Beyond Labels

A 360° Discussion of Foreign, National and Local Policy Issues

Pine Tree Power

October 3, 2023
6 Comments

We decided to discuss at our next (16 October) meeting the possibe pros and cons of Pine Tree Power, the proposed consumer-owned electric utility that will be the subject of a referendum question on the Maine ballot in November.

When we chose this topic at the end of yesrerday’s meeting, some of us felt that the public discussion so far about Pine Tree Power has been remarkably fact-free and that we need to do some research ahead of time to try try find some relevant facts.

I suggest some of the relevant questions about this issue include, for example, the following (in no particular order):

How are Versant Power and Central Maine Power currently financed? Would the component of the cost of elecricity to consumers.attributable to financing go up, go down, or stay the same if Pine Tree Power acquires their assets?

Some advertisements opposing Pine Tree Power assert that the take-over would “cost Mainers” something over $13 billion. What’s the basis for that claim? How would the cost of acquiring the assets of Versant/CMP actually be determined? What “cost” does the $13 billion figure represent? Who are the “Mainers” who will bear the acquisition cost, whatever it ends up being?

Would Pine Tree Power be a “consumer-owned utility”? If so, in what sense? If not, why not?

What has been the experience with consumer-owned electric utilities in Maine and elsewhere in the US? Has service and/or reliabilty improved? Have rates gone up or down compared to nearby inverstor-owned utilities with similar (in size and in any other relevant ways) customer bases and the condition of their infrastructure?

Will the economic incentives and advantages (e.g. bargaining power in purchasing electricity or other goods and services) or disadvantages be different for Pine Tree Power as a consumer-owned electric utility than they are for Versant/CMP as investor-owned utilities? If so, how?

How will Pine Tree Power be managed? Who would choose its directors and how? How much control will consumers have over Pine Tree Power policies (e.g., energy souces, choice of operator, system upgrades, etc.)? How much control do consumers now have over similar policies of Versant/CMP? Would more consumer control of such policies be a good thing or a bad thing? Why?

Will the role of the Public Utilites Commission change if Pine Tree Power takes over Versant/CMP? If so, how?

Will the role of the state (i.e., the legislative and executive branches) change with respect to the operation of the electric grid if Pine Tree Power takes over Versant/CMP? If so, how?

Aside from the issues raised above, is there any independent principled reason to prefer an investor-owned or a consumer-owned electric utility? If so, what principle and what option would it support?

Who is backing the advertising campaigns supporting or opposing Pine Tree Power? Which politicians are backing or opposing Pine Tree Power? Why do they say they’re taking that position? What are their likely (publicly) unstated reasons, if any, for taking that position?

if, at the beginning of the discussion, you support or oppose Pine Tree Power, why? If you change your mind at the end of the discussion, why? If not, is there anything that might cause you to change your mind? If so, what?

Here’s a link to the Pine Tree power web site (https://ourpowermaine.org/faq/) that adresses some of these issues from Pine Tree Power’s perspective. I’ll look for something similar from the perspective of Versant/CMP.

6 Comments

  • mdsinclair

    Here’s a link (https://www.maine.gov/meopa/sites/maine.gov.meopa/files/inline-files/Pine%20Tree%20Power%20Fact%20Sheet.pdf) to a “fact sheet” about the Pine Tree Power prposal issued by th Maine Office of Public Advocate, which is publicly neutral on the issue.

  • mdsinclair

    Here’s a link (www.maineenergyprogress.com) to one of the organizations opposing the creation of Pine Tree Power. The reasons given for that opposition are that (i) it will “cost Mainers” more than $13 billion; and (ii) Pine Tree Power doesn’t have plans to improve the reliabiliy of service, lower rates, or fight climate change. I’ll try to find some explaing how Versant or CMP plans to do those things.

  • mdsinclair

    Here’s a link (https://www.mainepublic.org/podcast/maines-political-pulse/2023-10-05/oct-5-2023-heres-everything-we-know-about-the-referendum-to-replace-cmp-and-versant-with-pine-tree-power) to an analysis of the debate about Pine Tree Power that was posted on the Maine Public Radio website this morning. Thanks to Peter Sly for calling attention to it.

  • mdsinclair

    The link I just posted is to a recording of a 15-minute MPR podcast about Pine Tree Power. Peter Sly sent an E-Mail message with text of a more comprehensive MPR discussion of that topic. I haven’t yet figured out how to find a link to that text, so here’s a copy of the text Peter sent:

    Question 3 asks Maine voters: “Do you want to create a new power company governed by an elected board to acquire and operate existing for-profit electricity transmission and distribution facilities in Maine?”

    Question 3 in November proposes a dramatic overhaul of who is responsible for delivering electricity to the majority of Mainers. In this state and across the nation, it’s unmatched in manner, scope or known outcomes.

