MAINE, USA — Editor's note: The video above was published Sept. 12, 2023.
As voters decide whether to take over their transmission and distribution utility companies, we’re providing Mainers with some history of the power system in the region — and clearing up some confusion.
Key takeaways:
• Maine’s utility companies deliver electricity to homes and businesses. The companies own and maintain the poles and wires through which the electricity flows. They do not own the means to generate electricity, such as wind turbines, solar panels, hydroelectric dams, and natural gas plants.
• Central Maine Power and Versant are the state’s largest utilities, and are owned by investors. Maine also has nine cooperatives and municipally owned utilities.
• There are 125 active electricity producers (also known as suppliers) operating in Maine, including Brookfield Renewable (hydroelectric), Longroad Energy (wind and solar) and Calpine (natural gas).
• Overall, Maine does not produce enough electricity to meet demand, and must import electricity from other states.
• The price of supplying electricity is determined by the free market and overseen by state regulators, who solicit bids each year, typically for 12-month contracts.
• Electricity supply accounts for roughly 60% of an average bill.
• The price of delivering electricity is set by state and federal regulators, who determine how much utility companies can charge for the services they provide.
• Delivery accounts for roughly 37% of an average bill.
• Question 3 proposes replacing Maine’s two investor-owned utility companies — CMP and Versant — with a board of elected and appointed members and a private third-party operator. The ballot question would change who owns the poles, wires, substations and other associated infrastructure, and who is responsible for delivering electricity. It would not change who owns electricity production or supply.
First, some history
For much of the 1900s, the electric grid in the United States was a patchwork of local monopolies. Companies would build a power plant and then run the power lines to homes and businesses. At first these networks were largely isolated, but they soon began to connect with one another.
Today, the United States (and Canada) share two major electric grids, known in utility parlance as “interconnections.”
Maine is part of the Eastern Interconnection, which operates east of the Rocky Mountains. There is another in the West, stretching north to the Alaskan border. Alaska, Texas and Quebec have their own grids. These systems are connected but share very little power between them.
The eastern and western grids are managed by operators — typically nonprofit organizations — that coordinate and control electricity flowing through the system. Some operators cover a single state, others manage a larger region.
Most of Maine is under the umbrella of the Independent System Operator of New England (ISO-NE). Parts of northern Maine, which shares power with Canada, are operated by the Northern Maine System Operator.
ISO-NE is a nonprofit organization, headquartered in Massachusetts, that is responsible for making sure the electricity being produced around the region — by wind turbines, natural gas plants, solar panels and other generators — matches the amount being used by millions of people in their homes and businesses across six states.
“You have to keep the amount you’re generating and putting into the wires the same as the amount as being consumed at the other end,” said Thomas Welch, former chair of the Maine Public Utilities Commission, which is responsible for setting utility rates and making sure the companies operating in Maine are meeting certain standards.
“The reason you have to do that is if you get an imbalance the lines burn up. The system literally falls to the ground. It explodes.”
The supply
In Maine, the production of electricity (this is the “supply” portion of your bill) is regulated separately from its delivery.
The cost of supply typically accounts for around 60% of your electricity bill. Unless you choose your own electricity supplier (more on that later), the price of supply is set once a year by the Maine Public Utilities Commission after a competitive bidding process.
There are 125 electricity producers in Maine owned by a number of different companies (the PUC lists 269, but some are inactive or serve only certain customers).
This includes Brookfield Renewables, which operates most of the state’s hydro-electric dams; Longroad Energy, which owns numerous solar and wind projects, and Calpine, which owns a natural gas plant in Westbrook. CMP and Versant do not own any electricity production.
Most of the electricity generated in Maine is produced by hydroelectric dams, wind turbines and the burning of wood fuels. Solar accounts for around 3 percent; the rest is natural gas.
Most of the electricity in New England overall comes from natural gas (60 percent) followed by nuclear power plants (26 percent). That’s a big change from the 1990s, when our electricity was primarily produced by nuclear power, coal and gas-fired plants.
Electricity supply companies are loosely regulated, meaning that authorities do not tell them how much they’re allowed to charge for the electricity they produce (they still have to meet certain safety and emissions standards). These companies operate in the free market. They can sell into the wholesale, regional market, or they can sell electricity directly to consumers.
