- and investor-owned utilities.

Commission staff said it was “unclear” if NewGen had experience with investor-owned utilities or other private sector clients.” They said NewGen had “no apparent Maine or New England experience.”

Conversely, staff found London Economics International’s proposal to be “logical and comprehensive.” They said the company had a “strong knowledge of Maine and New England utility and economic issues.”

Despite losing out on a nearly $500,000 contract, NewGen spokesperson Nicole Levinson said her company had not appealed the commission’s decision to award the contract to London Economics International.

“NewGen defers to the PUC and respects their judgement regarding this matter,” Levinson said. NewGen has never worked with Central Maine Power or Emera Maine, Levinson said.

David Littell, who served on the commission from 2010 to 2015, said it sounded like regulators received two proposals: one from NewGen that didn’t address all the issues it wanted studied. The other, from London Economics International, addressed all the relevant issues and was from a consultant the commission was “already comfortable with.”

“They went with the one that fit,” Littell said.

London Economics International is a worldwide consulting firm with an office in Boston. It has a history of working for Maine regulators.

The commission has repeatedly contracted the firm to evaluate the Efficiency Maine Trust in recent years.

In 2015, the firm conducted a study for the commission that found the cost of new natural gas pipelines would outweigh potential benefits for Maine consumers. In 2012, the firm produced a report for the commission on renewable energy standards.

In 2018, London Economics International developed an independent analysis of Central Maine Power’s proposed transmission line for the commission.The analysis found the line would provide a lower level of economic benefit to Maine and New England than a previous study paid for by Central Maine Power.

Also in 2018, Emera Maine paid London Economics International $36,530 to evaluate biomass plants.

London Economics International has recent experience comparing consumer-owned and investor-owned utility models. In 2019, it completed a study of ownership and regulatory models for the state of Hawaii, which has the nation’s highest electricity prices. The study found that changing regulations, rather than changing ownership, would produce the best outcome for customers.

Maine Focus is a journalism and community engagement initiative. Questions? Write to mainefocus@bangordailynews.com.

 


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