BANGOR – The Maine Public Utilities Commission is considering an independent audit of Bangor Hydro-Electric Co.’s operations after receiving – and approving – at least five rate increases from the utility in five years.

The PUC seriously is considering the audit after repeated complaints over the years from Bangor Hydro customers about higher electricity delivery rates compared to anywhere else in the state.

At a hearing Tuesday, Commissioner Stephen Diamond said it is primarily customer complaints that are motivating the PUC to consider having an outside party examine how Bangor Hydro operates. The management audit would include everything from operating costs and capital expenditures to wage levels and executive compensation.

“At least in my view, the impetus for the management audit is not solely internally generated at the PUC,” Diamond said. “We get questions from customers out there wanting to know why Bangor Hydro has materially higher delivery prices than any other investor-owned utility in Maine and why that seems to be consistently the case.”

A management audit could suggest how Bangor Hydro might operate more efficiently, with any savings being passed on to customers. Such audit requests are rare. The PUC last ordered an audit of a utility in 1994, which resulted in $29 million in savings being realized by Central Maine Power Co.

While the PUC was prepared to vote on calling for the audit Tuesday, Bangor Hydro asked for and got a 90-day extension. Bangor Hydro’s attorneys said the utility already is studying its overall operations to determine whether any efficiencies or cost savings could be implemented and possibly passed on to customers now that it has been purchased by Emera Inc. of Nova Scotia.

“Bangor Hydro shares the PUC’s concern about its cost structure,” said attorneys William Harwood and Andrew Landry in a letter to the PUC. “In fact, Bangor Hydro and its new parent corporation, Emera Inc., have been investigating ways to reduce costs in the three months since the merger closed on October 10. Bangor Hydro and Emera are confident that, given sufficient time, they will succeed in identifying and implementing the potential merger savings.”

Bangor Hydro’s ratepayers, according to the PUC, would be paying for the management audit if it eventually were approved. PUC spokesman Phil Lindley said state law requires that ratepayers cover the cost. No one had estimates for what the audit might cost.

The proposal for a management audit came up earlier this month after months-long discussions on a request from Bangor Hydro for a $6.4 million, or 11.4 percent, increase in electricity delivery rates.

It is at least the sixth rate increase request from Bangor Hydro in the last five years, according to the PUC. Five other rate increases have been approved since 1997.

In 1999, Bangor Hydro residential customers were paying a combined rate of 14.5 cents per kilowatt-hour for electricity and its delivery. When the state restructured its electricity market on March 1, 2000, customers began paying separate rates for electricity and for delivery of it. Right now, Bangor Hydro’s delivery rates are 9.4 cents per kilowatt-hour. Starting March 1, it will be 9.8 cents.

Most of Bangor Hydro’s residential customers buy their electricity through standard offer, a plan that is overseen by the PUC. Customers now pay 7.3 cents per kilowatt-hour for standard offer power, and starting March 1, they will pay 5 cents per kilowatt-hour for it. In December, Constellation Energy of Baltimore was awarded the contract to sell standard offer power starting in March.

Combined, residential customers will pay 14.8 cents for electricity and delivery starting March 1. Comparatively, residential customers in CMP’s territory will pay 12.5 cents per kilowatt-hour. The difference is CMP customers will pay about 2.3 cents less for the delivery of their power.

The PUC, which has approved all of the rate increases, now is wondering whether they were all really necessary. It may be that all of the increases were justified, but the PUC wants to be sure, Lindley said.

“At the present time, Bangor Hydro’s average [transmission and distribution] rates are significantly higher than the state’s other investor-owned utilities,” according to a PUC document on why it is considering the independent audit. “The company’s high rates do not appear to relate solely to the size or to geography.”

The primary contributing factor for higher rates is the utility’s investment in capital projects, according to Bangor Hydro’s letter to the PUC.

“In recent years, Bangor Hydro has made significant investments in its system reliability and these investments are now showing positive results.”

Bangor Hydro, in proposing the 90-day delay, said it also would postpone its request for a $6.4 million rate increase until after it concludes its own evaluation of its operations. In the meantime, the utility wants to have meetings in the next three months with the PUC, the state’s public advocate and the Industrial Energy Consumers Group about what it is finding in its self-evaluation.

PUC Chairman Tom Welch said he could not find any fault with that.

“The longer a rate case is deferred, the longer it would be before rates went into effect,” said Welch on Tuesday.

He said that if discussions between Bangor Hydro and the PUC break down in the next 90 days, “we have not lost authority” to approve an independent management audit.

Bangor Hydro, though, is questioning whether the PUC has the authority to order an audit. In documents filed with the regulatory agency, Bangor Hydro states the PUC does not have the right to OK an audit when it is reviewing a request for a rate increase.

Welch disagreed.

“I think we do have the authority,” he said. “I think there’s a reason to look at that.”