Here’s why electricity bills in Maine are getting more expensive this month

After a series of recent changes in electricity rates, the Maine Public Utilities Commission is trying to clear up public confusion around the pricing of electricity and on Thursday held a briefing with reporters.

Over the course of May and June, the PUC approved settlements with Central Maine Power and Versant Power to increase the rates for electricity distribution and so-called stranded costs, and to slightly decrease the “standard offer” supply rates.

With the rates finalized, CMP customers will now pay an average $5 more per month and Versant customers will pay $13 more in their next electricity bills than they did at the start of the month. CMP customers are set to pay an average $159 a month, around $33 more per month than in 2022, when the average electricity bill was $126 a month, and $62.50 more than in 2021, when that bill was $96.50 a month.

Some of the changes took effect July 1, after months of negotiations and number-crunching.

Spokesperson Susan Faloon said the commission is hearing from many Mainers who are now struggling to wrap their heads around it all. In the face of many calls, emails and comments on social media, PUC Chair Philip Bartlett held the briefing to help the public understand why July electricity bills look the way they do.

“Our concern was that the combination of all of these changes happening at once, which is somewhat unusual, and to see this magnitude of change happening all together … certainly, we think there’s been a lot of confusion or potential for confusion because there have been so many changes happening so fast,” he said.

Here are some key points the Press Herald took away from the briefing.

DIFFERENT BILLING RATES, AND WHY SOME ARE CHANGING

Four components go into an electricity customer’s bill: supply (the cost to generate electricity using various fuels), transmission (the cost for the electricity to move through the grid), distribution (the cost CMP and Versant charge to deliver that energy), and stranded costs (other expenses such as investments made to stimulate solar energy development).

Distribution rates have increased so CMP and Versant can cover the higher expenses of delivering electricity, improving service reliability, and increasing resiliency amid storm damage associated with climate change.

“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,” Bartlett said.

Then there are stranded costs, which are largely to pay for long-term power purchase agreements approved by the state, and the net energy billing costs associated with renewable energy projects such as community solar farms.

Those costs originally stemmed from the deregulation of Maine’s electricity industry in 2000, when the state separated the entities that deliver electricity from those that generate it, and had to pay back CMP and Versant for the generating plants and assets they lost.

But Bartlett said the driving force behind the substantial increases is the state’s net-energy billing program, which is meant to encourage renewable power generation. A portion of those incentives are financed by the stranded costs. Through February 2024, net energy billing will make up $94.6 million of the $95.2 million in stranded costs, Bartlett said.

All the while, customers will pay less for the standard-offer supply cost, the default option for customers who have not chosen a specific supplier to generate their electricity.

On Jan. 1, the supply costs increased the average bill by $31.98 each month because of a volatile market related to wildly varying fuel costs, the commission had previously said.

“We’re highly dependent on fluctuations over time in natural gas prices,” Bartlett said. “As you can see, with the war in Ukraine and volatile international markets over the last couple of years, we’ve seen pretty significant increases in the electricity supply prices.”

But now that those fuel costs have settled down, the PUC was able to cut those rates by an average of $5.50 a month.

“When we were going out in November for our standard offer procurement we only had a couple of months of information. We now have information through April of those contracts and we saw that they were less than anticipated,” he said. “And therefore we felt comfortable that we could reduce the standard offer … and still be able to satisfy those out-of-market costs while giving customers a break in the second half of the year.”

WHAT ENSURES CUSTOMERS GET WHAT THEY PAY FOR?

CMP, Versant and PUC say the ultimate goal is to help the utility companies make enough money to improve their services. But the PUC wants to make sure that those improvements actually happen, and that customers are getting what they pay for.

To do so, the commission at the start of 2023 tightened up its ongoing service quality metrics to measure the performance of the state’s two investor-owned electric distribution utilities.

The stricter metrics come amid ongoing criticism from customers, particularly about CMP’s performance.

The PUC amendments set standards for service performance, including power outage frequency and duration, storm restoration, call-center responsiveness, billing errors and customer satisfaction. The rules also require CMP and Versant to send customers and the state reports on these metrics.

“We felt strongly that the utilities should back up their claims of improved reliability, improved service from the investments that they were making” Bartlett said. “The purpose is to make sure that customers actually see the tangible benefits from the investments that the utilities are making.”

CMP and Versant face penalties as high as $8.8 million a year thanks to a 2022 law.

“If they don’t, they will be penalized based on the amount of months that they’re missing metrics and that money would then flow back to those customers,” Bartlett said.

WILL THE INCREASES EVER COME TO AN END?

“I would not say that the costs are going to stop,” Bartlett said.

That’s in part because of the mounting stranded cost estimates.

The PUC estimates the total stranded costs in the state will reach $95.2 million by February 2024, $147 million by 2025 and $167 million by February 2026.

But with new restrictions and a December 2024 deadline for developers to secure large solar projects, the PUC expects stranded costs won’t increase at such a high rate beyond 2026.

“You can start to see it level off, and you would not expect to see it to be going up substantially beyond that point,” Bartlett said.

But he cautions that other factors and other electricity costs could continue to drive up bills.

“I think it’s reasonable to expect that significant ongoing investment is going to be needed in order to make the clean energy transition, to accommodate the load growth we expect from bringing on (electric vehicles) especially, on top of converting folks to heat pumps,” he said. “I think you’ll also potentially see some transmission costs increase over time as load grows in the region and we have to deal with reliability issues.”