Power discount criticized Business incentives may up others’ bills

AUGUSTA – Legislation submitted by Gov. John Baldacci to ease the electric bills for businesses in Pine Tree Economic Development Zones would raise the bills of other businesses and homeowners, experts told the Legislature’s Utilities Committee on Monday.

At issue is the way the Department of Economic and Community Development drafted the bill. As introduced, the measure would allow any business located in a Pine Tree Zone to get the lower electricity rates by not having to pay that portion of the rates caused by what are called stranded costs.

Stranded costs are investments utilities made while they were regulated and were expecting a certain return on. With deregulation, those costs are allowed to be recovered in the rates the companies charge.

The biggest stranded cost in Maine involved the early closing of the Maine Yankee Nuclear Power plant in Wiscasset as Maine utilities sold their generating facilities and became distributors of power.

Stranded costs can make up a third or more of the transmission and distribution portion of residential and commercial electric bills, utility representatives told the panel. There are more than a dozen different business-rate classes, and all have different stranded cost provisions.

“A large business that happened to be in a Pine Tree Zone and got certified and suddenly stopped paying stranded costs would make for higher rates for other ratepayers,” said Eric Bryant of the Maine Public Advocate’s Office, the state agency charged with representing consumer interests in utility matters.

He suggested the legislation be amended to make sure no costs would be shifted from one group of ratepayers to another.

The utilities testifying before the panel agreed and warned the bill as written would result in higher rates for businesses not in the zones and for residential customers across the state.

“We could see other businesses and residential customers picking up the costs these Pine Tree Zone businesses do not pay,” said David Allen of Central Maine Power Co. “We are willing to work with the department to see if there is a way to provide businesses in a Pine Tree Zone with discounts, but we oppose this as drafted.”

Peggy Shaffer, a policy analyst with the Department of Economic and Community Development, was the only person supporting the legislation at the public hearing Monday other than the lawmaker formally presenting the bill.

“As the Legislature worked to create this program last year, we knew that in order to reduce the cost of doing business in these zones, we needed to include more than just taxes,” Shaffer said. “Without these [Pine Tree Zone] benefits, these businesses would not exist, so the tax dollars and the payment of stranded costs were never a possibility, and therefore could not be included in any cost or tax projections.”

But, as drafted, the bill goes further than covering just new business locating in a Pine Tree Zone. The biggest concern was for existing businesses that might move into a zone, causing a third or more of their current electric bills to be shifted onto other consumers.

Shaffer said in an interview after the hearing that the bill had been drafted too broadly and an amendment would be offered to narrow the scope of the measure.

“We will be meeting with the utilities that have opposed the bill to see if they have an alternative solution that would accomplish the same goal,” she said.

Allen told lawmakers that CMP already has a rate break available to businesses that expand their operations or new businesses that locate anywhere in their service area, not just in the development zones, which have yet to be designated.

“The Maine Made Incentive [program] says if you expand your business and increase your use of electricity by 10 percent or more, or you are a new business, you get a penny and half [per kilowatt hour] off your bill for the first year,” he said.

The break decreases by a half-cent a year and ends after three years. The discount applies to the transmission and distribution part of the bill. The break is paid by company shareholders and can represent as much as a 60 percent discount for the first year.

“We are already negotiating discounted rates with new customers all the time,” he said.

Maine Public Service also expressed opposition to the bill and the Public Utilities Commission provided testimony about the history of rate making and how discounts could be crafted to achieve the same goal as the intent of the legislation.