Power marketer expects competition to be factor in Maine

While many electricity suppliers say they cannot compete with Maine’s standard offer rates, one company that recently secured the contract for standard offer service in northern Maine believes competition will take hold in Maine.

Ed Howard, a power marketer with WPS Energy Services, said recently that his company expects to see significant competition for the customers in Maine Public Service territory. WPS, which is based in Wisconsin, recently was awarded the contract to supply electricity to standard offer customers in MPS territory for the next three years.

WPS uses a combination of Canadian power and electricity produced by the generators it bought from MPS when Maine’s deregulation law took effect to help keep prices lower in northern Maine than the rest of the state.

Competition will come to the MPS region, Howard said, because the competitive market eventually will force other suppliers to try to beat his company’s prices – especially if the price for oil starts to drop. The worst thing Maine can do, Howard said, is significantly change the regulatory scheme for electricity sales or alter the structure of the standard offer.

“I don’t know that [WPS’] viewpoint is that the structure of regulations as it’s set up in Maine doesn’t allow for competition,” Howard said. “I think there’s an opportunity for competitive suppliers.” A change to the standard offer structure, Howard said, could derail Maine’s electricity market by forcing companies to adapt to a new set of market rules.

“That’s going to artificially cause a delay in competition,” Howard said. “I don’t really see anything wrong with the system. The problem is that the market is in a high period.”

The key to the current regulatory scheme, Howard said, is that the risk in committing to future energy costs is largely assumed by the standard offer provider. WPS, he said, locked in standard offer rates that reflected then-current market pressures, and therefore risks losing customers to competitive suppliers should the cost of oil and gas fall dramatically during the next three years.

“There’s no question there’s risk when you take on those prices for one year or multiple years,” Howard said. “The onus is on every supplier to review and analyze their risk when they make their bids.” Doing so, he said, makes sure that market risk is placed on the supplier and not on the consumer. “That’s what competitive suppliers bring to the table,” Howard said.

The energy marketer also said he believes it is in the best interest of all electricity suppliers to keep the retail price of electricity to the consumer as stable as possible. A standard offer that is dictated by the market, Howard said, would anger consumers as they struggle with the constant fluctuations of the market.

“Typically the consumer wants some stability in price,” Howard said. “Even if [the price] is jumping around quarterly, the end-use customer isn’t real receptive.”

A standard offer rate set for one or more years, Howard said, provides Maine customers with a rate they can become accustomed to – whether it is high or low. “The only real factor is the instability to the customer,” Howard said. “A price that’s fixed for a year is always most attractive to the customer.”