Throughout New England, including all of Maine (except for parts of northern Maine), electric energy flows, and is bought and sold, through the regional grid and market. This means Maine customers can buy energy from suppliers both inside and outside of Maine, and Maine generators can sell their production throughout New England.
The price of supplying electricity is determined by the free market, and, if they want, customers can contract directly with electricity suppliers. Ratepayers who make no choice will automatically get the “standard offer,” which is set by the Maine Public Utilities Commission, typically for a 12-month term. Roughly 90% of people choose the standard offer.
Up until the late 1990s, the companies that now own the poles and wires — including CMP and Versant (then Bangor Hydroelectric) — also owned electricity generators, like nuclear and oil-fired power plants and hydroelectric dams.
That changed in 1999, when the Maine legislature decided to break up those monopolies. Lawmakers reasoned that opening generation of electricity up to competition would lower prices and shift the risk of future investments away from ratepayers and onto shareholders.
“The idea was that competition would help drive down the price, and I think in general it probably has,” said Welch, who was involved in the transition. “But a lot of the efficiencies are masked by changes in geopolitical energy markets,” like high natural gas prices caused in part by the war in Ukraine.
Almost all of New England, and roughly half of the country, said Welch, eventually “deregulated” or “restructured” its market, banning utilities from having any financial stake in the production of electricity.
Vermont is the only state in New England that still has such a vertically integrated monopoly utility, where companies can own both the means to produce electricity and the poles and wires through which it flows. (In Maine, whether battery storage is considered generation — and whether utility companies should be allowed to own it — is currently up for debate.)
The companies that generate electricity in Maine, however, do not make enough to meet demand, which means we have to import power from Canada and the rest of New England to keep our lights on and our hospitals running.
About 30% of Maine’s electricity was imported in 2021. In New England, most of that electricity (roughly 60%) is made by natural gas power plants. The next largest share is from nuclear power plants (26%) followed by hydro (5%).
The delivery
After electricity is produced, it flows through transmission lines, which are designed to carry power efficiently at a high voltage over long distances, across regions and between states.
Because the lines cross state, and sometimes national boundaries, the Federal Energy Regulatory Commission sets the price for transmitting electricity through these lines.
At the other end of the transmission line, the electricity travels through a substation, where it’s converted to a lower voltage.
At that point it can travel on what’s known as the “distribution” system, the local lines that deliver power to homes and businesses. The cost of transmission and distribution accounts for roughly 37% of a typical bill.
The “transmission and distribution” system is where CMP and Versant come in.
They own the local poles and wires, and are responsible for fixing them when they break and making sure the local grid can handle the energy flowing through it.
They are also partly responsible for helping companies that want to generate electricity (like wind farms and solar projects) figure out how and where to connect to the grid, and whether substations or transformers need to be upgraded to handle more electricity.
Making sure the system isn’t overloaded is important, since putting too much flow through places that weren’t designed to handle it can cause power lines to melt and catch fire. ISO-NE (the nonprofit based in Massachusetts) also plays a role in studying this, particularly for larger projects.
The line of generation projects — which includes wind and solar farms, as well as rooftop solar systems — waiting to connect to the grid is called the “interconnection queue.”
“With new generation of any kind they want to be sure that whatever interconnects doesn’t crash the system,” said Welch.
Planning, policy and price
There’s a lot of planning that goes into managing the grid at every level.
State and federal lawmakers can enact legislation that incentivizes one kind of resource over another — like the net energy billing policies that helped drive the adoption of solar, by paying people for the energy they produce with rooftop panels; or, at the federal level, the Inflation Reduction Act, which offers tax credits to developers who want to build low-emission electricity generators.
At the state level, Maine’s legislature can (and has) also directed transmission and distribution utilities (CMP and Versant) to report certain metrics and develop their own climate action plans (due by the end of the year).
Maine also has the Governor’s Energy Office, which is involved in developing programs and policies to reduce the state’s carbon footprint.
Who determines the price of all this power?
On the distribution side, the Maine Public Utilities Commission oversees CMP, Versant, and a number of smaller utility companies around the state. (Each state has its own PUC serving a similar function.)
