The Public Utilities Commission’s recent rejection of bids to provide residential electricity in Aroostook County provides a cautionary tale as Maine considers withdrawing from the regional energy management system. The problem in Aroostook County is that the market is too small to encourage numerous energy suppliers to participate. The same thing could happen if Maine becomes its own market.

Last month, the PUC rejected retail standard offer bids for Aroostook County. It had received two bids – of different durations – from the same electricity supplier. The new bids would have resulted in a large price increase for residential customers. The problem, says PUC Chairman Kurt Adams, is that because there was only one bidder, there was no way to know what factors contributed to the large price increase.

With no connections to the New England power pool, Aroostook County functions as an independent energy market. For years this has worked well as Maine Public Service Co. has been able to sell its customers electricity for about half what customers of the state’s two large utilities pay. However, with only 37,000 customers and no connection to the New England power system, there had long been concerns that a competitive market did not exist in Aroostook County. Last month, the PUC officially decided it did not and has launched an inquiry into the competitive market challenges in the county.

Possible solutions include building a transmission line to connect the county to the New England system and re-regulating the market. The latter could involve allowing Maine Public Service Co. to return to generating electricity. This would require a change in state law and would likely encourage the state’s large utilities to seek the same treatment.

While the PUC is looking into connecting Aroostook County to the rest of Maine, they are also, by the direction of the Legislature, looking at whether Maine would be better off leaving ISO New England, the region’s electricity grid manager. This review was prompted by the Federal Energy Regulatory Commission’s approval of a new pricing plan to fund the building of new electricity generating facilities in New England. Because growing demand for electricity is greatest in southern New England, Maine residents will pay higher rates to help pay for new facilities to serve other states under the plan.

However, electricity readily flows across state borders and Maine barely produced more power than it used during the first half of this year. With its heavy reliance on natural gas and the uncertainty in that market, Maine could end up importing electricity from other states or Canada.

Regulators in southern New England should understand that they will benefit from infrastructure that is built in Maine so Maine ratepayers should see a benefit (lower rates), too. If some of that infrastructure, including additional wind-power facilities, is in Aroostook County, that could benefit the county and the region as well.