    Uncertainty may prove to be the determining factor in whether voters approve Question 3 in November. However, public interest is high in what supporters promise — more accountability, lower rates and greater reliability. The proposal comes amid increased nationwide scrutiny of electricity delivery as extreme weather events knock out power more often and for longer durations, and alongside a simultaneous push to decarbonize power generation and increase electrification of heating and transportation.

    Question 3 was born from a heightened public focus on whether Maine’s two largest utilities — Central Maine Power and Versant Power — can be trusted to meet the aforementioned challenges. Supporters argue that neither company can. They say what’s needed is a takeover of CMP and Versant’s grid assets, including the wires, poles and substations that bring electricity to most Maine homes and businesses. Under their plan, the investor-owned utilities would be replaced with a publicly owned utility operated by an elected board and its handpicked panel of energy experts.

    They’re calling it Pine Tree Power.

    Image removed by sender. Maine Public

    Central Maine Power Co. lineman John Baril works to restore electricity, Wednesday, March 15, 2023, in Lewiston, Maine. (AP Photo/Robert F. Bukaty)

    CMP and Versant are spending millions of dollars to defeat it. The utilities are using former legislators — some who previously supported the concept behind Question 3 — and other political influencers to argue that Pine Tree Power will come at great expense and risk to ratepayers and ultimately stall renewable energy development while the takeover bid is hung up in court.

    Outgunned in campaign spending, Question 3 supporters are making sweeping promises. However, the Office of the Public Advocate, a state agency created to protect ratepayers, was less certain of the potential outcomes when it released its fact sheet about Question 3 last month.

    The agency took no position on Pine Tree Power. Its seven-page assessment of the proposal contained few declarations or predictions.

    The campaigns for and against Question 3 have filled that void with competing claims, using selective data from other public utilities with no precise analog to what Pine Tree Power proposes.

    What would it mean for electric rates?
    Unsurprisingly, the campaigns on either side of Question 3 have vastly different answers to this critical question. And there’s no crystal ball to tell us exactly what will happen because a takeover of this size and complexity would be unprecedented in the U.S.

    Further complicating matters, comparing electricity rates across states or regions can be apples-to-oranges because generation costs vary so widely. For instance, New Englanders now pay among the highest rates in the nation because many of the region’s power plants burn natural gas, which has soared in price in recent years.

    Yet Question 3 would have no impact on the generation costs that account for roughly half of Mainers’ electricity bills. That’s because CMP and Versant don’t generate electricity — they only deliver the juice that flows to homes and businesses across their wires, poles and towers.

    There are competing analyses about how Pine Tree Power would affect the “transmission and distribution” rates paid to CMP and Versant.

    Arguably the most independent analysis, prepared by London Economics International for the Maine PUC, estimated that the changeover could cost ratepayers up to $118 million during the first decade largely because of the upfront acquisition costs. But LEI projected that ratepayers could save as much as $236 million over a 30-year period as Pine Tree Power benefited from tax-exempt and low-interest loans.

    But Maine economist Richard Silkman said LEI “seriously misstated the financial consequences to Maine ratepayers” based on what he contends are calculation errors and faulty assumptions.

    Silkman pegged the savings at $858 million over 30 years. And Pine Tree Power has seized on those projections to suggest that households would eventually save nearly $400 annually.

    Or maybe they’ll pay more, according to an “independent” analysis funded by CMP parent company Avangrid.

    Concentric Energy Advisors used far less-rosy assumptions than Silkman to estimate that an electric grid takeover could cost ratepayers $4.7 billion over 30 years.

    “Because of this incremental risk of government-owned power . . . customers in Maine are not well served by only reviewing the most optimistic scenarios,” Concentric wrote.

    Maine’s Office of the Public Advocate, which is charged with representing the interests of utility ratepayers on regulatory matters, didn’t even attempt to parse the rate debate in its “fact sheet” on Pine Tree Power.

    The office only noted that any rates “must be approved by the MPUC and FERC and must be sufficient to pay the company’s full cost of providing service, including the cost of debt.”

    Reliability
    According to data from the U.S. Energy Information Administration, Maine has historically averaged some of the most frequent and longest power interruptions in the country.

    In 2019, the EIA found that Maine customers averaged 15 hours without electricity, more than triple the U.S. average. In 2020, the state had the highest number of power interruptions per customer.

    The Pine Tree Power campaign has made frequent use of such statistics to assert that its proposal will yield fewer and shorter power outages. At times the campaign uses Nebraska, the only state where public power utilities control the entire grid, to claim that the solution is to boot investor-owned utilities that won’t make grid hardening investments.

