March 29, 2020
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A public takeover of state’s largest electric companies is wrong solution for Maine

Troy R. Bennett | BDN
Troy R. Bennett | BDN
The Maine Legislature is considering a bill that would turn Central Maine Power and Emera Maine into consumer-owned utilities.

As a former manager of a consumer-owned electric utility in Maine, I support municipal power. But we should let businesses do what they do best and governments regulate them appropriately. I do not support legislation that would impose “public power” on Maine taxpayers by requiring a state takeover of its privately owned electric companies.

LD 1646 is a bill that would require the state government to take over Central Maine Power and Emera Maine and then hire a contractor to operate the electric grid. If CMP and Emera Maine chose not to sell, the state would have to “take” their assets through eminent domain.

This bill arose due to frustration with CMP. However, a state takeover of our electric system will not solve problems, only create new ones.

It is akin to nationalization. Such a takeover of private companies is an extraordinary step that primarily occurs in developing countries, but not in places with prosperous economies.

This takeover of CMP and Emera Maine would cost Maine customers billions of dollars in financing costs beyond what is currently included in their electric bills. Likewise, hiring yet another company to operate the grid could subject consumers to price markups that CMP and Emera Maine are not allowed to charge today.

It is true that CMP and Emera Maine are not locally owned, but neither are our paper companies and many other of our large employers. Outside ownership is not a crime, and we should welcome outside investment, which is exactly what CMP and Emera Maine have done over decades.

In many cases, private investment ensures that our critical infrastructure is working properly. Our roads are publicly owned, but our government has not maintained them properly, and they are deteriorating. Can we take this risk with our electric system?

A public takeover would result in $35 million to $40 million in lost state taxes, and $71 million in property taxes would be at risk, depending on whether voluntary payment in lieu of taxes payment were made.

My experience running Madison Electric Works was positive, and, as a consumer-owned utility, it has competitive rates and good service. But consumer ownership is not always the answer. On Swan’s Island, just off Mount Desert Island, the answer turned out to be a private takeover of Swan’s Island Electric Cooperative. Although consumer owned, the utility charged some of the highest rates in the state, and in recent years, their system needed major improvements it could not afford.

With urging from the Maine Public Utilities Commission, Swan’s Island approached Emera Maine — an investor-owned electric company — about taking them over. In 2017, the takeover was complete, and the island is now part of a privately owned electric system. Their rates are now substantially lower, and necessary investments on the island’s grid have taken place.

In Washington County, Eastern Maine Electric Cooperative is another consumer-owned electric system. It is well-managed and cares about its customers. But, in the 1980s, the cooperative went bankrupt, and over the years, its rates have generally been higher than CMP’s rates, sometimes substantially so.

Nationally, only one state is predominantly “public power” — Nebraska. Nebraska has lower rates than Maine, but ranks near the bottom of states in terms of grid modernization and energy efficiency. Maine, which is predominantly served by privately owned utilities, is closer to the top in both categories.

Nebraska also has virtually no trees and no ocean coastline, which makes it cheaper and easier to keep the lights on as compared to Maine, which is the most forested state in the country and has more than 3,000 miles of coastline. Nebraska also gets a majority of its power from coal – which is much cheaper than the power produced in Maine, 75 percent of which is renewable.

Does consumer ownership make Nebraska cheaper? Very simply, no.

So, what can Maine do to ensure better service from our utilities without taking on billions of dollars in debt and risking higher rates by making CMP and Emera Maine consumer owned?

The key is making sure the utilities commission has appropriate regulatory tools. Utilities are heavily regulated, and even privately owned utilities can only charge what the government allows – and only after months of public scrutiny. The quality of utility services is subject to government oversight, and owners of privately owned utilities with poor service can face financial penalties – penalties that cannot be assessed on consumer-owned utilities without private owners.

Right now, Mainers are mad. But imposing “public power” will not solve problems, only make things worse.

Phil Curtis of Madison represents Maine House District 111. He is a former general manager of consumer-owned Madison Electric Works.

 


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