Governor LePage continues effort to lower energy costs for Maine ratepayers

Source: Scott Thistle, State Politics Editor, Maine Sun Journal • Posted: Tuesday, January 7, 2014

Paul LePageCREDIT: AP/ROBERT F. BUKATYAUGUSTA — For the fourth year in a row, Republican Gov. Paul LePage’s administration is pushing to roll back or significantly change portions of Maine law aimed at boosting in-state renewable energy production.

LePage says he wants to level the state’s energy-production playing field and open the door to cheap, renewable hydropower from Quebec and maritime Canada, an idea to which Canada seems lukewarm.

The governor and his top energy adviser, Patrick Woodcock, believe expensive electricity is among the key obstacles keeping manufacturing companies from expanding or relocating to the Pine Tree State.

The state’s electricity costs, consistently among the highest in the nation but the lowest in New England, are holding back job creation and the economy, LePage says.

But supporters of current policy say that even if the governor were successful in reforming Maine law, the changes would amount to only a few dollars of savings per year for most homeowners and a few thousand dollars a year for the largest industrial consumers.

They argue the advantages — in both capital investment and jobs — of supporting a burgeoning renewable-power industry in Maine far outstrip any disadvantages of slightly higher-priced power for ratepayers.

Supporters of current policy say Maine’s readily available natural resources, including an abundance of space, onshore and offshore wind and biomass from the state’s forest products industries, put the state in an enviable position in New England.

What is the reality of the debate?

Investment figures from the renewables industry and a recent report from the state’s Public Advocate’s Office give some perspective.

In the past decade, renewable power producers have invested more than $2.5 billion in taxable infrastructure in Maine. That’s a figure no other industry has come close to, said Jeremy Payne, executive director of the Maine Renewable Energy Association.

The association includes companies that make electricity from wind, hydro, biomass and tidal currents, including Casella Waste Systems, Patriot Renewables and the nonprofit, Boston-based Citizens Energy Corp.

Meanwhile, a November review by the Office of the Maine Public Advocate shows an average homeowner pays an extra 60 cents per month for Maine’s current bundle of renewable policies, which in many cases essentially pay renewable power generators a slightly higher amount for their power or give them exclusive access to limited markets.

Other Maine policies supported by ratepayers include those that help develop community-based, renewable power generation and those that pay small, solar-electric generators for surplus power they return to the grid. A smaller amount of the cost of renewables is embedded in the guaranteed rates small producers are allowed to lock into for the long term.

For the biggest industrial consumers, the monthly cost of Maine’s renewable policies is $663 in the areas covered by Central Maine Power.

Differences in the mix of community-based generators in the Bangor Hydro coverage area mean renewable policies add 65 cents to the average monthly residential bill, and $707 to the average industrial bill.

“The numbers are the numbers, and you can decide whether you think that is significant or not,” Maine Public Advocate Timothy Schneider said.

Schneider said the review was meant to show which renewable policies add to consumers’ energy bills. It also projects how those costs would grow if Maine doesn’t readjust its energy policy moving forward.

According to Schneider’s report, if Maine’s current renewable policies were fully implemented — some policies have yet to take effect — the charges for those in the CMP service areas would shoot up by another 21 cents, to an average of 81 cents a month for residential customers and an average of $881 a month for industrial consumers.

Schneider’s forecast shows Bangor Hydro customers’ renewable costs would go up even more: another $1.27 a month for residential users and another $1,325 for industrial consumers.

The policy that makes up the largest portion of that cost is Maine’s Renewable Portfolio Standard, which requires more electricity in Maine to come from renewable sources, such as wind power and solar energy. That type of power costs more to provide.

The standard also limits eligibility based on the size of a facility’s generation capacity. Those that generate more than 100 megawatts are ineligible to sell their power to Maine’s renewable portfolio, including the largest hydro dams in Quebec. Key to LePage’s reforms is the removal of the 100-megawatt cap on renewable sources.

Maine policy also exempts wind energy from the 100-megawatt cap, an issue LePage says creates unfairness in the market.

And, while electricity distributors can satisfy the Renewable Portfolio Standard by purchasing renewable energy credits from renewable producers, the value of those credits can vary from state to state depending on the specifics of each state’s portfolio.

The bottom-line price of electricity is driven by a complex and not-always-neat interlacing of New England states’ energy policies, coupled with the demands of the Regional Greenhouse Gas Initiative, an effort by Northeast states and eastern Canadian provinces to reduce greenhouse gas emissions.

The cost of electricity in New England is further compounded by a constrained supply of fuel — namely natural gas — that’s needed to produce electricity. The Midwest, for instance, has ready coal for its plants.

