Mainers getting bad deal on power

Portland Press Herald

Striking an energy deal with New Brunswick might make financial sense, a new report says.

TUX TURKEL, Staff Writer
December 6, 2007

Maine consumers are getting beaten up in an unresponsive
wholesale electricity market that's dominated by high-cost
natural gas, a new report says, and they might do better if the
state formed stronger energy ties with New Brunswick.

In a draft of a final report to the Legislature, the Maine Public
Utilities Commission says Maine's energy policy is at a
crossroads. The current arrangement with New England's power
grid operators, born 10 years ago with utility restructuring, has
turned into a bad deal for Maine. Prices are rising, environmental
goals are threatened and the state has diminished influence to
control its energy destiny.

The PUC suggests three possible paths to a better future: Push
for reforms in the current market, create an independent
transmission company in Maine, or join with neighboring New
Brunswick to form a common energy market.

During a media teleconference Wednesday, PUC Chairman Kurt
Adams declined to give a preference but said he would offer his
opinion to lawmakers. In other forums, Adams has promoted the
benefits of clean power from Atlantic Canada. He also has been
meeting with his counterparts in New Brunswick.

The PUC's options will receive further scrutiny this winter, when
the Legislature convenes. Lawmakers who head the committee
that handles utility matters said Wednesday that they don't
expect any firm decisions during the session, which is expected
to end in April. But they hope to reach agreement on some
general direction.

In New Brunswick, the energy minister said he was encouraged
that the report recognized the potential benefits of Maine and
his province exploring a closer energy relationship.

Gov. John Baldacci asked the PUC last year to look into whether
Maine should stay in the New England Regional Transmission
Organization. In an interim report, the commission found that
Maine consumers are paying more than their fair share of
regional costs for transmission and generation, and that the
state has other options.

The PUC found plenty of motivation for change.

– Electricity supply prices have risen 55 percent since 1990 in
Maine and New England.

– Supply prices are volatile, driven largely by the cost of natural
gas. The region relies on gas for 40 percent of its power
generation, and more than three-quarters of plants on the
drawing board are gas-fired.

– Maine is a net exporter of power, and it's paying an unfair
share for transmission and generation shortfalls in more
populated states. Through utility restructuring, decisions that
affect Maine are being made by federal and regional regulators.

– The region's reliance on natural gas, along with unfavorable
transmission-cost rules, will limit Maine's efforts to tap distant
renewable resources, such as Canadian wind and hydro power,
and cut emissions that are linked to climate change.

The PUC looked at the pros and cons of three alternatives to the
status quo.

One option is to stay in the New England Regional Transmission
Organization and try to fix the current system. That's less
disruptive, because of existing arrangements. But history
suggests that more powerful states tend to prevail in market
negotiations, and the current rules and generation mix won't
lower prices.

A second choice is for Maine to form its own power authority
and manage access to regional transmission lines, a sort of
back-to-the-future approach. That could create a system that's
more responsive to Maine's interests.

But the go-it-alone approach carries great risks. Start-up costs
could be high, the state might have to pay exit fees to the
regional grid, and Maine consumers would again bear the costs
of power plant construction, as they did before restructuring.

The third option has appeal, but it may be difficult. New
Brunswick wants to sell more power to New England. A joint
venture with the province would let Maine retain its ties to New
England, but as a stronger player. It would also lead to a more
diverse power supply in Maine, which could help consumers.

But start-up costs could be high. And possible fees for leaving
the regional transmission organization present risks, as do
uncertainties of dealing in an international market.

Despite obstacles, teaming up with New Brunswick may hold
promise for Maine, said members of the Legislature's Utilities
and Energy Committee.

"That may provide the greatest opportunity in the long run for
the Maine consumer," said Rep. Ken Fletcher, R-Winslow.

New Brunswick has more diversity in its generation supply,
Fletcher noted, a mix of nuclear, oil, coal and hydro. The
province wants to export more power south, and must cross
Maine to do it. It also has an easier time finding locations for
energy projects and building them.

"Look at the struggle we have, just to get a few wind turbines
going," Fletcher said, referring to opposition to large-scale wind
farms.

Such factors suggest that even if Maine stays in the New England
organization, Canada will play a bigger role in Maine's energy
decisions, according to Sen. Philip Bartlett, D-Gorham, a co-
chair of the committee.

Bartlett said he hopes to hold hearings next year to get a sense
of how lawmakers want to proceed. If nothing else, he said, the
New Brunswick alternative gives Maine bargaining power in New
England, if the state decides to stay and negotiate better terms.

If lawmakers do signal interest in a Maine-New Brunswick
regional transmission organization, it will advance political and
energy relationships that already are evolving.

Baldacci and Premier Shawn Graham signed a memo of
understanding this year in which the two governments agree to
explore new ways to develop and transmit power.

At the same time, Graham's government has been working to
create an energy hub in the St. John area. A liquefied natural gas
terminal is being built, and a second oil refinery is being
studied.

At the nearby 650-megawatt Point Lepreau nuclear power plant,
planners are considering a second reactor that would generate
1,000 megawatts, mostly for export to the Northeast.

Jack Keir, New Brunswick's energy minister, said the province
also has signed contracts for 400 megawatts of wind power to
be on line by 2010. Wind and nuclear power could help Maine
and the region meet power needs without emissions that
contribute to climate change, he said.

New Brunswick and Maine's growing relationship, and the PUC's
report, are being watched closely by ISO-New England, the
regional grid operator.

Ellen Foley, an ISO spokeswoman, said the organization shares
concerns about fuel diversity, interconnetions and the
environment. But it's better, she said, for Maine and the region
to work together to solve differences.

Lawmakers will decide next year if that's desirable.

"The most important finding," said Fletcher, "is we just can't
keep doing what we are doing."

Staff Writer Tux Turkel can be contacted at 791-6462 or at:

tturkel@pressherald.com

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