Voters in Maine will have a lot of material to chew over before they decide later this year if a public agency should take over service provided by investor-owned electric utilities.
What they won’t necessarily get is a slam-dunk yes or no recommendation.
Maine’s Office of the Public Advocate, a state office created to represent the interests of Maine utility consumers, this week published a full review of Question 3, the November ballot measure calling for the state to purchase and replace investor-owned Central Maine Power Company and Versant Power with a quasi-governmental utility provider called Pine Tree Power Company that would take over service to nearly 800,000 people.
The initiative first began as a signature-driven petition, making it into the ballot after state lawmakers narrowly failed to pass the measure in June, with dissenters citing a lack of clarity on costs and potential tax loss for their lack of support.
Under Maine law, the denial automatically set the proposal up for a public referendum, triggering a flurry of campaigning by opponents and advocates likely to continue until election day.
Those in favor of the move claim it will help reduce rapidly rising electricity rates statewide while naysayers predict it will do the opposite.
For the state, it’s not quite so easy to tell, officials said in their report.
The effects of a takeover, the report concluded, were “impossible to predict with certainty” and questions remained “as to whether the quality of utility service would improve or deteriorate following the acquisition.”
“Although it has been suggested that PTP would be more responsive to ratepayer concerns, there is no clear evidence that a private third-party operator would provide better customer service compared to the existing utilities,” the report continued.
The impact on rates would be nuanced, the report said.
The Public Advocate cited a 2020 report the state Public Utilities Commission commissioned from utility consultant London Economics International.
According to LEI’s 100-page report, in the short run, the cost of financing the buyout would raise rates; but in the long run “the proposal was likely lower rates over the long-term due to future lower financing costs and tax savings,” according to the Public Advocate’s summary.
The public power proposal, described by advocates as an attempt to establish a fairer, consumer-owned utility company, would see all of CMP’s and Versant’s facilities and assets acquired by Pine Tree Power.
Corporate leadership would be replaced by a 13-member board, seven members to be selected in statewide public elections with the remaining six appointed by those elected members. All would serve staggered six-year terms and existing utility staff would be kept on under the new management.
Should the public weigh in favor of the measure, Pine Tree Power would bankroll the acquisition of those private assets with federally taxable debt backed by future revenues, with obligations secured not by the state but by a mortgage on the purchased property.
Pro-public power advocacy group Our Power, which campaigned to have the measure placed on the November ballot, said on its website that Pine Tree Power would help reduce rapidly rising service rates statewide in part with the use of long-term debt financing.
The group said bonds could cover not only the costs of acquisition but future needs as well, with capital work, including green energy upgrades, bankrolled at 2 to 3% interest using tax-exempt revenue bonds, they say, using numbers apparently drawn up before the Fed began hiking rates last year.
“CMP’s and Versant’s equity investments and profits cost us, their captive customers, between 8% and 14%,” they said. “Even with debt financing to reduce the impact, IOUs cost far more than COUs.”
While the state review also found that Pine Tree Power would likely have access to debt at a much lower cost than what CMP or Versant would have to pay to issue equity shares or taxable debt, some of those opposed point to large unknowns that could drive the price of the takeover up.
Jacob Posik, director of legislative affairs at the right-leaning, small government advocating nonprofitthe Maine Policy Institute, which sent a representative to testify before the State Senate Committee on Energy, Utilities, and Technology earlier this year,said much uncertainty remains over how much debt the newly formed utility would need to complete a takeover amid the very real risks of a drawn-out legal battle, more likely if the state uses eminent domain powers to seize the private assets.
Mainers already pay among the highest energy prices in the country, Posik said, and the potential for additional costs associated with larger-then-predicted debt volumes could increase, not decrease, consumer costs in the end.
The project is also still without necessary approvals from state and federal officials.
“These points and more will all be subject to lawsuits and subsequent appeals,” Posik said. “Who knows what it will cost ratepayers or what entity will be in control by the time it’s all said and done?”
Our Power and other supporters estimated the takeover would cost Maine around $9 billion in all.
Willy Ritch, executive director of the Maine Affordable Energy Coalition, a group that includes private utility providers and labor unions opposed to the Pine Tree Power proposal, said analysts hired by the group put the figure for the cost of acquisition of CMP and Versant closer to $13.5 billion.
Market fluctuations and unexpected costs, along with the need to finance ongoing capital improvements shortly after purchase, could force the new utility into more debt, Ritch said.
The Office of the Public Advocate concluded similarly, saying there is “significant uncertainty” surrounding cost predictions.
Citing the findings of the LIE study, the Public Advocate said several factors, including actual costs or losses associated with the acquisition, operating management fees, financing, and the future rate of growth in utility capital assets all made it hard to “predict with certainty whether the acquisition will result in net savings to ratepayers.”
The Public Advocate also noted that a public power conversion could have second-order effects, saying “the proposal could increase taxes and/or result in a reduction in government services due to lower state tax revenues collected from CMP and Versant.”
Officials predict the takeover process will take anywhere from five to 10 years and will likely face litigation “over the constitutionality of the use eminent domain” as well as debate over the acquisition price.
Along with deciding on the Pine Tree Power initiative, voters in Maine will weigh also weigh a rival ballot measure put together by public power opponents. Question 1 will ask them to approve a law that would require a popular referendum for any government debt issuances over $1 billion, which could delay the process of a public power takeover.
“If this question is approved by voters, it would likely require PTP to obtain additional voter approval before issuing debt needed to finance the acquisition of CMP’s and Versant’s assets,” the Office of the Public Advocate wrote in its analysis.