    A car leaves a trail of light as it passes under power lines weighed down by toppled trees in Freeport, Maine, Tuesday, Oct. 31, 2017. Weather disasters fueled by climate change now roll across the U.S. year-round, battering the nation’s aging electric grid. (AP Photo/Robert F. Bukaty, File)

    It’s true that the Cornhusker State has some of the shortest and least frequent power outages in the U.S. However, it’s also one of the least forested states in the country. Maine is the most forested and CMP frequently claims 90% of its outages are from falling trees or limbs.

    The EIA noted this challenge in 2020 when Maine logged the longest average power interruptions in the U.S.

    Still, Pine Tree Power argues that CMP and Versant aren’t investing in grid hardening because it’s not profitable to shareholders. The campaign says the nonprofit utility it envisions will have access to low-interest bonds and federal disaster aid that investor-owned utilities don’t, translating to lower rates and grid hardening investments that will reduce and shorten outages.

    The Office of the Public Advocate was less certain.

    “It is not possible to predict with certainty whether reliability would improve or deteriorate following the acquisition,” the agency stated. “The priorities of low-cost and reliability are often in tension. It is possible that PTP would feel political pressure to keep rates as low as possible, which may negatively impact the reliability of its operations.”

    Governance & politics
    Perhaps the most consequential — and contentious — aspect to Question 3 is how it proposes to operate Maine’s electric grid.

    Right now decisions about operations, rate changes, upgrades and other projects are made by CMP and Versant executives and subject to approval by the Maine Public Utilities Commission. Supporters of Question 3 often assert that this system subjects Maine ratepayers to the whims and profit seeking of executives and shareholders who are unaccountable to ratepayers. Their campaign rhetoric has a particular focus on the fact that CMP is a subsidiary of Iberdrola, a multinational company headquartered in Spain, and that Versant is owned by ENMAX, a company controlled by Calgary, Alberta.

    Question 3 turns the investor-driven governance on its head. Instead of executives, a 13-person board of seven elected members and their handpicked team of six energy experts would make decisions. That same team would then have to contract with a for-profit grid operator that would employ the customer service agents, lineworkers and other staff. The legislation in Question 3 requires that the contracted operator retain most nonexecutive employees currently working for CMP and Versant.

    Each board member serves staggered six-year terms. The seven elected members represent geographic regions that include five state Senate districts with varying degrees of partisan dominance, or in some cases, little partisan lean at all.

    Candidates for the elected positions would compete in party primaries if they’re affiliated with one, just like candidates for governor, the legislature and Congress do.

    Supporters of Question 3 describe this governance structure as “democratizing” grid operations and making the utility operators more accountable to ratepayers.

    Opponents argue that this governance structure politicizes grid operations, making them less stable and leaving them in the hands of politicians whose ultimate allegiance is to their political party and its current energy policy. That was part of the concern expressed in a 2021 newspaper column written by former commissioners of the Maine PUC, which regulates utilities.

    “This ‘Pine Tree Power’ will be governed by elected politicians, and politicians do not have the competence to run a state-wide utility,” they wrote.

    Former Democratic state Rep. Seth Berry, who led the public power takeover in the legislature, pushed back on that assertion during a recent forum on Question 3 sponsored by E2Tech.

    “Don’t let the opposition tell you that this board is going to make bad decisions, or worse decisions, than those meeting privately on the top floor of the Iberdrola tower in Spain,” he said.

    How much will it cost?
    That’s the multibillion dollar question because, in truth, no one knows for sure.

    Pine Tree Power has suggested the price tag will be in the neighborhood of $5 billion while the opposition predicts it’ll be more like $13.5 billion, if not more.

    That’s a huge range. So let’s break down where those numbers come from as we attempt to cut through the spin from both sides.

    Pine Tree Power says their initiative “doesn’t cost Mainers, it saves Mainers money from day one” — to the tune of $9 billion over 30 years. But they would still have to pay CMP and Versant for those assets through billions of dollars in borrowing leveraged against the future earnings paid by ratepayers.

    Pine Tree Power’s $5 billion acquisition estimate comes from the Maine PUC’s own valuation of CMP and Versant’s assets. The PUC’s most recent estimate, from 2022, puts the “net utility plant value” of CMP at $4.2 billion and Versant at $1.2 billion.

    That’s arguably a starting point for the contentious and adversarial haggling over how much CMP and Versant would be paid – and the utilities say an unrealistically low one.

    Instead, the opposition points to the May 2021 analysis by Concentric Energy Advisors (again, paid for by CMP’s parent company) that projected the cost could be $13.5 billion.

    Concentric arrived at that $13.5 billion figure by predicting any takeover isn’t likely to occur until 2030 because of the inevitable court battles and bureaucracy needed to create an entirely new statewide utility. Concentric also assumed that Versant and CMP will have to be paid twice the “book value” of their assets based on several much-smaller utility takeover bids in Florida, Oregon and Washington. LEI and Silkman’s estimates presumed payouts at 1.5 times the book value, and the difference adds up to billions of dollars.

