The Maine Public Utilities Commission is going to explore the idea of pulling out of an electric power sharing arrangement with other New England states, which it says is benefiting Connecticut and Massachusetts at a cost of hundreds of millions of dollars to electric-users here.
Operators of that grid say Maine would pull out at its peril. After all, the lights stayed on here during the Northeastern blackout in August of 2003, largely because the New England grid operators had their act together.
“We certainly believe that reason will prevail,” said Ken McDonnell, a spokesman for Independent System Operator New England, which oversees the power sharing between the New England states.
Legislators called for the Public Utilities Commission to look at alternatives in the likelihood the New England Power Pool and the system operator that runs it got federal approval to spend more than $4 billion to encourage power generators to build more plants serving New England, in particular the greater Boston area and southern Connecticut.
Maine’s share of that bill will be more than $300 million over the next four years, even though the state already produces more electric energy than it consumes. That’s a 6 percent hike for residential customers and up to a 10 percent increase for larger commercial and industrial users. Another $22 million rate hike is going into effect on July 1 to upgrade transmission lines – again for work largely benefiting Massachusetts and Connecticut.
The Federal Energy Regulatory Commission approved the $300 million plan on June 15, and the Public Utilities Commission made good on its promise to explore other options, including a partnership with Canada, a week later.
“The Legislature has voiced serious concerns with the fairness of the regional regime, and at their instruction, next month, the public will have its chance to speak to the issue,” said Kurt Adams, chairman of the Public Utilities Commission. The first round of public comment is due in Augusta by July 10.
Sens. Olympia Snowe and Susan Collins have written to the Federal Energy Regulatory Commission chairman asking the rate hike be reconsidered.
“This decision is another instance in which Maine ratepayers are being unfairly required to pay for infrastructure deficiencies in other, more affluent, parts of New England. Not only does this represent unsound energy policy, but it also places an onerous economic burden on those who can least afford it,” the senators wrote.
Independent system operators
Independent system operators and regional power grids were created as part of electric deregulation, when local power companies got out of the business of generating electricity.
The idea was consumers would be able to buy electricity more cheaply if generators competed on an open market. The independent system operator’s job is to coordinate that market and make sure there is enough electricity available to serve the market’s needs.
Maine’s Public Advocate Stephen Ward describes it on his Web site – www.maine.gov/meopa – as “sort of like the air traffic control tower at the airport: It has no affiliation with any user of the electric system – customer, generator or utility.”
It manages New England’s six-state electric grid and supervises the wholesale electric market that sets a price for power purchases, Ward says, “But ISO New England’s board not only is independent; from my vantage point as the advocate for Maine’s utility ratepayers, it is also at times indifferent to the consumers it affects.”
McDonnell, the spokesman for New England’s system operator, said Maine consumers actually are getting a good deal under the New England power-sharing arrangement because the state has to pay only 8 percent of the costs associated with running the grid. The state pays 8 percent because it uses about 8 percent of the energy under ISO New England’s control.
If Maine secedes from the grid, McDonnell said, Maine would have to pay the full cost of maintaining a system, including the cost of developing the generation market, running a control room for in-state generation to make sure there’s a reliable supply and having access to reserves should a major power generator or transmission line go down.
“The whole idea of the power pool is economy of scale,” McDonnell said. “It can be argued that it’s more important for the smaller states than it is for the larger states because the larger states are subsidizing the smaller states.”
Maine officials disagree, however, particularly when it comes to increasing generation capacity for future needs. Maine already produces more power than it uses, generating 19 million megawatt hours as compared to consuming 12.4 million, according to the most recent data.
New England as a whole, however, needs to get more power on line, to serve the most populated areas.
According to a study released by ISO New England, “as early as 2008, the region may not have enough supply to meet its electricity needs on the hottest days of the year.”
The problem, McDonnell said, is the top price generators serving the New England grid can charge for electricity has been legislatively capped and is not covering the capital costs of their plants.
The $4 billion rate increase – $300 million of which is Maine’s share – will be used to make those generators whole on their current costs over the next four years and, it is hoped, encourage them to build additional capacity that could be available by the end of the decade. Just what consumers will pay when that increased generation capacity is in the mix will be determined by market conditions.
Alternatives
Glenn Poole, the energy manager at International Paper in Bucksport and president of the Industrial Energy Consumer Group, said the theory behind the rate increase is “if you spread enough money around somebody will do something,” but there’s no guarantee any new power plants will be built.
He also believes the plan goes against one of the main tenets of electric deregulation, which was to require the electric generators to take the risk of investing in new plants, not consumers.
“This proposal shifts the risk of capital recovery from the investors in generating plants to Maine’s electric customers – exactly what restructuring was to end,” he said.
Poole believes breaking away from the New England grid is worth exploring.
“There’s a lot of issues to deal with. We could either be a separate ISO, in effect, or join with the (Canadian) Maritimes,” he said. “Unless we look at it, we won’t know if there’s a benefit there.”
Poole said Maine is more like the Maritime provinces in terms of our peak winter demands and rural population.
“We’re not anywhere near like Connecticut,” he said, where they like to bury their power lines – a very expensive proposition. “Sure they’d love us to pay for it.”
“The problem with Connecticut is they have the load there so they need the power, but they don’t want to build any power plants and they don’t want to build any transmission lines,” he said.
Sen. Philip Bartlett, D-Cumberland County and chairman of the Utilities and Energy Committee, said the idea of pulling out of the New England pool sounded a little far fetched when it was first suggested, but he’s rethinking his position.
“People are very angry about what’s going on with the price increases,” he said, and if the Maine PUC study shows other options are feasible, “I expect there will be pretty good reception to that.”
Bartlett said Maine couldn’t set up a different system without help, and, at the very least would have to hire its own system operator to navigate the grid. “It’s not the case where we could just clip the transmission cable and be our own entity.”
The deadline for initial public comment to the Maine Public Utilities Commission is July 10. Comments should identify the docket number 2006-364, and be addressed to Dennis Keschl, Acting Administrative Director, 242 State Street, Augusta, Maine, 04333.
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