A discount on power for businesses could result in a cost increase for homeowners.
AUGUSTA – Legislation submitted by Gov. John Baldacci to ease the electric bills for new businesses in Pine Tree Economic Development zones would raise the bills of other businesses and homeowners, experts told the Legislature’s Utilities Committee on Monday.
At issue is the way the Department of Economic and Community Development drafted the bill. As introduced, the measure would allow any business located in a Pine Tree Zone to get the lower electric rates by not having to pay that portion of the rates caused by what are called stranded costs.
Stranded costs are investments utilities made while they were regulated and were expecting a certain return on that investment. Those costs are allowed to be recovered in the rates the companies charge.
The biggest stranded cost in Maine was the early closing of the Maine Yankee Nuclear Power plant in Wiscasset as Maine utilities sold their generating facilities and became distributors of power.
Stranded cost can make up a third of the transmission and distribution portion of an electric bill and even higher for some industrial customers, utility representatives told the panel. There are more than a dozen different business rate classes, and all have different stranded cost provisions.
“A large business that happened to be in a Pine Tree Zone and got certified and suddenly stopped paying stranded costs would make for higher rates for other ratepayers,” said Eric Bryant of the Maine Public Advocate’s Office, the state agency charged with representing consumer interests in utility matters.
“We could see other businesses and residential customers picking the costs these Pine Tree Zone businesses do not pay,” said David Allen of Central Maine Power Co.
“We are willing to work with the department to see if there is a way to provide businesses in a Pine Tree Zone with discounts, but we oppose this as drafted.”
Peggy Shaffer, a policy analyst with DECD, was the only person supporting the legislation at the public hearing other than the co-sponsor formally presenting the bill.
“As the Legislature worked to create this program last year, we knew that in order to reduce the cost of doing business in these zones, we needed to include more than just taxes,” she said.
“Without these (Pine Tree Zone) benefits, these businesses would not exist, so the tax dollars and the payment of stranded costs were never a possibility, and therefore could not be included in any cost or tax projections.”
But, as drafted, the bill goes further than covering just new businesses locating in a Pine Tree Zone. Shaffer said in an interview after the hearing that the bill had been drafted too broadly and that an amendment would be offered to narrow the scope of the measure.
“We will be meeting with the utilities that have opposed the bill to see if they have an alternative solution that would accomplish the same goal,” she said.
Allen told lawmakers that CMP already has a rate break available to businesses that expand their operations or new businesses that locate anywhere in their service area, not just in the development zones that have yet to be designated.
“The Maine Made Incentive (program) says if you expand your business, and increase your use of electricity by 10 percent or more, or you are a new business, you get a penny and half (per kilowatt hour) off your bill for the first year,” he said.
The break decreases by a half a cent a year and ends after three years. The discount applies to the transmission and distribution part of the bill. The break is paid by company shareholders and can be as much as a 60 percent discount for the first year.
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