Lawmakers responding to complaints about Central Maine Power and Versant Power are looking at ways to authorize regulators to consider the companies’ performance when setting rates.

Legislators reviewed a bill Tuesday that would give the Maine Public Utilities Commission the ability to set electricity rates using the utilities’ performance as a guide. The move comes in the wake of the resounding defeat in November of a referendum to create a publicly owned utility.

The bill, L.D. 2172, would authorize regulators to establish performance-based metrics they would use when considering a rate increase. Objectives would be to promote efficient, cost-effective utility operations; increased planning and preparation for extreme storms and climate hazards; a cost-effective and comprehensive response to outages; and selling electricity at a more affordable cost.

“It’s been my experience that utilities perform according to expectations that are set by regulation,” Rep. Gerry Runte, D-York, a member of the Legislature’s Energy, Utilities and Technology Committee, told colleagues Tuesday. “If we want to change it, regulation and regulatory reforms ought to be the first step.”

The idea of performance-based ratemaking, which for him preceded the rejection of the proposed Pine Tree Power public utility in November, is “not just a reaction to fix a current set of circumstances,” Runte said in an interview. It’s also a way to fix what’s “happened in Maine on a piecemeal basis.”

The Legislature and Gov. Janet Mills took a first step in 2022, he said, enacting legislation establishing a “report card” for utilities, rules adopted by the PUC to establish minimum requirements for a utility to meet quantitative planning and operational standards for reliability, and timely responses to customer requests for service, information, billing and restoring service.

Deirdre Schneider, legislative liaison for the PUC, which does not support or oppose the legislation, told lawmakers that the agency used performance-based ratemaking in two recent rate cases. In the case of CMP, distribution revenue may be reduced annually up to $8.8 million based on the frequency and duration of outages, billing accuracy and call answering, she said. Versant Power also faces a financial penalty in the form of customer credits based on similar metrics.

The new requirements were established last May and June. An annual report to determine compliance has not yet been done.

Runte has proposed amending the legislation now before lawmakers. He said the measure would invite participation from customers, consumer and environmental advocates, utilities, regulators and others. The bill initially implied the PUC “would go ahead and do all this and periodically let people know what they were up to. That wasn’t the idea at all,” he said.

He urged flexibility for regulators. “Let’s trust the process. The process here is evolutionary, not revolutionary,” Runte said.

Rebecca Schultz, a senior advocate for climate and clean energy for the Natural Resources Council of Maine, told lawmakers that Runte’s proposed changes are “far too diluted and we’d like to see something much stronger.”

A proposal to examine every three years rate regulation tools based on performance “does not lead toward meaningful reforms,” she said. The legislation would ask the PUC to consider taking action when it could instead “strike a better balance between deferring to the PUC’s regulatory expertise and providing it with a clear directive to reform utility incentives,” she said.

Maine’s two investor-owned utilities oppose the legislation. Peter Cohen, vice president of regulatory affairs at CMP, said in testimony to the committee that the 2022 law established “strict performance metrics, reporting requirements and associated penalties” on utilities.

COMPANIES OPPOSED

CMP has made changes where metrics were determined to measure reliability and customer service, he said. Reliability metrics measure the length of an average customer interruption, the frequency of interruptions, total hours an average customer was without power and a measure of circuits that performed poorly compared to the rest of the system, Cohen said.

“CMP believes customers would be better served by letting the ink dry on the new reporting under (the 2022 law) and taking the time to evaluate the results before implementing even more changes,” he said.

James Cote, a lobbyist who represents Versant, said in testimony to the Energy, Utilities and Technology Committee that he hopes lawmakers consider the “progress within the already established metrics and policy initiatives.”

He suggested the PUC investigate the concept of performance-based ratemaking, including how it functions in other states, and report back whether it would work in Maine.

Sean Mahoney, vice president and senior counsel at the Conservation Law Foundation, an environmental advocacy group, said in testimony to lawmakers that although Maine voters disagreed over whether to establish Pine Tree Power, “there was little split among Maine people that the performance of our transmission and distribution utilities needs to improve.”

The foundation called for changes to increase utilities’ accountability with metrics to measure their performance regarding affordability, grid modernization, transparency and compliance with Maine’s climate and clean energy laws.

Seventeen states have authorized performance-based ratemaking or are establishing policies calling for it, according to RMI, a clean energy research organization.

Performance-based ratemaking is an alternative to the traditional “cost of service” regulation by compensating utilities for how they perform, rather than for selling more electricity or making new infrastructure investments, RMI said. States are increasingly turning to performance-based ratemaking to address goals such as reliability, emissions reductions and cost control, it said.

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