Hydro customers likely to see worst rate increase

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BANGOR – The electricity users most likely to be hit hardest by a Federal Energy Regulatory Commission ruling last week could be those in the transmission area of Bangor Hydro-Electric Co.

FERC’s ruling is expected to have a widespread impact on power rates throughout Maine, with customers likely to shell out millions of additional dollars.

Most of that money, though, could come from residential, commercial and industrial consumers in Bangor Hydro’s service territory whose power rates aren’t protected in long-term contracts signed with the state.

Bangor Hydro residential consumers already are paying the most in the state for standard offer electricity service at 6.1 cents per kilowatt-hour. Another increase of possibly up to 2 cents would put prices at nearly double what standard offer users are paying in the service territories of Central Maine Power Co. and Maine Public Service Co.

The standard offer electricity rate for residential consumers in CMP’s territory is set at about 4.1 cents per kilowatt-hour through Feb. 28, 2002, and cannot be changed because of FERC’s ruling, said Tom Welch, chairman of the Maine Public Utilities Commission. Neither can the standard offer electricity rate for residential, commercial and industrial users in MPS’ service territory. There, residential users pay 4.29 cents per kilowatt-hour through Feb. 28, 2001.

Standard offer is a default electricity rate – and not the transmission rate – charged to residential, commercial or industrial power consumers who have not chosen another company to sell them electricity.

Under the state’s restructuring of the electric industry, Maine’s three utilities no longer generate power only transmit it.

Power suppliers bid to be the sellers of standard offer electricity, and the PUC evaluates the bids and sets the rates for the three customer classifications in the state’s three service territories.

The PUC liked the rates for residential users in CMP’s territory, and for residential, commercial and industrial users in MPS’ territory. The commission said the rates were in line with what consumers were paying before electric industry restructuring started on March 1.

But the standard offer bids from power suppliers for all customer classes in Bangor Hydro’s territory came in too high. So did the bids for commercial and industrial users in CMP’s territory.

The PUC, then, set the standard offer rate for those customers and told Bangor Hydro and CMP to go out and buy power to meet the demand for standard offer electricity. The utilities were instructed to provide standard offer through Feb. 28, 2001.

But price volatility in the energy marketplace has affected the price Bangor Hydro must pay for electricity to meet its standard offer obligations.

A couple months ago, Bangor Hydro was forced to ask for more money through rates to cover its costs of buying power from wholesale suppliers.

Now with FERC’s ruling, both Bangor Hydro and CMP either are asking for rate increases or evaluating whether to petition for rate increases to cover extra costs from their wholesale suppliers.

CMP late last week filed a request for standard offer rate increases with the PUC, saying it will be charged an additional almost $12 million from their suppliers that face penalties under FERC’s ruling.

Bangor Hydro hasn’t made a decision on whether to do so, said company vice president Carroll lee.

Last week, FERC set a penalty to be charged to power suppliers who do not meet a requirement to have in place all the electricity they are obligated to send over the grid daily plus extra in case it is needed during peak demand periods.

For most Maine ratepayers, FERC’s decision translates into an additional 2 cents per kilowatt-hour for electricity only, Welch said. Transmission rates are fixed and are not affected by the ruling.

The 2-cent increase remains an arbitrary number, and has not been approved as an actual increase by the PUC nor has it been factored into rates yet, he said.

Power users’ bills are broken down into three parts: the electricity supply rate, which could be the standard offer charge or another amount charged by a consumer-selected supplier; the transmission rate; and the distribution rate.

Any increases are applied to the electricity supply rate, and not the transmission and distribution charges, which are fixed. Bangor Hydro’s transmission and distribution rate is set at about 9.4 cents per kilowatt-hour and is not affected by FERC’s decision.

Consumers can choose to buy their electricity from other power suppliers that might offer better rates, Welch said.

If a standard offer electricity rate increase is approved for the Bangor Hydro service territory, it would be another in a series of increases that already have gone into effect or will be soon.

. In August, Bangor Hydro, facing higher costs to purchase the standard offer electricity, asked the PUC for an increase to cover its expenses. Electricity supply rates went up, from about 4.6 cents to about 6.1 cents per kilowatt-hour. The increase added $7.5o per month to residential users’ bill based on usage of 500 kilowatt-hours.

. Because of FERC’s ruling, Bangor Hydro could petition the PUC to change the current standard offer rate of 6.1 cents per kilowatt-hour to cover the cost of penalties the suppliers probably will pass along to the company.

If the rate were to go up 2 cents, to 8.1 cents, residential standard offer users would pay $10 more per month.

. Earlier last week, before FERC’s ruling, the PUC announced that it had tentatively chosen power suppliers to sell standard offer electricity to residential, commercial and industrial users in Bangor Hydro’s territory. The rate would go into effect on March 1.

The PUC would not release the rate until a contract with the supplier is completed, but it is expected to be higher because of current market conditions. So far Bangor Hydro hasn’t decided whether to ask for an increase, Lee said.

“As far was we’re concerned, we haven’t decided whether to do anything at this point,” Lee said. “We’re aggressively opposing [FERC’s decision]. It’s just outrageous. If we go back to Augusta, there’s going to be some extra costs for us if this holds. It’s probably going to be awhile before that happens. People are going to be reluctant to make these payments seeing it’s still in dispute.”