A bill to transfer ownership of Maine’s electric grid from for-profit companies to a publicly owned utility could increase customers’ rates and reduce state tax revenue in the near term, but it could benefit ratepayers over the coming decades, according to an independent review of the proposal.

The switch to public ownership would not guarantee lower electricity prices, better reliability or lower management costs, said analysts from London Economics International in a report issued Saturday.

Proponents of creating a consumer-owned electric utility in Maine said the report leaves out important parts of the issue, including an analysis of reliability and customer service. It also does not address major changes in the electricity industry that could influence its economic modeling, including electric vehicles, energy storage, carbon reduction targets, electrified heating and more.

“It is hard to predict the future already; when you take out the part you know is happening it makes it pretty challenging to produce a thorough and comprehensive evaluation of the matter,” said Vaughn Woodruff, CEO of Insource Renewables, a solar energy company in Pittsfield. “I thought it was interesting that even without including major pieces, that there would be a benefit of a consumer-owned utility – they saw a pretty reasonable return on investment.”

London Economics, a British consulting firm with an office in Boston, was hired last year by the Maine Public Utilities Commission to review the impact of L.D. 1646, which would create a consumer-owned public utility called the Maine Power Delivery Authority to take over operation of the transmission and distribution assets of Central Maine Power Co. and Emera Maine. A private contractor would be hired to manage the system, and it would be overseen by a board of directors appointed by the governor.

The bill was sponsored last year by Rep. Seth Berry, D-Bowdoinham, partly in response to controversies that have dogged CMP since 2017, including the botched rollout of a billing and metering system.

Berry said he will ask the company to provide its full analysis, including calculations, underlying data and assumptions to the pubic utilities commission and general public. It was surprising that information was not included in the report and that the company did not consider reliability, beneficial electrification, climate change and Maine’s clean energy goals, he said.

“To ignore these imperatives is to miss the point of the bill,” Berry said in a written response to the study. “The low-cost capital and local control of MPDA are key to Maine’s ability to achieve these goals and face our future successfully.”

Supporters of the bill have said a consumer-owned private utility would improve reliability and lower costs for businesses and households by removing a profit motive and operating for the public good. But electric companies have pledged to fight what they see as a government takeover of their business and claimed their profits already get reinvested into the grid.

The team that analyzed the impact of the bill envisioned a legal path forward for the state to take control of the two companies’ assets, but also predicted extended resistance to the plan.

“The independent report’s findings demonstrate that public power is not in the best interest of Maine electric customers or taxpayers,” said CMP spokesman Ed Crowder in a statement. “We look forward to providing detailed comments to support policymakers during the review process. Meanwhile, CMP remains focused on our ongoing efforts to improve customer service and build a smarter, cleaner, more reliable electric grid for Maine people and businesses.”

It is unclear how much it would cost to buy CMP and Emera’s assets, but it could be up to two times their present value, according to the report. In public testimony filed about the bill last year, Emera estimated the cost of buying the two companies at $7 billion to $9 billion.

Paying for the transmission lines, plus a section of the bill that would require the new agency to keep employing all unionized power company workers at the highest wage scale, could mean increased rates in the first years after the transition, the report’s authors said.

Ratepayers could pay almost $12 million a year more than they otherwise would for the first 10 years after the public takeover, the report estimates.

But, in the long term, the new agency could reduce rates if it were allowed to invest in its transmission system using tax-free borrowing, according to the report. In that scenario, ratepayers should save from $4 million to $8 million a year over 30 years, the report says.

“In other words, L.D. 1646 may create an inter-generational trade-off where current ratepayers may perceive the value of L.D. 1646 differently from future ratepayers,” it says.

Transitioning to a publicly owned utility also could mean the loss of some state tax revenue paid by the privately owned utilities, according to the report. If the contracted for-profit operator working for a publicly owned utility kept its costs low, it would benefit ratepayers but also reduce corporate income taxes paid to the state, it says.

Maine Revenue Services would not provide corporate income tax receipts for CMP and Emera because those tax records are confidential. In the Legislature last spring, Emera testified that it and CMP paid a combined $35 million to $40 million in state taxes in 2018.

Local governments would receive payments from the state in lieu of property taxes on electric utility infrastructure under the proposed regime, but only as long as the public utility was generating revenues that exceeded its expenditures and reserves, according to the report. That arrangement could put local tax revenue at risk and force communities to cut services, the report says.

Bill Dunn, a consultant from Yarmouth with almost 50 years of experience in electric utilities, said he isn’t convinced by the report’s findings regarding the impact on state and local taxes.

Utilities set rates to recover costs, which would cover payments to local governments, he said.

“I think it is a red herring, trying to make it seem like taxpayers are going to take a hit,” Dunn said. “The question is, will the total cost go down, and the total cost will go down because the financing will go down and profits won’t be sent to companies out of the state of Maine. I don’t think the tax shift will be appreciable.”

The bill, as currently written, would not automatically fix some issues, the report says. Because the authority’s board would be assigned by the governor from among various stakeholders, it would not solely represent ratepayer interests, it says. Instead of being a consumer-owned organization, it would operate like a government-owned one, it adds.

The proposed ownership change would not guarantee lower electricity prices or improved reliability and customer service at no additional cost, the report says. Financial benefits to local residents are not ensured, and it would not eliminate management and administrative costs, it says.

Woodruff, of Insource Renewables, said that in his experience, both sides will pick apart a report such as the one from London Economics to find points that support their positions. Proponents of a publicly owned utility in Maine already have reportedly criticized the PUC for choosing London Economics to perform the $500,000 evaluation because it has done work for Emera in the past.

“At the end of the day it becomes politics,” he said. “I think the important part is that when you have a report like this, it gives you a baseline to argue from.”


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