    But none of those specifics are spelled out in the legislation behind the ballot initiative. Instead, all of those purchase-price details will only be hashed out after voters approve Question 3. And ultimately Maine’s Supreme Judicial Court will likely set the final price under the appeals process laid out during acquisition.

    As a result, it’s impossible to say at this point what the final cost would be. And that’s clearly a hurdle that Pine Tree Power’s advocates will have to overcome as the utility-funded opposition spends millions on ads telling voters that Maine can’t afford a risky takeover scheme.

    Climate goals & renewables
    Pine Tree Power is partially driven by the belief that CMP and Versant have been slow or reluctant to facilitate grid connections to renewable energy projects.

    A restructuring of Maine’s electricity industry in 2000 prohibits the utilities from owning power generation assets, but it’s still responsible for hooking up those projects to the grid and Pine Tree Power would be subject to the same rules.

    It has been a rocky road.

    Like investor-owned utilities in other states, CMP has fought against programs like net metering, which credits rooftop solar customers for electricity they generate but don’t use. That earned the company the ire of rooftop solar customers, renewable energy advocates and environmental groups.

    CMP also scrambled in 2021 to come up with a plan to hasten grid hookups to solar projects after widespread complaints that it was dragging its feet and jacking up the cost, prompting Gov. Janet Mills to call for an investigation.

    Supporters of Pine Tree Power argue that CMP and Versant can’t be trusted to willingly participate in other decarbonization projects that don’t increase the utilities’ profits. They also note that meeting Maine’s climate change goals is a key charge in the Pine Tree Power legislation.

    However, critics of Pine Tree Power argue that the proposed takeover could actually stall renewable energy development because of the long legal fight it’s certain to provoke.

    The Office of the Public Advocate did not address the latter argument. Instead, it acknowledged that “it’s conceivable that PTP would be more aggressive in pursuing climate-related policies.” However, it also warned that such progress might run up against pressure to keep rates low.

    Who will work for PTP?
    If and when Pine Tree Power purchases the assets of CMP and Versant, the new nonprofit utility would have to hire an outside contractor (or contractors) to carry out the daily operations, routine maintenance and emergency response currently handled by employees of the two utilities.

    In turn, that operations contractor will be required to hire back any of CMP’s and Versant’s unionized workers or other employees governed by contracts negotiated by the unions. The operator could also hire any other nonunionized or CMP or Versant employee except anyone who served on the two companies’ executive boards.

    As an additional enticement, any returning workers would receive healthy retention bonuses of 8% and 6% during their first two years. Pine Tree Power and the new contractor must honor existing collective bargaining agreements and could not stop workers from striking or engaging in work slowdowns.

    Those provisions haven’t won over union leaders at the International Brotherhood of Electrical Workers, which represents line workers and other employees at the two utilities.

    After Mills vetoed an earlier Pine Tree Power bill in 2021, IBEW 1837 business manager Tony Sapienza said that “the change to a consumer-owned utility would bring with it tremendous risks and uncertainty” and the union remained “opposed to replacing Central Maine Power and Versant Power with a consumer-owned utility.”

    Likewise, the executive board of the 40,000-member Maine AFL-CIO came out against Pine Tree Power last year.

    “The majority of workers at CMP and Emera Maine do not support this proposal,” Maine AFL-CIO President Cynthia Phinney said at the time. “They do not want these companies sold and thrown into legal uncertainty.”

    One concern raised by the unions is that, because Pine Tree Power would be a quasi-municipal entity run by an elected board, any workers could be considered public employees. Under state law, public workers are prohibited from striking.

    Pine Tree Power and the Our Power campaign, meanwhile, accused CMP and Versant of “spending big on fear tactics and misinformation to trick both workers and customers” while predicting Pine Tree Power would lead to “more and better jobs for utility workers than the status quo”.

  • suzannedoncarmichael

    I THINK THESE ARE TWO GOOD SOURCES TO START UNDERSTANDING THE DETAILS AND THE FINANCING OF THIS BALLOT QUESTION
    Here’s the official Maine Sec. of State’s Citizen Guide to info on Question 3 (and the other initiatives)…you can read the bill itself start at p.18. There’s also the required commentary from the Maine Attorney General’s office and a Fiscal note. I think this is a good place to start reading/get some background. https://www.maine.gov/sos/cec/elec/upcoming/pdf/citizensguide23.pdf

    If you want to follow the money. . . go to the Maine Ethics Commission filings…start on this page https://mainecampaignfinance.com/#/index then click on the arrows to get deeper and deeper into the disclosures.
    Suzanne Carmichael

Leave a Reply

  • Subscribe via Email

    Receive email notification of new posts/announcements about our weekly meeting.

    Join 244 other subscribers

  • Recent Posts

  • Recent Comments

    • Copyright © 2013-2024 D. Scott Miller