PUC OKs standard offer rate CMP’s commercial costs rise 28 percent

In a move seen as a likely prod for Maine business owners to seek lower, competitive electricity deals, the state Public Utilities Commission on Wednesday agreed to new standard offer prices for Central Maine Power Co.’s commercial and industrial customers that represent a 28 percent increase for some.

Residential power rates were unchanged, and are guaranteed to remain constant through Feb. 28, 2002.

The new standard offer rates pertain only to large commercial and industrial electricity users in CMP territory in central and southern Maine. The “standard offer” is the charge applied to electricity supply – not delivery – for customers that don’t select a competitive electricity supplier.

Large commercial customers are large grocery stores, office buildings and convenience stores with large amounts of lighting and refrigeration. Industrial customers include mills and shipyards.

The new standard offer, set to take effect March 1, represents a 28 percent increase for large commercial customers over the current electricity rate. Industrial electricity users in CMP territory also will see substantial increases. The rate change applies only to midsize and large businesses in CMP territory, not homeowners and small offices in that region.

The PUC locked in the new rates for the year beginning March 1 after reviewing bids for the standard offer service from various electricity suppliers. Those bids were rejected by the PUC, and CMP was ordered to secure the power from wholesale suppliers through a one-year contract. The new standard offer rates are the result of those negotiations.

Electricity suppliers are companies that buy power from generating plants and make it available to customers on the retail market. Under deregulation, utility companies such as CMP maintain transmission lines and stations and deliver the electricity to their customers. They no longer generate power.

The new rate for CMP’s 11,000 commercial customers is set at 8.52 cents per kilowatt-hour (kwh). That figure is up from 5.67 cents per kwh this year. The delivery price for electricity to commercial customers is 4.45 cents per kwh for a total cost of 12.97 cents per kwh for both supply and delivery of standard offer electricity.

The new standard offer rate for CMP’s 360 industrial customers is dependent on the time of day and the season of the year the power is needed. From September to May during off-peak hours of the day, the new standard offer rate is 5.6 cents per kwh. During high-use hours in the same months the rate is set at 8.97 cents per kwh. The rates increase during June, July and August to 6.54 cents per kwh during off-peak hours and 14.58 cents per kwh during high-use hours. The rates reflect an average of a 3-cent increase over the current prices.

The result is a yearly average of 7.95 cents per kwh for standard offer supply for CMP’s industrial customers.

The cost of transmission to industrial customers also varies by the time of day and the season of the year. Those costs can range between 1.43 cents and 4.8 cents per kwh.

Thomas Welch, chairman of the PUC, said in a prepared statement that he was “disappointed” that the standard offer rate had to increase by such an extent. He urged customers to watch the competitive market for better deals over the course of the next year. The rates, Welch said, “do not commit customers to paying these high prices for long. If cheaper supply becomes available from competitive electricity suppliers … customers are free to leave the standard offer service.”

Stephen Ward, Maine’s public advocate, said Wednesday that the new rates likely would encourage CMP’s commercial and industrial customers to seek lower-priced, competitive electricity suppliers. Those who stay with the offer will pay higher rates but also enjoy a guarantee of that rate until Feb. 28, 2002, Ward said.

“The way I see [the new standard offer rates,]” Ward said, “a large customer who has chosen to remain on the standard offer … will really now get a kick in the butt.”

For companies that buy large amounts of power, Ward said, even the slightest increase in energy costs translates into much higher electricity bills. “That’s the kind of price that gets your attention.”

Anthony Buxton, the lawyer for Industrial Energy Consumers Group, said the new rates, while high, are set at rate that will encourage businesses to find a competitive supplier. “Quite frankly,” Buxton said, “we think that CMP and the PUC did a good job under very difficult circumstances.”

Among those difficult circumstances are the installed capacity, or ICAP, charges which the Federal Energy Regulatory Commission currently is reviewing. Those charges are applied to the cost of power for industrial customers when the electricity needed to meet demand is not made available to the market. That price can vary dramatically – on the order of a few cents or several dollars – and a FERC hearing on what price to charge as an ICAP penalty has yet to be scheduled.

The new standard offer rates, Buxton said, allow for a portion of those costs, but could be increased if the ICAP charge is set on the high end of the spectrum. “The price could jump dramatically,” Buxton said. The PUC, he said, has “not put a ceiling on prices but rather a floor on prices.”

As a result, Buxton said, businesses in CMP territory should seek a guaranteed price from a competitive supplier that is locked in over a period of months or years. “The standard offer contains a cost for risks that can be avoided,” by switching to competitive suppliers, Buxton said.