Deregulation profits

Two brief comments Tuesday by Central Maine Power CEO David Flanagan explain the deregulation of electric utilities as well as anything else that has been said about it to date.

On what changes customers might expect to see now that CMP Group has been sold to Energy East Corp. of New York, Mr. Flanagan said things would look pretty much the same as before, “the same orange trucks with the green seedlings on them.”

On why the New York media were told about the purchase of CMP on the same day the Maine media were told there was no purchase, Mr. Flanagan said, “We’re not entirely in control of how things are managed. For Energy East, the principal focus had to be on Wall Street, informing Wall Street.” That’s deregulation — looks like the same old system, but it is entirely new underneath.

There was one change, however, that was immediately apparent in Tuesday’s announcement. CMP customers might recall the dark days during the last decade when customers experienced a 50 percent increase over six years followed by Maine Yankee closing, companies such as Hannaford Bros. threatening to leave CMP’s system and similar events that would increase prices. Then, customers were told to expect higher rates because the burden, after all, had to be shared three ways — among the company, its shareholders and ratepayers. All for one and one for all.

Now that the good times are here, and before deregulation is fully in place, it looks like a party of two. The company is strengthened and its officers richly rewarded and shareholders got a windfall when stock prices rose 28 percent on news of the sale. But someone must have neglected to invite customers to the celebration; sure, they got to come down early and get a taste of the feast — a 10 percent break when CMP got the surprise of its 100-year life in FPL’s reckless offer to purchase its generation assets — but they weren’t invited to the main event.

The merger of Energy East and CMP is not unique in the electric-utility industry. By selling their generation assets, companies in several states have had cash to make purchases and objects of desire in other utilities that, slimmed down by the loss of generation, were affordable. Wall Street likes the bigger companies because they enjoy efficiencies of scale to lower costs, they are more diversified and often better able to make long-term investments in themselves. Unfortunately, Maine’s interests are not necessarily Wall Street’s, and complications are certain to arise from, for instance, regulating a utility whose parent company is based out of state.

Meanwhile, benefits to customers from deregulation are still mostly theoretical and based in large part on the promise of vigorous competition, which deregulation has managed to reduce. For tangible profits from deregulation, perhaps now’s the time to sell all those CMP stocks you’ve been accumulating.