A Press Herald reporter recently called me up about a story about Question 3, the Pine Tree Power referendum. The story was about the provisions in the referendum that would require a private company to be brought in to run the grid to be managed by a board run by elected politicians.

“Why would you take that kind of gamble?” I asked the reporter. “The stakes for Mainers are too high.”

This is something I care deeply about. For 11 years I served on the board of ISO New England, including five years as its chair. As New England’s “independent system operator,” it was our responsibility to oversee the grid in our six states to ensure reliability, plan the system and administer markets. It was our responsibility to ensure that there was adequate capacity to power our homes and businesses.

The prospect of elected Pine Tree Power board members with no experience in utility policy in charge is, to put it mildly, concerning. The reliability and economics of our grid are complex and changing rapidly and our economy is built on our grid. The ISO-NE board included experienced engineers, system planners, economists and finance experts. None of those independent board members would have served if they had been required to run a political campaign to be a board member.

The timeline for switching from our current utilities to a state-run system under Pine Tree Power would likely stretch out for years – Gov. Mills said it might even take “decades.” But long before we get to the point where this board of elected politicians would be running the day-to-day operation of the grid, Mainers would have to start paying for the multi-billion dollar takeover. And the cost, taking into account interest payments alone, would be massive.

Thee U.S. Constitution requires that “just compensation” be paid for private property that is seized by eminent domain. There is some debate over what that number is for Pine Tree Power; proponents have sometimes cited a number of $9 billion, opponents say it’s $13.5 billion. In any case, it’s huge number and it’s important to understand what that really means.

For 12 years, I ran the New England Office of Standard and Poors Bond Ratings. I can tell you that not only are the predictions of bargain basement interest rates by the Pine Tree Power proponents hopelessly optimistic, they are also promising policies that would likely drive current high interest rates even higher.

The campaign manager for Pine Tree Power recently claimed that the interest on the debt to seize the utilities might be as low as 2%. The bill for seizing the utilizes will be 100% debt, and due to tax law that initial borrowing cannot be done with tax-free bonds. That means borrowing money from investors who can earn 5% on guaranteed 10-year U.S. Treasury debt. With the uncertainties involved in this start-up, a reasonable interest rate might be more like 7% or 9%. Even if the cost to take over the utilities is only $9 billion, that means between $600 and $800 million a year in interest payments alone. That’s more than three times the combined profits of the state’s utilities last year. That money will leave Maine and we won’t have anything to show for it.

In reality, that interest payment may be even higher. The bond rating for the new entity will be based in part on its ability to collect revenues to repay debt. Tougher collection policies will lead to a better bond rating and lower interest rates. Lax collection policies will lead to lower bond ratings, higher interest costs and higher electric rates.

Changing complex operating systems involves assumptions of outcomes and the willingness to accept risk related to those outcomes. Our electric system is the foundation of our economy and our lifestyle. It is too important to take risks with. Running the system and planning Maine’s grid takes both general and local skills and experience. One only has to look to Texas in 2021 to see the stakes involved. Hundreds of lives and billions of dollars are at stake. Let’s not take chances.

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