PUC asks state to grant extension of price program

BANGOR – Still waiting after nearly three years of deregulation for the marketplace to work its magic and bring competitive electricity prices to the state, the Maine Public Utilities Commission is recommending to the Legislature that a temporary pricing program, called standard offer, be extended beyond its original deadline.

When the way power was bought and sold in Maine was restructured in March 2000, the traditional utilities – Bangor Hydro-Electric Co., Central Maine Power Co., and Maine Public Service – stopped making electricity, but continued to transmit it to homes and businesses. Deregulating the sale of electricity was supposed to entice outside power suppliers to enter Maine’s marketplace and begin selling cheaper electricity to households and businesses.

As a failsafe, however, the PUC established standard offer prices in each of the three areas the utilities serve so that customers could be assured of paying a reasonable price for electricity until competitive suppliers could enter the market and offer them a better deal.

For the vast majority of residential and small business customers, however, that hasn’t happened yet.

About 90 percent of Maine’s 500,000 households still use standard offer service for electricity. And those who aren’t using the standard offer are actually paying more for power provided through alternative sources that are more environmentally friendly.

That’s mostly because electricity suppliers have not found it profitable to sell power at below the standard offer prices set for residential and small business customers in Maine. By contrast, several suppliers have managed to compete to sell power to the larger businesses and industrial users in the state.

PUC Chairman Tom Welch said Wednesday that households and small businesses are nevertheless enjoying the benefits of marketplace competition because they have received “market-based standard offer prices” during the last three years. Outside power suppliers submit bids to become the standard offer provider, and the PUC selects the companies that offer the lowest price for consumers.

“The current lack of supplier interest in this sector appears to be driven largely by forces external to Maine,” said Welch, in a statement.

Residences and small businesses in CMP’s territory currently pay 4.95 cents per kilowatt-hour for power, while customers in Bangor Hydro’s territory pay 5 cents per kilowatt-hour, and users in MPS’s area pay 5.69 cents. Customers are charged extra for transmission in each territory.

Anthony Buxton, an attorney for the Industrial Energy Consumers Group, said Wednesday his organization disagrees with how the PUC sets the standard offer rate for households and small businesses, noting that it does not encourage competition if it is set too low. Companies have expenses, such as billing and marketing, that they must factor into their rates, he said, while the firms that provide standard offer service do not.

“As long as we in the state continue to breast feed [consumers], we cannot expect a marketplace to form,” Buxton said.

To attempt to make the residential and small-business marketplace more competitive, the PUC wants to make it easier for companies to mass-market to households and shops, according to PUC spokesman Phil Lindley. The commissioners do not want to inflate standard offer prices so companies can more easily come in with lower prices to attract customers, he said. They would rather suppliers be enticed into selling power here with a little help from the transmission companies, who could make it easier to switch people over by providing mailing lists and other customer information, such as account numbers.

More than half of the state’s medium and large businesses currently purchase their electricity from competing companies”In Maine, the percent of our electric load that is served by competitive suppliers is greater than in any other state,” Welch said. “At this point, most activity is concentrated among larger business consumers, for whom competitive electricity supply is already a realistic and attractive option. For these customers, the standard offer should truly be a last resort and not just another supply option.”

The standard offer program is set to expire in March 2005. The new 121st Legislature will begin debating the extension request next year.