SOUTH PORTLAND — Town councilors from Cape Elizabeth and Scarborough expressed little enthusiasm last week for joining the city’s efforts to establish a municipal energy company.

It was the first time the elected officials heard details about the prospective energy supply company, which would purchase energy at wholesale prices from the ISO-New England grid.

The goal of the program is to reduce energy costs for residents and small businesses, while establishing a potential revenue source for the communities.

But the idea, which has been in the works for nearly a year, generated many questions and little excitement, even from South Portland City Councilors.

Officials in all three communities said they were concerned about the up-front investment to establish a company, the relatively long pay-back period, and whether forming an energy company fits within the mission of a municipality.

Some questioned whether the predicted benefits would be enough to outweigh the project’s risks.

South Portland Assistant Manager Erik Carson said it would take a nearly $1 million investment to establish the company. Each town would pay a share proportionate to its consumption.

Carson said customers could save between 5 percent and 10 percent on their electric bills. But it would take between three and five years for each community to recover its expenses and start generating revenue.

Officials in Cape Elizabeth were skeptical the benefits would outweigh the risks.

Cape Elizabeth Town Council Vice Chairwoman Sara Lennon this week said the council has not discussed the proposal since last week’s meeting in Cape Elizabeth.

Lennon said that, throughout the Feb. 17 presentation, she kept asking herself what taxpayers would say about the venture.

By the end, Lennon said the best-case scenario for Cape Elizabeth residents would be a savings of about $5 a month, which she described as a “minimal benefit.”

“That was one of my biggest concerns,” she said.

Lennon and Town Manager Michael McGovern said they appreciated the work and innovation behind regional project. But McGovern said South Portland has a large commercial tax base, which could make the project more beneficial for the city.

“That incentive isn’t there for Cape Elizabeth,” he said.

Although Scarborough officials expressed similar concerns, they still seemed open to exploring the idea.

Town Manager Tom Hall said he believes the meeting, which was only attended by one councilor, was a successful introduction to the concept. He said he was not surprised by the “trepidation” of some elected officials.

While administrators have been working behind the scenes on the project’s feasibility, Hall noted it will be councilors who must determine the political implications.

Scarborough Town Council Chairwoman Judy Roy said the energy company would seemingly fit the mission of the town’s Standing Energy Committee, which is to reduce the Scarborough’s energy costs and carbon footprint.

But Roy, who said she would like to pursue the idea further, questioned whether municipalities should be competing with private-sector businesses that already provide this service.

“This would be the first such endeavor of this nature, so we are working on building a model that reduces risks and reaps benefits,” Roy said.

South Portland Mayor Rosemarie De Angelis said she shared the concerns of the other town officials. She also wondered whether it is fiscally responsible to use tax money on what could prove to be a risky business venture.

Carson said megawatts of electricity would be purchased up front by the energy company, which would serve between 1,000 and 3,000 customers.

Then, the communities would have to collect payments from their customers. Carson estimated that about 80 percent of customers would pay in the first 30 days, while the rest would pay later.

De Angelis worried about the prospect of the three communities making a significant investment to establish the company and purchase the electricity, only to find an insufficient customer base.

“Then what?” she said. “All the investment has been made. All the start-up costs have been put out there.”

Carson said South Portland plans to conduct a legal review of the business proposal, as well as having it reviewed by an industry expert. He said he hopes to be able to address the issues raised by the councilors at a future meeting.

Although the project would involve extensive outreach and education, Hall said he believes municipalities are better positioned for that work than a private start-up business.

He said he continues to be excited about the potential for the project, even though some elected officials are openly questioning its viability.

“We would be remiss if we didn’t explore this opportunity,” Hall said.

Randy Billings can be reached at 781-3661 ext. 100 or [email protected]

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