AUGUSTA – Calling it a victory for customers of Bangor Hydro-Electric Co., the Maine Public Utilities Commission on Thursday approved a plan to reduce transmission rates while holding the utility to high service quality standards.

One significant part of the agreement calls for dropping a proposal before the PUC for an independent management audit of Bangor Hydro’s organizational structure and its finances.

The PUC in its approval said the deal gives customers what they want – lower rates and the same or better service. Plus, customers would have been required to pick up the tab for an audit, which wouldn’t necessarily have resulted in reduced rates, said PUC Chairman Tom Welch.

Approval of the agreement at least ensures rate cuts, he said.

An audit was something a number of Bangor Hydro’s 110,000 customers wanted. More than 60 customers wrote or called the PUC to express outrage that they are paying the highest transmission rates in the state.

Commissioner Stephen Diamond said he wanted to reassure customers that their discontent was what forced negotiators of the agreement – including the utility – to come up with a plan that lowers rates, cuts costs and maintains or elevates the level of service they receive.

“This may sound a bit corny, but I think the voice of the public was heard in this case,” Diamond said. “The reality is this got us where we wanted to go without the management audit.”

The PUC vote marks the end of an almost yearlong, gut-wrenching struggle for everyone involved – from consumers to Bangor Hydro’s staff – and included a dramatic $12.8 million swing in just how much money Bangor Hydro said it needed to operate efficiently.

The fight started last year with Bangor Hydro asking the PUC for a $6.4 million rate increase, which would have been the sixth increase in six years. The fight ended officially Thursday after the utility cut costs by 20 percent or $6.4 million, reduced its 425-person staff by 112 people, and agreed to certain service standards or be fined up to $840,000 each year.

In addition, at least three of Bangor Hydro’s top executives announced their retirements and the utility’s new parent company, Emera Inc., brought in new managers.

And while that was going on, PUC staff analysts, Bangor Hydro officials, the state’s Public Advocate’s Office and representatives of the state’s largest industrial power users hammered out a plan to cut transmission rates while holding the utility to strict service standards.

Under the 19-page agreement approved Thursday, residential electricity distribution rates will drop by up to 12 percent over six years. The first rate reduction of 2.5 percent will take effect July 1, 2003, and subsequent reductions of between 2 percent and 2.75 percent will take place each year after that. Delivery rates for small and large businesses also will be reduced by about 12 percent over the same period.

Bangor Hydro customers currently pay 9.924 cents per kilowatt-hour for electricity transmission or $49.62 for an average household that uses 500 kilowatt-hours per month. On July 1, 2003, the rate drops to 9.676 cents per kilowatt-hour or $48.38 per month for the average household.

By July 1, 2007, the transmission rate will be 8.788 cents per kilowatt-hour or $43.94 per month for the average household.

Under the new service standards, Bangor Hydro will be required to keep to a minimum the average number of hours and the number of times during a year that its customers are without power during a small outage. A small outage is defined as a car hitting a utility pole, for example, and cutting electricity to less than 10 percent of the customers in a particular service area.

Bangor Hydro customers, on average, should not be without power for more than 2.13 hours a year and should not experience outages more than 1.43 times a year, according to the agreement.

Even though the PUC approved the agreement, it doesn’t mean the PUC will stop monitoring how Bangor Hydro operates, especially when it comes to making sure the utility is hitting the service quality standards, Diamond said.

“Obviously we’re going to keep a good watch on that,” he said.

With all the organizational changes that have gone on at Bangor Hydro during the last few months, Welch said he didn’t think “a management audit during this time is going to tell us very much.”

He said the dust needs to settle at the utility, and the new policies have to be given a chance to work. The agreement, though, gives the PUC some peace of mind in knowing that the rate reductions will be “gained by efficiencies and not by accounting tricks,” Welch said.

Nonetheless, knowing the PUC’s threat of a management audit was always there was a vital tool in the negotiation process to reach the agreement, Diamond said.

“[Sometimes] you achieve your objective by threatening to go to war instead of actually going to war,” he said.

Bangor Hydro spokeswoman LuAnn Williams, who was on hand for the PUC’s vote Thursday, said she was pleased with the outcome. The utility, she said, was looking for “stable, predictable rates” and the agreement will achieve that.

Now, after a yearlong struggle, “it looks like we’re going forward,” she added.