If you are an electricity ratepayer, you probably hate your electric bill right now. With rates as high as 31 cents per kilowatt-hour, households and some businesses across Maine are paying one of the highest rates in the nation. People dread their mail or inbox when the next bill arrives.
We also live in the most forested state in the nation; and with that distinction comes a host of other problems when it comes to the reliability of our power infrastructure. We just had Hurricane Lee roll through; and although it diminished to a post-tropical cyclone by the time it got here, it still packed a punch and knocked out power to over 36,000 customers in the Versant Power service area and 61,000 Central Maine Power customers at its peak.
Still, most of the hundreds of thousands of people who were affected that weekend had power restored within 36 hours. We should thank both companies and the smaller cooperatives in our state as well for their planning and hard work.
This brings me to Question 3, a citizens initiative that aims to create the publicly owned utility Pine Tree Power from the assets of Versant and CMP. The path to get there is through taking these assets by eminent domain, a power reserved to government most often associated with taking land without consent for public use.
On its very surface, we should all be concerned when such a daunting governmental power is used for the taking of any private property. In this case, the private property includes the Maine-based assets of both companies such as their facilities, poles, transmission and distribution lines, trucks and equipment.
Proponents have argued that service would improve and rates would come down under this so-called public power authority. I can’t see that either are true. In fact, the very nature of a free market is to create value and receive value in return at the best possible cost to create it. The incentive to do so is called profit.
When you take out the profit component, you also remove the possibility of reinvestment and the need to run the operation efficiently. In government, we call that a bureaucracy – we already have plenty of those.
And then there’s the cost. The doctrine of eminent domain requires that assets can only be taken by the government for “just compensation,” meaning that owners have to be made whole. The process of determining these “damages” uses fair market value, not the net asset value on the books that also reflects depreciation. However, it can take years in court to determine these values since book value is meaningless and real property like buildings and land appreciates.
While proponents have argued that the price tag to finance the asset seizure would be around $7.5 billion, opponents have said it’s closer to $13.5 billion. But what if it’s more? Consider the fact that two transmission line projects in Maine may already give us a clue.
The New England Clean Energy Connect and LS Power Grid Maine transmission line projects are both about 140 miles in length and projected to cost about $1.8 billion each. Simple math tells me that’s about $12.8 million per mile of line.
Now consider that CMP and Versant have over 4,200 miles of transmission lines combined along with another 30,000 miles of distribution lines. Add in about 300 trucks, 362 substations, hundreds of thousands of transformers, poles, meters and … well, you get the idea.
The bottom line is Question 3 is seriously flawed and will put Maine ratepayers on the hook for years of litigation and untold billions in debt and interest costs. And since this new authority will not pay income taxes like Versant and CMP do now, Maine taxpayers will also be on the hook for millions more in lost state revenue.
No matter how you cut it, this is a bad deal for Maine.
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