Consumer-owned utility could save Mainers a lot of money on their electricity
More than 50,000 Mainers have signed a petition to allow customers to own their utility. They want to replace our failing approach to electricity transmission with a better model. They are watching closely as the Legislature considers LD 1959, An Act To Ensure Transmission and Distribution Utility Accountability.
Although we believe LD 1959 ultimately falls short, it is a noteworthy milestone in Maine’s efforts to confront the persistent failings of our investor-owned electric utilities. LD 1959 recognizes that our current utilities, which report to investors in Canada (Versant Power) and around the world (Central Maine Power), are no longer accountable to ratepayers. And the bill’s whistleblower protections are long overdue.
Unfortunately, LD 1959 does not address the fundamental problem with our electric utilities.
Maine’s investor-owned utilities have been widely criticized for poor management, worst-in-the-nation customer approval and for hindering efficiency and renewable energy. Their workers are heroic, but the business model is broken. Even utility representatives admit failures.
But the problem isn’t just poor service. It is the unnecessary cost of our current system.
The legal structure in which our public utilities operate was established years ago to guarantee profit for investors. As a result of decisions of the U.S. Supreme Court, Maine’s diligent and well-intentioned regulators have limited power to protect ratepayers.
The stakes are enormous, involving a staggering amount of ratepayer money. We must invest tens of billions of dollars to ensure that our grid can handle the anticipated surge in heat pumps, electric vehicles and other electrification initiatives.
We think of utilities as poles and wires maintained by workers in bucket trucks. But utilities are financial mechanisms. Utilities are how society makes investments necessary for our livelihood in circumstances where the markets cannot operate freely.
Utilities finance these infrastructure investments by borrowing money or by selling stock to investors. The costs — including an investor premium — are passed along to ratepayers. Ratepayers pay investor-owned utilities for this financing at above-market rates of around 10 percent.
But there is another way. If consumers owned the utility instead of investors, we could finance grid improvements paying about 4 percent interest rates — typical for utility revenue bonds. This 6 percentage point difference would save billions of dollars.
If you were signing a 30-year mortgage, would you rather pay 4 percent or 10 percent? That’s what it boils down to. And that is where LD 1959 does not go far enough. It will not create a consumer-owned utility to take advantage of lower cost financing.
All the outages, interconnection failures and billing fiascoes pale in comparison to the financial implications of the ownership model we choose. The investor-owned business model can never deliver the savings of low-cost financing because it is designed to generate a substantial profit for capital investors.
We currently pay a higher cost than necessary, for unacceptable service. We should cut our losses and move on.
We need a new approach — one that will improve service, restore local control, promote equity and accelerate our response to climate challenges — all at lower cost.
Public utilities are not just a profit opportunity, they are a necessity. They are key to our climate goals.
Versant and CMP deride consumer ownership as “government control.” They don’t mention that Versant is already under the control of a government — the government of Calgary in Canada. And CMP’s corporate conglomerate is heavily influenced by foreign governments from Norway to Qatar.
The real issue is cost. Legislation to fix our public utilities must take advantage of the enormous benefits of low-cost financing that consumer ownership makes possible.
Our electric utilities have been protected from competition for decades, in exchange for the promise of affordable, high-quality service. But that privilege is not a God-given right, and should give way when a better, low-cost option is available.