Testimony: Opposing a State Takeover of Utilities
Testimony in Opposition to LD 1611: “An Act to Create the Pine Tree Power Company, a Nonprofit, Customer-owned Utility”
Senator Lawrence, Representative Zeigler, and the distinguished members of the Committee on Energy, Utilities, and Technology, my name is Nick Murray and I serve as director of policy for Maine Policy Institute. We are a free market think tank, a nonpartisan, nonprofit organization that advocates for individual liberty and economic freedom in Maine. Thank you for the opportunity to testify in opposition to LD 1611.
First, we’d like to thank the committee for holding a public hearing on LD 1611, which adheres to LD 1209 from the 129th Maine Legislature, despite the governor’s contention that the Legislature lost its opportunity to weigh in on this measure because of its previous sine die adjournment. Maine Policy worked hard on LD 1209 because we believe the public interest is better served when hearings are held on initiated bills before they go to the ballot, regardless of the Legislature’s ultimate action. The substance of these hearings and the information discussed is far greater and more enlightening for voters than the 30-second sound bites they will hear leading up to Election Day. This hearing today is why we pushed for passage of LD 1209 and why Gov. Mills signed it into law.
Mainers should have the benefit of being able to submit testimony, and hearing legislative deliberation by way of a public hearing before being asked to vote on a complex policy proposal amid everything else on their November ballot. The public has a right to know what is going on in government; political campaigns are far from an ideal arena to flesh out a policy as complex and unpredictable as the proposed Pine Tree Power Company (PTPC).
This idea has been debated several times over the last four years, both in the State House and in the public square, in similar forms. Cut to the core of the issue: how could it possibly lower rates for Mainers? Why should we believe that politicians can run a power company better than people who actually know the technical aspects of the business?
The sponsors’ attempts to explain the differences between an “investor-owned” utility (IOU) like Central Maine Power (CMP) and a “consumer-owned” utility (COU) like the proposed PTPC fail to recognize the economic realities of incentives. Simply: IOUs may balance risks and costs between their shareholders and ratepayers, while COUs only have ratepayers on whom to balance their books. As testimony from Worthington Sawtelle, LLC mentioned last session, the sponsors have grossly overstated the benefits of their model in terms of cost-savings, reliability, and capacity for decarbonization.
During the first attempt by sponsors to push an idea very similar to this one in the 129th Legislature, Boston-based London Economics International, LLC (LEI) published a report with drastic implications. As LEI’s “sensitivity analysis” notes, the overall costs and the estimated time needed to recoup the initial purchase may vary dramatically, even with minor changes to the many variables: the growth rate in Maine’s energy consumer base (population), the acquisition price of the IOUs’ property (“net book value”), the rate of interest paid on debt related to acquisition of utility property by the COU, and the rate of profit from the COU’s managed assets.
Back then, LEI estimated the “net book value,” or initial price of acquisition, to be around $4 billion, but more recent estimates pin the value of T&D assets in the state at more than $13 billion. Factoring in the many other variables, including unknown costs from a guaranteed court fight to ensue following potential passage in November, LEI estimated that it could take up to 20 years for the public-owned utility to recoup the initial cost. This project could take literally decades to become a “better deal,” as proponents claim, for the consumers who supposedly own the project, if ever.
The current situation is dire. Ratepayers are still reeling from record rate increases year-over-year since 2021. Misguided politicians running the states within our regional electric grid, ISO-NE, are rejecting reliable base-load power sources like nuclear and hydroelectric power in favor of intermittent, unreliable sources like wind and solar.
If that wasn’t enough, our state Public Advocate is warning that well-intentioned programs like community solar will make the situation for ratepayers even worse. The Mills administration is openly acknowledging that it is blocking the entrance of cheaper power for Mainers in favor of protecting their friends in the biomass industry. Our energy policy is seriously off-track.
There is nothing in Maine law which would prohibit a truly independent nonprofit corporation from raising, investing, and leveraging funds to negotiate with Central Maine Power and Versant to purchase transmission lines, but it should not need state-backed eminent domain power to force its way into the market. Furthermore, entrusting a quasi-public entity run by politicians, who are under no obligation to understand the economics or science of reliable energy transmission, presents a danger to ratepayers and public trust.
If Mainers are dissatisfied with their power company today, LD 1611 is a surefire way to make it worse. Please vote “Ought Not To Pass” on LD 1611 to signal to voters that this is a wasteful and economically destructive move. Given the harmful nature of this proposal, there is no tinkering on the margins that can be done by way of a competing measure that would make it palatable. Allow voters to defeat it later this year. Thank you for your time and consideration.