“Public power” sounds good, until we dig into the facts. That’s when we learn it’s a bad deal to require the creation of a new state “authority” to take over and operate Central Maine Power and Emera Maine, both of which are privately owned, like most electric utilities in this country.
As a lawyer and former Cumberland County sheriff, I have been trained to deal in evidence, not rhetoric. As a three-term member of the Legislature’s Energy, Utilities and Technology Committee, I similarly learned to look behind the claims of special interests, and when I did, the story was much more balanced. I urge Maine people to exercise similar caution when evaluating the idea of “public power.”
Public utilities – including privately owned ones – are not like any other private business. First, a public utility can only charge “just and reasonable” rates as determined by the Maine Public Utilities Commission. Likewise, public utilities are required by law to provide “safe and adequate” service; utilities that fail to meet this standard may be subjected to financial penalties. In CMP’s case, that oversight process is playing out now, with public scrutiny resulting in substantial financial penalties on CMP’s shareholders, including penalties that shield consumers from paying for CMP’s mistakes. Whether the Maine PUC got it exactly right can be debated, but I have confidence that the PUC, as an independent state agency, will do its job, as intended by the Legislature.
Supporters of “public power” argue that creating another agency of state government will give Maine the control it needs to effectively operate our electric grid, but will it? Are two overlapping agencies of state government better than one? And for those who argue that one agency of state government isn’t getting the job done, why do we think a second government agency will be better?
We also need to understand that the pending legislative proposal in Augusta for “public power,” L.D. 1646, does not call for the government to actually operate the electric grid. Instead, the system would be run by a private operator hired via a competitive bidding process. So, for people wanting to jettison private corporate interests, this bill doesn’t do it. In fact, this bill could result in CMP’s coming back as a private operator of the publicly owned electric system.
Nor is the combination of public ownership and private operation a panacea. Long Island Power Authority in New York follows this model, but a 2013 commission established by the state of New York in the wake of Superstorm Sandy – the Moreland Commission – investigated the disaster and found that the public authority and its private operator had failed to properly prepare the electric system for the storm and was operating with “disregard” for customers. The commission further found evidence of corruption and a “revolving door” of managers going back and forth between the government authority and the private operator of the system.
Supporters of “public power” also promise lower electricity rates. However, if the new state power authority is operated by a private company, that company would likely be allowed to charge consumers a markup over and above its day-to-day costs for operating the system, something CMP and Emera Maine, as public utilities, are not allowed to do. This is exactly what happens with the Long Island Power Authority, whose rates are among the highest in New York. Likewise, government-owned utilities may have lower financing costs to pay for necessary infrastructure, like poles and wires. However, taking over CMP and Emera Maine will require billions of dollars in additional borrowing, offsetting any reductions in operating costs and leading to an overall increase in financing costs. The end result will likely be higher electric rates.
Now, it is true that state ownership of our electric grid will “save” electric customers nearly $40 million in state taxes, and $70 million in local property taxes that are currently paid by CMP and Emera Maine. However, these taxes reflect anticipated budget revenues, which pay for other government services. I suspect the demand for these programs will not simply go away. Under the public power model , the resulting tax revenue deficits will have to be resolved in our state and local tax bills.
In the end, “public power” makes for great soundbites, but its economic promises ring hollow. Those are the hard facts.
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