Low-cost natural gas is a promising option for the Northeast, and LePage, as well as Democratic and Republican lawmakers in the Legislature, are working to address the constrained access currently limiting its flow to Maine.

“What has transformed the energy markets is this natural-gas revolution,” said Woodcock, director of the Governor’s Energy Office. He referred to a December report of the federal Energy Information Administration that shows natural gas will eventually surpass coal as the nation’s top fuel for generating electricity.

“Natural gas has been displacing coal as that low-cost energy source and it just so happens that that energy resource is in Pennsylvania,” Woodcock said. “We are actually in an enviable geographical position to access the lowest-cost natural resource in the world.”

Woodcock said the LePage administration has a multi-pronged strategy for lowering energy rates, including finding ways to increase the inflow of natural gas to New England and opening Maine’s energy markets to Canadian hydropower.

Helping to build a natural gas pipeline to increase supplies to New England while developing long-term contracts for lower-priced Canadian power are key objectives, Woodcock said.

“This is something that the rest of the New England governors have identified as a way to get competitive and also move forward with our environmental objectives,” he said.

He said other New England states are beginning to amend their renewable portfolio standards. Connecticut, one of New England’s top consumers of energy, recently lifted some of its restrictions on power from large hydro.

“As a result, Hydro Quebec is moving forward with a New England model of identifying specific resources that they could sell in the (Renewable Portfolio Standard) markets,” Woodcock said.

Canadians have never approached

LePage says Maine’s 100-megawatt cap on renewables gives industrial wind power an advantage, but because wind power’s renewable energy credits have become more valuable in southern New England, lifting the cap on hydro may cause wind energy little immediate damage.

State Sen. John Cleveland, D-Auburn, co-chairman of the Legislature’s Energy, Utilities and Technology Committee, said LePage sees the lifting of the cap as a symbolic gesture to Canadian power generators.

Cleveland and committee co-chairman Rep. Barry Hobbins, D-Saco, met with LePage recently to set ground rules for the upcoming lawmaking session. Cleveland said the meeting was cordial and relatively productive, but no specifics evolved.

He said the Canadian power producers have never approached the Maine Legislature about providing low-cost energy to Maine. The most likely negotiation, according to Cleveland, would be for the Canadians to offer Maine long-term low rates on electricity in exchange for some access to New England’s energy grid via a transmission corridor through the Pine Tree State.

Cleveland, who with Hobbins ushered through a landmark law in 2013 that put Maine in a leadership role on natural-gas expansion, including $75 million for pipeline construction in southern New England, said the likely focus for the energy arena in 2014 will be on small compromises. He said he and Hobbins and others have offered to meet with Canadian energy officials and see what might be possible.

But despite any changes around renewable policies that lower rates slightly, for the foreseeable future Maine is likely to remain among the states with the highest-priced electricity, Cleveland said.

That’s not solely a result of Maine’s renewable policies, but also because of other states’ access to lower-cost fuel sources, such as coal and natural gas or federally subsidized hydropower.

Large federal hydropower projects in the northwestern U.S. and access to an abundant supply of low-priced coal in the Midwest and the South mean Maine likely will remain among the states with more pricey energy, most experts agree.

More important is the state’s ability to continue to produce the lowest-priced electricity in New England, said Cleveland and others. Even states such as Vermont, which has tapped into Canadian hydropower, are paying more for electricity than Maine.

Meanwhile, advocates for preserving Maine’s existing policies, which help biomass, wind, tidal and hydro producers, said damage to existing in-state businesses wouldn’t be worth the lower rates for energy, according to Payne of the Maine Renewable Energy Association.

The recent announcement that a Maine company — Pittsfield-based Cianbro — won a contract worth $100 million to help build the Cape Wind offshore wind project in Massachusetts is proof of the long-term viability of the renewable sector in Maine, Payne said.

“That’s one of the benefits of developing a supply chain and that’s the ability to not just build the projects in Maine but also elsewhere,” Payne said. “We’ve become known in the Northeast for Maine’s workforce and its capabilities. That’s something we ought to be selling.”

Payne said the net effect of doing everything around renewables, which LePage would like to do, wouldn’t reduce the cost of electricity significantly.

“I would say it wouldn’t even reduce it modestly,” Payne said.

“Somebody needs to do some additional calculations to show the administration exactly what the price impact is and what that would do,” he said.

“We are allegedly the 12th highest,” he said. “My understanding is we would probably go to the 13th highest and in the process we would destroy one of the burgeoning industries we have as a state. So I don’t get it. I don’t see what the benefit is.”