When a utility company wants to raise rates, or build new distribution lines or substations, or recover money they spent on restoring outages after storms, they must go before three commissioners (who are also served by a number of staff) to justify the costs they want to pass on to ratepayers. Commissioners are appointed by the Governor, confirmed by the Legislature, and serve staggered six-year terms.
The PUC does not set rates for the production of electricity or for transmitting it through the high-voltage system. Companies that generate electricity compete for contracts in the open market, while the Federal Energy Regulatory Commission determines the price of transmitting energy through high-voltage lines.
Together, the supply and delivery (transmission and distribution) of electricity accounts for roughly 97% of an average bill in Maine. But ratepayers will also see two other charges: for “stranded costs” and “conservation.”
In Maine, customers have also paid “stranded costs,” which for the most part involved the cost of buying out contracts between generators and utilities — signed at the insistence of lawmakers — where the contracts turned out to be more expensive than power available on the market.
Ratepayers also pay for certain state policies, such as support for low-income customers and net-energy billing, a program designed to increase adoption of solar around the state.
The “conservation” charge funds state energy efficiency programs, including Efficiency Maine Trust, which provides rebates, discounts and loans to homeowners and businesses who install more efficient equipment.
At the regional level, the nonprofit ISO-NE coordinates who is selling power to the grid and when, but they don’t tell generators what they can charge for the power they’re producing.
ISO-NE is also “fuel-neutral,” meaning it doesn’t care whether it’s coal or oil or solar panels producing the power. They are primarily concerned with what is most reliable and cheapest (the lowest cost resource is always deployed onto the grid first).
ISO-NE monitors power flows across New England minute-to-minute as well as 10 years out, planning for which power plants are going to be retiring and which ones will be coming online.
They don’t plan to build specific projects, but they do work with states to figure out what kinds of generating resources and transmission lines will be needed and available in future decades, and how they will all contribute to getting power where it needs to go.
“The thing that makes the electricity system different from virtually every other aspect of daily life,” said Welch, “is that you cannot store it in significant quantities… you have to keep it in balance.”
Why has my bill gone up so much?
The biggest increase this year was the result of the volatile price of natural gas, which shot up after Russia, one of the world’s top three producers of natural gas (along with Iran and the United States), invaded Ukraine. (Prices rose again this week after concerns over the war in Israel.)
Sixty percent of New England’s electricity is generated by natural gas-fired power plants. Despite the United States being the world’s largest exporter of natural gas, New England has fewer natural gas pipelines than elsewhere in the country, and so must import liquified natural gas, which means competing with other countries, particularly the European Union, for the fuel.
That competition had a dramatic effect on bills in Maine and elsewhere around the region, although prices have since come down, decreasing slightly this summer.
Bills also increased because the Maine Public Utilities Commission approved requests by CMP and Versant to raise rates to cover the costs associated with delivering electricity, according to the Portland Press Herald.
“The utilities are needing to spend more to improve reliability and to begin the process of modernizing the grid for the load growth that we expect and to incorporate the distributed energy resources into our system,” PUC Chair Philip Bartlet told reporters this summer, according to the Portland Press Herald.
There have also been increases in the “stranded costs” associated with the state’s net-energy billing program, although this is currently a much smaller portion of the bill.
Overall, the cost of supplying and delivering electricity has risen faster than inflation in the past decade, with a significant jump last year.
In CMP territory, distribution rates went up 21 percent between 2013 and 2022, according to PUC data, from 5 cents per kilowatt hour in 2013 to 6 cents in 2013.
Transmission rates in CMP territory more than doubled over that timeframe, from 2 cents to 5 cents; and the cost of supplying electricity (the “standard offer”) went up 71 percent, from 7 cents to 12 cents.
In Versant’s Bangor Hydro district, distribution rates went up 9 percent between 2013 and 2022, from 7 cents to 8 cents, according to PUC data; transmission rates increased 75 percent, from 2 cents to 4 cents; and the price of supplying electricity went up 71 percent, from 7 cents to 12 cents.
This story was originally published by The Maine Monitor, a nonprofit and nonpartisan news organization. To get regular coverage from the Monitor, sign up for a free Monitor newsletter here.