Maine Restructuring Splits Market in Two

Bottom Line Energy Issues - January 2002 - Part 4 of 6


After nearly two years of deregulation, the benefits of retail competition as promised have not arrived for residential users in Maine. Nearly all of them receive energy from the state-administered standard offer service. The PUC has contracted with Constellation Energy to provide standard offer supplies for three years. This deal disturbs renewable generators such as wood-fired plants. They complain the standard offer rate is too low, and more users would choose green power if it were higher.

But a closer look discloses significant changes are occurring among commercial users. Beginning this March small commercial users served by Central Maine Power will pay rates 6 percent below 1999 levels. Maine has perhaps more competition for midsize and large users than any deregulated state. In CMP’s territory, 88 percent of large users have signed contracts with other energy providers. The figure is 42 percent for midsize users, including supermarkets. Maine has attracted some of the largest energy suppliers. And aggregators have sprung up to broker supplies to collections of users, including restaurants and hotels. Some large users, including Fairchild Semiconductor, have paid higher bills driven by last year’s runup in natural gas and petroleum rices. Paul Jones, purchasing executive, notes that businesses must pay attention to their energy suppliers and control their costs by negotiating the terms and lengths of power contracts. He hopes, “The promise down the road will be the possibility of lower rates.”

The regulated Maine utilities sold off their generating plants and now function as distribution companies. This historic state mandate transferred the risks of market failure from ratepayers to stockholders. Maine customers do not absorb the cost of power company investments which previously got added to monthly bills. Richard Silkman, a partner of one of the state’s leading aggregators observed, “I’ve always thought this benefit was one of the most important over the long haul.”

Some pundits like the market dichotomy in Maine - a competitive market for large users and a state-administered market for small users. Phil Lindley of the Maine PUC observed that, “Markets take a while to develop and emerge.” There seems to be fairly wide agreement that the trend of deregulation in Maine is moving in the right direction.

Continue Article >> Deregulation Sputters in Connecticut


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