Powerful Secret Nonprofit electric firm attracts customers to Madison

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Tucked into the hills of the Madison business park, a small brick building is one of the best-kept secrets in central Maine. Madison Electric Works, which has been in business since 1888, provides electricity, at the lowest rates in New England, to most of Madison and parts of Anson, Starks and Norridgewock.

Because it is a nonprofit entity, MEW can offer delivery rates that blow Central Maine Power and Bangor Hydro out of the water.

“No matter how high energy charges go, Madison will still have the lowest rates in New England because they are a nonprofit and can keep their delivery costs down,” Brian Hamel of Hamel Enterprises, the town’s economic consultant, said this week.

The result is a powerful economic development tool that Madison is leveraging to bring new families and businesses to town.

Consider this: A family of four that uses an average 1,000 kilowatts a month will pay close to $180 to Bangor Hydro. They would pay about $155 to CMP. They would only owe $80 to MEW.

MEW’s delivery charge is 3 cents per kilowatt, compared with 8 cents by CMP and between 9 and 10 cents by Bangor Hydro.

“For a family, over a 20-year period, that’s a significant savings, possibly $24,000,” Calvin Ames, MEW superintendent, said this week. “For a business, the savings could be astronomical.”

The low delivery rates not only are luring new homeowners to Madison, a suburb of Skowhegan in the central Maine mountains, but businesses are inquiring every day about the electricity rates. The recent location of a $25 million tomato greenhouse business has been directly attributed to the low rates.

U.S. Functional Foods estimates its first year’s electricity usage at 40 million kilowatts. Just computing the delivery charges, it would have cost $3.2 million if the electricity were to be delivered by CMP. MEW’s delivery charges will be $1.2 million.

“That’s a $2 million savings that can be invested back into the business and, ultimately, back into Madison,” Hamel said.

Energy rates in New England are high compared with the Midwest and South, Hamel said. “We need to have some competitive advantage. Maine has a fine quality of life and low-cost land. We need those lower rates to attract and promote.”

Hamel said it was the electricity rates and a large tract of flat land that convinced U.S. Functional Foods to build the first of three $25 million greenhouses in Madison. The company expects to hire up to 500 people as the project grows.

“This is the advantage of having Madison Electric’s rates,” Hamel said. “Without them, U.S. Functional Foods would never have looked at Madison.”

MEW was founded in 1888 and brought electricity to Madison at about the same time the lights went on in Portland. The company was originally part of the Madison town government.

Electricity has been deregulated in Maine since 1998. “Everybody in the state has the right to get energy from anywhere they want, from a single customer to the biggest business,” Ames said.

“In 1974, through a legislative act, Madison Electric Works separated from the town and became a nonprofit entity,” said Ames. “It is partly the town fathers’ fault. They robbed the electric works accounts to buy school buses and build buildings while the company was stuffed in the basement of the town hall and forced to use trucks that couldn’t get an inspection sticker.”

It is in MEW’s charter that the company remain nonprofit. “We have no shareholders, no stockholders to give the money to,” Ames said. “We are considered a consumer-owned company and according to the Public Utilities Commission, if we make too much money, we must lower rates or give it back to the customers.”

The company has only 11 employees and still maintains a close-knit relationship with the community. “Many of our customers still come into the office to pay their bills,” Ames said. “The other night we had a scheduled outage and our office workers called every single affected person and business, even though we had mailed them a notice. Our whole goal is customer service and we consider low rates part of that service.”

MEW buys all its electricity through an open bidding process. A small hydroelectric dam on the Sandy River is in the process of being torn out to allow for fish passage, but Ames said that dam was “an insignificant source for us.”

MEW has a five-year contract with Constellation NewEnergy, based in Boston. MEW now buys about 25 million kilowatts a year but once the U.S. Functional Foods greenhouse goes on line, that amount will nearly triple. USFF estimates they will require 40 million kilowatts until their own biomass facility is up and running.

MEW’s contract with Constellation is effective until January 2009, at which time Ames expects energy prices to rise. “But still, we are so low on delivery that half of the equation will still remain cheap. The delivery rate is the key,” he said.

When the original contract was bid to Constellation three years ago, Ames said it came in at the regular market price of 41/2 cents per kilowatt. “But energy has gone up since then,” he said. Ames said MEW bid its own contract, while CMP and Bangor Hydro allowed the PUC to bid their contracts.

Ames confirmed that MEW and USFF have filed a complaint with the PUC against Constellation NewEnergy. Since last April, Constellation has balked at providing USFF with MEW’s standard service rate. Constellation has maintained that because of the grossly higher demand, USFF should pay a higher, market-based rate.

Ames said MEW has a clear and simple contract with Constellation that states that every consumer – residential or business – except Madison Paper pays the .045 cent rate. Madison Paper pays 2 percent more.

Ames said that when USFF came to Madison, it was because of the cheap rates and MEW notified Constellation last February that USFF would be coming on line this September. He said that Constellation failed to recognize the potential for development in Madison and he is sure MEW will prevail with the PUC.

The PUC has not scheduled a hearing date on the contract issue.

Meanwhile, MEW continues to expand, adding new businesses and homes to its system. “If we can keep the rates low, we can change the face of Madison for years to come,” Ames said.

“People will relocate here. Businesses will settle here. We can definitely help Madison grow.”