October 14, 2010

Experts debate impact of electricity deregulation

PORTLAND — Maine’s electricity rates could be lower if the state’s energy policy only focused on low-cost power, experts said today, instead of broader interests such as renewable energy and conservation.

Rates are higher here because we don’t burn coal, resist public power options, add on well-meaning surcharges and make policies based on theoretical, long-term benefits, according to Gordon Weil, a retired consultant who served as Maine’s first energy director. These policies, such as funding efficiency programs through rates, have a cost that many customers don’t even know about, he said.

Despite this, Maine’s electric rates have moved closer to the national average over the past decade, from 50 percent higher to 20 percent, according to Steve Ward, who served as Maine Public Advocate from 1986 to 2007. The biggest factor now is the volatile cost of natural gas, which fuels many of the region’s power plants.

Weil and Ward’s assessments came during a symposium on Maine’s decision to deregulate its electric power industry through a law that took effect in 2000. The forum, sponsored by Mainebiz and MPBN, explored the premise that electric costs for Maine business are continuing to rise, and posed the question of what can be done about it.

A panel of experts had some ideas, and some differing opinions.

Embrace efficiency, because it costs less than generation, said Tony Buxton, a lawyer who represents industrial power consumers in Maine. Building a liquefied natural gas terminal in the state would lower electric rates by up to a penny a kilowatt hour, he said, by providing cheaper natural gas.

Be careful about banking too much on renewables, Buxton said, because the price of land-based wind power today is much higher than natural gas, and three or four times the expected cost of off-shore wind. And don’t look for miracles from Canada. The Canadians can produce low-cost hydroelectricity, but they sell it in the United States at the market price.

“There’s no such thing as cheap Canadian power,” he said.

Participants also debated whether deregulation, which was opposed in the Legislature by only one vote in 1997, had the effect of raising or lowering rates. David Wilby, a former executive director of the Independent Power Producers of Maine, challenged the premise of the seminar.

“It’s not to say prices aren’t high, but they would have been higher if not for restructuring,” he said.

That viewpoint was disputed by Carroll Lee, a former president of Bangor Hydro-Electric Co. and an opponent of deregulation. The law was a response to high prices in the early 1990s, he said, and the clear expectation of businesses was that it would cut electricity costs. Rates are not only higher, he said, but unstable, which is bad for business.

“I want to make sure we don’t rewrite history here,” Lee said.
 

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