Utility regulators used broad authority in approving wind deal

Send by emailSend by email
17 April 2012

MAINE- The Maine Public Utilities Commission recently issued a decision in a hotly contested case allowing Emera, the Nova Scotia company that owns Bangor Hydro and Maine Public Service, to create a new company with First Wind, a major wind power developer.

c439219_m

The three-member regulatory body decided that the economic development benefits of the project had so much potential that they could approve it while imposing enough conditions to protect utility customers.

In its decision, the PUC went against the recommendations of its own experienced staff and all of the parties to the case, other than the applicants. Those parties, including the Maine Public Advocate, represented utility customers and the Northern Maine Independent System Administrator, the neutral body responsible for maintaining electric reliability in northern Maine.

According to a report by the Maine Center for Public Interest Reporting, a principal focus of the PUC decision was the potential the new entity would have for creating jobs in Maine, perhaps more than any other development now on the horizon. Though Maine’s unemployment rate is well below the national level, job creation remains near the top of voters’ concerns.

That the PUC should give economic considerations great weight while finding that its conditions were sufficient to provide consumer protection reflects a broad view of its mandate.

Maine law gives the Commission the mission “to ensure safe, reasonable and adequate service and to ensure that the rates of public utilities are just and reasonable to customers and public utilities.” There is nothing explicit in its legal mission about job creation.

In fact, most courts and regulatory bodies have limited functions. While regulators apply powers assigned to them by legislative bodies, elected legislatures normally exercise obvious policy functions such as adopting economic development measures.

However, the limits on impartial bodies are gradually being lifted. In addition to the traditional regulatory mandate, Maine law also tells the PUC to decide “consistent with the public interest.”

Does “the public interest” include only utility-related matters or does it include the broad range of public policy? The answer comes from the regulators themselves. If the broader interpretation applies, then the PUC could consider job creation, as it did.

In fact, the Commission sought to make both of its mandates mesh, by stressing that it would impose strict conditions on the new operation. But its own professional staff, in a 74-page recommendation, said that it would be impossible to impose tough enough conditions to protect customers.

For the Commission to enforce many of the proposed conditions, its staff will have to continually monitor how the new entity operates. Such a watchdog role is not often used. Utility regulatory bodies usually rely on required reports from utilities and others rather than actively keeping watch themselves. The PUC’s relatively small staff specializing in electric matters will find itself with an expanded set of responsibilities.

The concern about customer protection is based on the plan for the project to develop a significant amount of new wind power. Both Maine law and national policy strongly favor the development of renewable energy sources to cut the need for imported oil and to reduce greenhouse gases.

But the development of renewable sources like wind often costs more than the continued use of traditional fuels like oil and coal. If it were less costly, developers would need no incentives.

Its higher cost is why some federal stimulus money and tax breaks go to support development of renewable sources.

When this assistance proves insufficient, utility customers pay higher rates to support the development costs for both new generation and the transmission lines needed to bring the power to market. Instead of the added cost being supported by tax dollars, it is paid in rates by what amounts to user fees.

Consumer advocates protest these higher rates, especially in states like Maine that already have among the highest electric rates in the country. Should conditions designed to protect customers fail to fully control rates, it is usually impossible to roll back approved deals that caused the higher rates.

The PUC decision to authorize Emera, which owns electric transmission grids, to also own generation is allowed because the company will use an affiliate that would be legally insulated from its utility business under the Commission’s conditions. Maine law prevents wires companies from directly owning generation without the use of an affiliate, because of the concern that they might favor their own power supply even if more costly than alternatives.

While the Commission believes that this decision will not allow such favoritism, this may not be the end of the story. Emera has openly sought to change Maine law so that it can directly own generation.

Gordon L. Weil is a contributing writer at the Maine Center for Public Interest Reporting (pinetreewatchdog.org). He is an author and publisher and was also a correspondent for the Washington Post and a columnist for the Financial Times. He was Maine’s first Public Advocate, serving in 1981-82. He may be contacted at Weil.Gordon@gmail.com