May 20—Efforts to force the sale of Central Maine Power and Versant Power's assets and create a so-called consumer-owned utility called Pine Tree Power Co. reached a milestone Thursday when the Legislature held a public hearing on the proposal.
Some aspects of the plan have created confusion and disagreement. Here are answers to some key questions:
The bill would require CMP and Versant to sell assets, such as substations, trucks and power lines. Has there ever been a forced asset sale of an existing private utility in the United States on this scale?
No. A forced sale of the assets of two investor-owned utilities to form a statewide transmission and distribution company would be unprecedented.
The advocacy coalition behind the bill, Our Power, downplays the novelty by making it seem routine. The group notes that there are roughly 2,000 consumer-owned utilities in the country, including nine cooperatives or municipal-owned entities in Maine. Some in other states have been "converted" from investor-owned utilities, supporters say. Top examples they cite are Winter Park, Florida, and the Long Island Power Authority in New York.
But these comparisons omit some key distinctions.
Maine's nine consumer-owned-utilities serve tiny populations. The largest, Eastern Maine Electric Cooperative, has 10,400 home customers. That's compared to CMP's 560,000, and more than 135,000 for Versant Power. Taken together, CMP and Versant serve 96 percent of Maine homes, according to the Public Utilities Commission.
Most of Maine's consumer-owned utilities were formed long ago as part of municipalities, not takeovers of existing utilities. Eastern Maine Electric Co-op came to be as part of the country's Rural Electrification Act in 1936. The Houlton Water Co., acquired by the town in 1902, also provides water and sewer service.
Regarding modern-day, investor-owned sales, Winter Park broke from Progress Energy in 2005. Residents were fed up with reliability problems and voted overwhelmingly to approve $43 million in revenue bonds to buy the assets. Winter Park is currently burying its electric lines underground, as a hedge against storm damage.
Located near Orlando, Winter Park is a growing suburban city of 15,600 electric customers within a 9-square-mile service area. By comparison, CMP's service area is 11,000 square miles.
The Long Island Power Authority is more comparable in size, with 1.1 million customers, although its service area is much smaller, 1,230 square miles.
LIPA, as it's known, was formed by an act of the New York Legislature in 1986, after a nuclear power plant being built by the local power company was canceled over cost and safety issues.
LIPA issued $6.7 billion in bonds in 1998, largely to take over the failing company's distribution system. At the time, it was the largest municipal bond debt in U.S. history and is still being paid down.
Estimates of the value of CMP and Versant range from $5 billion to more than $13 billion. Why such a difference?
First off, the bill states that fair market value would be negotiated or determined by "a referred process." But CMP and Versant have made it clear they will fight what they consider a seizure of their private assets in court.
Having said that, market value is influenced by time. Each year, the Maine PUC documents the "net utility plant" of CMP and Versant based on their balance sheets. The latest figures are $3.9 billion for CMP and $1.2 billion for Versant, for a total value of roughly $5 billion. That's what Our Power considers the starting point.
But CMP says the total figure could reach $13.5 billion. It's basing that on how long a hostile acquisition might be fought in court. CMP estimated it could take up to 10 years. Our Power says three to four years.
Our Power is relying on a study done last year for the PUC and follow-up calculations by an energy market expert. They assume a start date of 2024. A consulting firm hired by CMP, however, said value would keep growing, as the utilities continue to make capital investments to handle the new wave of clean-energy generation.
The fact is, no one really knows how long the process could take or what the value ultimately would be.
Would the new company be "government controlled," as CMP repeatedly claims?
CMP is raising the specter of a state-run power company. It says the sale would be a seizure of private assets enabled by state government.
It's true that the Legislature would enable the sale. But the privately-operated, non-profit authority would be controlled by an independent board of directors. It would be made up of seven voting members representing five state Senate districts, elected to staggered terms by Maine residents. The board also would include four advisory experts. The PUC would have some oversight role, including ratemaking.
Our Power's campaign says the board will be "transparent and responsive to us," meaning Mainers. But that doesn't mean the board will be free from influence.
Supporters sometime point to Nebraska as a good example of how a statewide consumer-owned utility works. But last year, candidates for the 11-member Nebraska Public Power District board took in record-breaking campaign contributions. Money flowed from environmental groups, industrial customers and others trying to influence clean-energy decisions in the state.
Who would actually operate and maintain the poles, wires and substations?
Our Power's campaign says CMP and Versant's existing workers will stay on, and the board will put out a competitive bid for qualified, private-sector pros to run the facilities. That's how Long Island's system operates.
But LIPA's business model is unique, according to Fitch Ratings. It's the largest municipal electric distribution company in the country, but system operation and maintenance is contracted to a subsidiary of Public Service Enterprise Group, an investor-owned diversified energy company based in New Jersey.
That arrangement hasn't always assured satisfactory performance. LIPA was criticized for poor response to Superstorm Sandy in 2013. It also caught flak following Tropical Storm Isaias last year, leading to reports of communications and management failures and consideration of canceling its contract with Public Service.
Proponents say the new company would be "lower cost." Will my electricity bill be lower?
This is a confusing claim. CMP and Versant only distribute power; they don't generate it. The sale wouldn't affect power supply, which accounts for roughly half the total bill home customers of those utilities pay.
Our Power says Maine's existing consumer-owned utilities charge home customers 58 percent less than CMP and Versant. But Eastern Maine Electric Co-op has a higher delivery rate than CMP, according to PUC data, and a higher total bill rate. Madison Electric Works has a low delivery rate, but its standard offer power supply rate makes the total bill rate higher than CMP.
There's wide agreement, however, that any utility will need to spend billions of dollars to upgrade the grid to accommodate Maine's climate change and clean-energy goals. Supporters say a consumer-owned utility will be able to borrow money at a fraction of the cost of CMP or Versant, which has to compensate investors. That could save $9 billion over 30 years, according to one estimate, and be passed on in lower rates.
Regarding power supply, a related bill was introduced last month to establish the Maine Generation Authority. It would authorize the sale of revenue bonds, backed by electric ratepayers, to finance and own renewable energy projects in Maine. That proposal has had a public hearing and is being considered in the Energy, Utilities and Technology committee.