In an economy dominated by inflation, Maine’s electricity customers got welcome news Wednesday as state regulators approved sharply lower rates for next year – about $30 per month on average – that reflect falling natural gas prices.
The Maine Public Utilities Commission approved a 2024 standard offer rate – the default supply for nine of 10 home and small-business customers who don’t contract for electricity with competitive energy providers – of 10.84 cents a kilowatt-hour for Central Maine Power customers. That’s down 35% from current rates.
An average Maine home using 550 kilowatt-hours a month would pay $59.57 for its energy supply under the new rate, down from $91.30.
For Versant Power’s residential customers, the PUC approved a 2024 rate of 11.29 cents, which is 24% less than current prices. The PUC already had approved on Tuesday a 2024 residential rate of 10.76 cents a kilowatt hour for Versant Power’s Bangor Hydro District, a 30% drop.
In June, the PUC approved small increases for the distribution portion of electricity bills – roughly $2 per month on average for CMP and $5 a month for Versant – but the decrease in supply cost more than cancels that out.
The new rates take effect in January.
“We’re obviously very pleased to see prices drop meaningfully from where they were in calendar year 2023,” PUC Commissioner Pat Scully said.
Natural gas is the dominant energy source for New England generators, driving a large share of the cost of electricity. ISO-New England, the region’s grid operator, said natural gas accounted for 46% of its resource mix last year. Nuclear power was at 23% and renewables were a distant 11%.
The standard offer service recently has represented the biggest and most volatile part of a household electric bill. Rates for electricity supply are separate from what CMP and Versant Power charge for delivering power to homes and businesses, though they are included in customers’ monthly bills.
Former state Rep. Seth Berry, of Bowdoinham, who chaired the Legislature’s Joint Standing Committee on Energy, Utilities and Technology and has been a critic of the utilities, said the lower standard offer rate is good news, but it “does not slow the steady ratcheting up of CMP and Versant delivery rates. These rates are at an all-time high.”
Jon Breed, spokesperson for CMP said charges for distribution and transmission include “major investments in reliability through automation and grid modernization.”
Judy Long, a spokesperson for Versant Power, said the utility has been affected by price increases and labor market pressures, like most businesses.
“However, we’ve continued to implement more sophisticated technology to inspect our equipment, ensuring we keep the costs of repairs, replacements and improvements as low as possible,” Long said in an email. “During our last distribution rate case, we deliberately opted out of seeking an opportunity to earn a greater rate of return on investments.”
Falling energy demand during the pandemic helped cut standard offer rates to about 7 cents a kWh in 2020 and about 6 cents in 2021. In 2022, however, Russia’s invasion of Ukraine roiled global natural gas markets, causing rates to nearly double. This year, standard offer rates rose to 17.6 cents a kWh in CMP’s service area, and more than 16 cents in Versant Power’s Bangor district, before a midyear adjustment at the PUC trimmed them by a penny.
Public Advocate William Harwood said it’s been three years since an overall decrease in electricity prices in Maine.
“What the ratepayers care about is the bottom line,” he said.
The standard offer has been volatile, responding to falling demand for natural gas at the onset of the COVID-19 pandemic that shut offices and other workplaces in 2020, then rising as the pandemic retreated and the U.S. economy reopened and taking another leap in 2022 with the war in Ukraine.
However, other costs billed to consumers are going up. The PUC has approved a two-year, $67 million plan to upgrade the distribution grid to increase reliability, reduce storm damage linked to climate change, accommodate clean energy investments and more stringent financial penalties to hold CMP accountable if it misses new service quality standards.
STRANDED COSTS ON RATEPAYERS
And so-called “stranded costs” that pay for subsidies for community and residential solar energy sites will be paid by ratepayers. Approval by the PUC in June adds a monthly charge of $5.95 to a typical CMP residential bill, based on a home that uses 550 kWh of electricity a month.
“They’re coming home to roost,” Harwood said. “All the development work as projects come online immediately have a rate impact.”
Many community solar projects generate less than 5 megawatts, but are still good sized, Harwood said, and produce zero-carbon energy that advances Maine’s clean energy goals. Still, he said policymakers may need to ask if it’s the “smartest way to use our subsidy dollars.”
Money may be needed to finance incentives for offshore and onshore wind, he said.
“Every dollar that net energy billing soaks up isn’t a dollar for another,” Harwood said.
Republican lawmakers highlighted those additional costs.
“We should have seen a steeper decline in rates, but the continued march toward more expensive renewable energy is costing Maine ratepayers far more than what we should be paying,” Senate Minority Leader Trey Stewart, a Republican from Presque Isle, said in a statement. “These ‘Green New Deal’ policies and the choices we’ve made regarding solar subsidies continue to hurt Maine families.”
House Minority Leader Billy Bob Faulkingham, of Winter Harbor, said Mainers pay more for energy for “no measurable benefit.”
Dan Burgess, director of Gov. Janet Mills’ Energy Office, said Maine must continue to diversify its energy supply with “affordable renewable energy” to reduce the state’s reliance on electricity generated by fossil fuels and “reduce our vulnerability to price increases driven by global events, like those that affected us over the past two years.”
Phil Bartlett, chairman of the PUC, said Wednesday that the use of renewable sources of energy are “relatively small” in New England, which relies for the most part on natural gas and oil. Offshore wind from southern New England and importing hydropower-sourced energy from Quebec “will be helpful.”
However, offshore wind projects have been plagued by supply bottlenecks and cost inflation, while the transmission line bringing power from Canada has been slowed by opposition that rejected the project in a 2021 referendum, only to be overturned by a Portland jury this year.
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