Relief expected for Maine utility customers

Sun, 10/29/2023 - 10:30pm

    After enduring record-high electricity supply rates this year, most Maine households will start seeing some welcome relief in January, based on recent declines in other New England states and projections by Maine energy experts. 

    Some New Hampshire utility customers already have seen supply rates drop by nearly 40% over last year. They’ve slid a similar amount in Massachusetts. In Maine, experts are anticipating a drop in the 20-30% range, which would cut rates that now stand at roughly 16 cents per kilowatt hour by a nickel or so.

    “My expectation is something in the 11- or 12-cent range,” said Andrew Price, president and chief operating officer at Competitive Energy Services in Portland, which helps commercial and institutional clients negotiate contracts. “But we’ll still be north of 10 cents, I believe.”

    For context, an average Maine home using 550 kWh a month at 16.6 cents per kWh is now paying $91.30 for its energy supply. If the rate falls to 11 cents, that would lower the charge to $60.50 — a monthly savings of nearly $31.

    The precise levels will become clearer beginning Nov. 7, when the Public Utilities Commission kicks off a new procurement process for selecting winning bids for 2024 standard offer service. That’s the default supply for the nine out of 10 home and small-business customers who don’t contract for power with competitive energy providers, and it represents the biggest and most volatile part of a household electric bill. 

    These rates for electricity supply are separate from what distribution utilities such as Central Maine Power and Versant Power charge for delivering power to homes and businesses, although they are included in the monthly bills people see and are passed on to the suppliers. 

    Supply rates make up roughly 60% of an electric bill. They don’t include CMP and Versant’s delivery charges, which account for around 37%. Neither CMP nor Versant generate power; they only distribute and transmit it via substations, poles and wires.

    For reference, this year’s standard offer suppliers are New Brunswick Energy Marketing, a subsidiary of Canadian provincial utility New Brunswick Power, and NextEra Energy Marketing, part of Florida-based NextEra Energy Resources.

    Maine’s rate drop is expected to be more modest because other states such as Massachusetts seek separate bids that straddle winter and summer months, and the price differences reflect higher or lower seasonal demand.

    Looking at the forward prices for wholesale energy contracts over the next couple of years, Price sees an overall trend for costs that are lower than sky-high 2023 benchmarks. 

    Keeping an eye on global events

    Global events have sent Maine’s electricity supply rates on a roller-coaster ride since 2020, fueled largely by price volatility for the natural gas needed to run many of the region’s power plants.

    Plummeting energy demand during the pandemic slashed standard offer rates to about 7 cents per kilowatt hour in 2020, and roughly 6 cents in 2021. But a year later, Russia’s invasion of Ukraine roiled natural gas markets and caused rates to nearly double.

    This year the lingering impacts pushed standard offer rates to an unprecedented 17.6 cents per kilowatt hour in Central Maine Power’s service area, and more than 16 cents in Versant Power’s Bangor district, before a mid-year adjustment at the PUC trimmed them by a penny.

    Maine’s PUC negotiates standard offer rates in November to take effect in January for the following year. As world energy markets began readjusting last winter, wholesale gas prices fell sharply. Experts expect to see that trend reflected in the 2024 electricity supply rates.

    One near-term wild card, though, is whether the fighting in the Middle East spirals into a wider war that directly involves oil-producing nations, such as Iran, and ripples into liquefied natural gas markets.

    “Everyone’s a little on edge about what’s happening in the Middle East,” Price said.

    Maine’s PUC conducts its bid selection every year around mid-November. After Hamas militants invaded Israel on Oct. 7, it was too late to adjust the schedule, according to Philip Bartlett, Maine’s PUC chair. But the agency already planned something different to hedge against sudden spikes in wholesale energy markets.

    This year’s bid selection is unusual in that it will be split into two sessions, roughly three weeks apart. The PUC will select supply bids for the residential and small business customers classes on Nov. 7 and 8, first for Versant and then for CMP customers.

    But it will pick winners for only half the annual customer demand on those dates. On Nov. 28 and 29, the process will be repeated for the other half.

    “We hope that by spreading it out, we don’t get stuck with a particularly bad day,” Bartlett said.

    Studying stability vs. volatility

    The distinction between supply rates and distribution rates is sometimes lost on frustrated customers, who may blame the state’s two investor-owned utilities when their bills take an unanticipated jump. If perception matters, the timing of the PUC’s deliberations may be especially notable, according to William Harwood, the state’s public advocate.

    The PUC’s process will kick off on Election Day, just as voters are considering Question 3. The ballot initiative asks if they want to buy out the CMP and Versant assets to create a public transmission and distribution company.

    Although CMP and Versant aren’t involved with supply rates, Harwood said he wonders if the prospect of lower overall electric bills might influence how some voters feel about the takeover campaign.

    “The utilities get the bulk of the criticism when prices go up,” he said. “They might get some credit when they go down.”

    The sharp price swings in the standard offer supply rate have policy-makers debating the value of stability.

    At issue is whether customers are better off with an annual bid process that reflects the highs and lows of the market at that moment, or if it makes more sense to stagger the bids for longer or shorter periods, to achieve more stable rates over time.

    A legislative resolve earlier this year directs the PUC to study the matter. But the results won’t be ready before next month’s bid selections.

    That’s a letdown for AARP Maine. The advocacy group worries about the impact of price swings on seniors living on fixed incomes.

    “This approach,” AARP Maine wrote to the PUC in early October, “does not appear to reflect the recently adopted resolve that calls upon the commission to develop a standard offer procurement policy for residential customers that will reduce the volatility that we have experienced in purchasing generation supply for 100% of the load at one point in time.”

    Harwood, the public advocate, has similar concerns. A consultant hired by Harwood’s office recommended that the PUC solicit standard offer bids for half of the 2025 customer demand for homes and small businesses during next month’s process.

    “Rate stability for most consumers is more important than accurate price signals,” Harwood said. “They want stability so they can plan their budgets.”

    Bartlett said the Legislature’s late adjournment last summer made it impossible to study changes by November. He agreed that a multiyear procurement strategy is worth considering, but cautioned that even if 2024 standard offer rates fall by 30%, they are still relatively high.

    “We’re still in a historically very high-rate environment,” he said. “How much of these high prices do you want to lock in long term?”