Maine Legislator Proposes Consumer Owned Utility

What if states took their power back from foreign-owned utilities and saved money in the process?  That's the basis for a new plan proposed this week by Maine Rep. Seth Berry, co-chairman of the Legislature’s Energy, Utilities and Technology Committee.  It's shocking, it's stunning, it's brilliant!

The plan would require Central Maine Power and Emera Maine to sell all transmission and distribution assets to the proposed Maine Power Delivery Authority. Bill supporters said the authority would use low-interest revenue bonds to make the multibillion-dollar purchase, allowing the new consumer-owned utility to provide electricity to most Maine residents at lower rates than those charged by the two investor-owned utilities.

The proposal is, in part, a response to the controversies that have dogged CMP since an October 2017 windstorm left some customers without power for more than a week, as well as massive bill spikes reported by thousands of customers.

“Maine people want and deserve a utility that will keep the costs down and the lights on and put its Maine customers and workers first,” said Berry, the co-chairman of the Legislature’s Energy, Utilities and Technology Committee. “Our current utilities have failed us in every respect, with the clear exception of our own consumer-owned utilities.”

Why, indeed, do we allow ourselves to become captive customers of investor-owned mega-utilities who run roughshod over our lawmakers and regulators in their own pecuniary interest?  Whoever thought giving investor-owned corporations monopoly power over a necessary service was a good idea?  It's a terrible idea!  When out-of-state (and even out-of-country) for-profit corporations own a monopoly we depend upon, we end up paying more than we need to to ensure corporate profit, huge compensation packages for over-stuffed executives, and buckets of dark money that funds continued dominance and profit.  All those things disappear when our utility is a not-for-profit.  There's nothing wrong with paying at cost rates for a monopoly service, it's all those other costs that run up our bills unnecessarily.  A not-for-profit collects just enough money to run the business. 

How would this proposal work?

...the state create[s] a nonprofit, consumer-owned transmission and distribution utility, and have it take over CMP and Emera’s assets and operations.

“A Maine power delivery utility that purchases at a fair price the assets of CMP and Emera Maine, and shakes their hands and says, respectfully, ‘goodbye,’” he says.

That could cost at least $4 billion, the value of the combined CMP and Emera assets according to 2017 filings with state regulators. Berry says it would be affordable though, because the state would float revenue bonds to finance the purchases — bonds that are not taxed by the federal government.
“This is not magic, it’s not sleight of hand. We are refinancing at different interest rates. That’s all it is, and that’s how we would reduce rates,” he says.

And Berry says that in addition to the debt-cost savings, ratepayers in the newly created Maine Power Delivery Authority would also benefit because their rates would no longer have to return profits to private investors — returns that routinely rise over 10 percent in Maine. That tax savings and the lack of a the need to generate profits for shareholders, he estimates, would cut electricity delivery rates by 15 percent while improving service reliability.

That's right, it's a refinancing of utility debt at a lower interest rate.  The interest rate of a utility with good credit and a captive ratepayer revenue stream is probably less than 5%.  That's the rate at which the utility could borrow the $4B to pay the investor-owned utilities for their stranded investment and take over ownership of the infrastructure.  Since electric consumers would be on the hook for that $4B whether it was to a consumer-owned utility or one owned by investors, the only difference is rate savings.  Investor-owned utilities earn a profitable "rate of return" from consumers on their investment in utility infrastructure in the neighborhood of 10%.  The difference between 10% interest and 5% interest on a balance of $4B is significant.  All that cash could turn into a rate benefit for consumers.

Under the plan, the new consumer-owned utility would take the transmission and distribution assets of CMP and Emera and pay "just compensation" for them.  The investor-owned utilities would be made whole for their costs, but it wouldn't be at 10% interest over 50 years.  They would be paid off for their current equity, dollar for dollar.  The true value of the assets, if sold on the open market, should not be a factor, as transmission and distribution assets are paid for by customers over long periods of time.  Once fully depreciated, or paid for, the assets belong to the consumers who paid for them.  The investor-owned utility should not be reimbursed for the value paid by consumers over the life of the assets, in addition to what is still owed... that would require consumers to pay twice for the same assets.

CMP objects to having its property confiscated this way.

CMP spokeswoman Catherine Hartnett said few details of Berry’s bill – which is still in the legislative drafting office – have been released but the company has “strong concerns about the state seizing private property.” Hartnett questioned how the proposed authority would match the professional experience and on-the-ground knowledge of CMP workers.

“Every time it has come up before (in the Legislature), it has been rejected first of all because of the questionable benefits, but also because of the constitutional issues,” Hartnett said.

CMP is concerned about the state seizing private property?  That's funny!  I'm betting CMP is a strong advocate of CMP seizing private property using the power of the state when it wants new utility rights-of-way.  Puh-leeze, CMP, you slay me!

And about that professional experience and on-the-ground knowledge of CMP workers?  The proposal would retain current employees, at least the ones who do the work to keep the utility functioning.  The fat cat executives aren't necessary at a consumer-owned utility.  And those fat cats pull in multiple millions in salaries and benefits every year.  Perhaps a consumer-owned utility could pass along the salary savings to consumers, or perhaps they could use that money to increase the pay and benefits for current employees.  Or perhaps a new consumer-owned utility could do a little of both.

This proposal is win, win, win!  Everybody benefits, except for a few fat cat executives and parent company balance sheets.  It's long overdue just desserts for an industry that has gone dangerously out of control.

Bravo, Maine!