The entity that manages New England’s power supply has come up with a bad solution to a real problem. Worse, the proposed solution would cost Maine electricity customers an average of an extra $190 a year.

The problem is that there needs to be enough electric capacity in the New England grid to meet peak demand, although energy use varies throughout the year. The solution that ISO-New England supports is simply to give electricity generation companies a lot of money now in the hopes that they will be around, and possibly expand, in the future. It has called this plan locational installed capacity or LICAP.

New England electricity customers would be required to pay $13 billion over the next five years to encourage companies to build new electricity generators. There is no requirement, however, that they use the money to build such facilities or that they even stay in business. Public Utilities Commissions in the six New England states and some power companies, including Central Maine Power, have opposed LICAP, which has been submitted to the Federal Energy Regula-tory Commission for its approval.

Kurt Adams, chairman of the Maine Public Utilities Commission, said that electricity companies have made a compelling case that they are not being adequately paid to ensure adequate power capacity. In fact, many generation companies have filed for bankruptcy. In the past several months, however, energy prices have risen dramatically. Chairman Adams rightly wonders if electricity companies are now in a much better position and don’t need this handout.

Under LICAP, money from Maine electricity customers would be transferred to out-of-state companies. The Maine State Planning Office predicts that between 500 and 1,500 jobs would be lost here because consumers would spend less money due to their higher electricity bills.

An approach supported by Chairman Adams makes more sense. Rather than paying companies for simply being in business, he suggests a three- to five- year contract that would specify a set amount of power to be generated. Companies would then bid on the contract, thereby assessing the expected cost of fulfilling such a requirement. This is the way many futures markets, such as those for oil and gas, work. Based on how much they were being paid, companies would decide whether to increase generating capacity.

This is a saner way to account for the known ups and downs in the electricity market. ISO-New England and the region’s electricity regulators should continue to search for a way to ensure adequate capacity without unduly burdening customers.