Rates to be cut in Bangor Hydro area

BANGOR – Electricity rates will be going down significantly for residential and small-business customers in Bangor Hydro-Electric Co.’s service territory.

The Maine Public Utilities Commission on Wednesday released the new rates for standard offer electricity after a competitive bidding process among numerous power suppliers. The rates go into effect March 1, and will be in place for three years.

Rates, however, will be going up for small-volume users in Central Maine Power Co.’s service territory, but not to the high levels that were feared.

Standard offer is a default rate paid by consumers who have not chosen another power supplier to sell them electricity. Since the state restructured its electricity market a couple of years ago, Bangor Hydro and CMP no longer sell or generate electricity, just transmit it.

The rates are for electricity only. Consumers also pay a separate rate to have the power transmitted to homes or businesses, and that rate is expected to remain at or near current levels.

In Bangor Hydro’s service territory, standard offer rates will drop from the current 7.3 cents per kilowatt-hour to 5 cents per kilowatt-hour. The average consumer, who uses 500 kilowatt-hours, will save $11.50 each month.

“That’s pretty dramatic,” said Stephen Ward, the state’s public advocate.

“It will free up a lot of money,” said Jennifer Giosia, division manager for client services at Penquis CAP in Bangor. “A lot of people are on such a tight budget right now.”

The total bill – with 5 cents for electricity and 9.4 cents for transmission – will be $72 for the average Bangor Hydro residential consumer who uses 500 kilowatt-hours of power each month. That’s 14 percent below current bills, and slightly below the total bill paid in 1999.

In CMP’s territory, standard offer users who have been paying 4.1 cents per kilowatt-hour for the last two years will see rates go up to 4.95 cents per kilowatt-hour. The average consumer will be paying $4.25 more each month for electricity.

“It’s not a huge amount,” Ward said.

“Obviously 4.1 cents is nicer than 4.9 cents,” said Clark Irwin, a CMP spokesman, who analyzed the new rate from a consumer’s point of view. “But given the national uncertainty on energy pricing it’s nice to see … it’s relatively moderate.”

The total bill – with 4.95 cents for electricity and 8 cents for transmission – will be $64.75 for the average CMP residential consumer who uses 500 kilowatt-hours of power each month. That’s 7 percent more than current bills, but 2 percent below the total rate paid in 1999.

For the last couple of years, customers in Bangor Hydro’s service territory have seen their rates go up a few times, eventually being more than 3 cents above what customers in CMP’s service territory were paying.

Ward said the lower prices finally mean that competition among power suppliers has come to the Bangor Hydro service territory, and consumers finally will be paying rates comparable to those set for the rest of the state.

“People in Bangor Hydro’s territory no longer have to feel that they’re stranded,” Ward said.

The standard offer electricity provider is chosen through a bidding process at the PUC. Because no acceptable bids were given during the last two requests for prices, the PUC asked Bangor Hydro to purchase electricity on the wholesale market and sell it at cost under the standard offer program.

“We saw virtually no competition in Bangor Hydro’s territory even when markets dropped,” said Tom Welch, chairman of the PUC.

Bangor Hydro had sought permission from the PUC to continue providing standard offer electricity once it’s obligation is completed on Feb. 28. Bangor Hydro filed a rate plan with the PUC that would have combined standard offer and transmission rates, offering customers an 8 percent discount from current prices.

The PUC last month, however, said no because Bangor Hydro would assume too much financial risk by going to the wholesale market and buying electricity there.

Carroll Lee, chief executive officer of Bangor Hydro, said he is pleased the utility no longer will be the standard offer provider, although the rate plan the company submitted last month “was a good proposal.”

“The commission has given us a strong message that it is their responsibility to manage [standard offer] and not ours,” Lee said.

In the latest bidding process, numerous power suppliers sought to be the standard offer provider both in Bangor Hydro’s and CMP’s territories, Welch said. He said he would not name the company or companies that will be selling the standard offer electricity because they now are buying the power on the wholesale market. Releasing their names, he said, could put them at a disadvantage when negotiating prices with power generators.

Welch said that even though the standard offer rates seem low now, he believes power suppliers will be looking to get consumers to switch from standard offer to their possibly lower rates. Electricity prices on the futures market are low, he said, even after last week’s terrorist attacks.

The PUC was to announce standard offer rates on Sept. 11, the day the attacks took place. Welch said he decided to wait, however, to see how future pricing for electricity would react to the events.

“They’re lower than what I thought they’d be,” Welch said. “Futures markets pumped a little bit then went down. The energy prices, I think, are a little bit nervous. The uncertainty surrounding the economy … that tends to drive electricity prices down. People have to find a place to put their electricity.”