FAME to guarantee $50 million PERC loan > Move to help Bangor Hydro save money

BANGOR — The Finance Authority of Maine approved a $50 million loan deal Thursday that promises to stabilize electric power rates, guarantee a place for towns to burn their trash and lower the monthly mortgage payment for the trash-burning incinerator in Orrington.

After hours of discussion, the board of directors of FAME voted 8 to 1 to approve the loan guarantee to PERC. The This will allow the plant’s owners, along with 170 communities in central Maine with long-term waste disposal contracts with PERC, to extend relief to the Bangor Hydro-Electric Co.

The deal between PERC and Bangor Hydro dates back to 1987 when the plant was built. It is part of the legacy of the state forcing its regulated electric power utilities to buy power from alternative energy producers, which are commonly referred to as non-utility generators, or NUGS. As staff from FAME pointed out, Bangor Hydro pays a rate for PERC’s power that is well above the going market price.

With the guarantee in place, and with the promised ratification of the new arrangement by a majority of the municipalities, Bangor Hydro will pay PERC a rate of about 9 cents per kilowatt hour of power, as opposed to the current 12 cents.

The savings to Bangor Hydro have been estimated at more than $3 million per year over the life of the contract, which runs until 2017.

“This is an attempt to keep electric rates down,” said FAME board member Jeff Kaelin of Winterport. “It’s a response to poor decision-making [by the state] in the past.”

The one board member who voted against the guarantee, which carries the weight of the state’s backing, was State Treasurer Dale McCormick. She cautioned against locking in a long-term arrangement between the towns, PERC, and Bangor Hydro while the state’s electric power industry is undergoing a major restructuring.

The new arrangement between the three groups involves concessions from both the owners of the plant and the towns. Representatives from the managing owner of PERC, Kerr Technology Inc. of New Jersey, said that the owners will be giving up profits from the plant. The towns will pay more to dump their trash to be incinerated.

“We’re clearly giving things up over the next twenty years. We’d prefer things not to change,” said Orono Town Manager Gerry Kempen, who heads the committee of the 170 communities with long-term PERC contracts. However, he added, “this does give us more security.”

The FAME staff noted in its recommendation to the board of directors that the communities have “no foreseeable future alternative [to PERC] for trash disposal.”

Bangor Hydro initiated discussions to renegotiate the power contract in 1995. Since that time, the company’s financial situation has worsened as its investment in the now-closed Maine Yankee nuclear power plant has cost it millions of dollars.

Robert Briggs, the president and CEO of Bangor Hydro, said at the FAME meeting that, if the agency did not give the guarantee, the company would have to raise its power rates by about 3 percent.

The company presently has a 15.58 percent rate increase request before the Public Utilities Commission that, Briggs said, takes into consideration the FAME guarantee.

The approval of the guarantee is the second time that FAME has stepped in to assist Bangor Hydro in dealing with uneconomical NUG contracts. In 1995, FAME financed the company’s buyout of contracts with two wood-fired power plants at a cost of $103 million.

FAME also aided Central Maine Power Co., the state’s largest electric power utility, in a similar buyout in 1994, at a cost of $64 million.