A 2012 deal worth hundreds of millions of dollars to expand wind energy projects across the Northeast was dealt a blow Tuesday by the Maine Supreme Court, which ruled that a state agency’s approval of the complex deal was invalid.
The transaction included prominent wind developer First Wind, Maine utility companies Bangor Hydro and Maine Public Service and Nova Scotia-based electric utilities owner Emera, Inc.
The Public Utilities Commission (PUC) had approved the proposed transaction in April 2012. In June 2012, the companies announced they had closed the multi-part deal to affiliate, which would provide First Wind with the cash to build wind turbines across the region.
A press release stated the joint venture amounted to $361 million in loans and investments, adding that “the completion of the joint venture could lead to up to $3 billion in future economic investment in the region in the coming years.”
But between the PUC’s approval and the companies’ announcement of the closing, three parties appealed the approval to the state’s highest court. The appeals were made by the state Public Advocate, the Houlton Water Company and the Industrial Energy Consumers’ Group, which represents large energy users and advocates for lower electricity prices.
Their primary argument was that the deal would violate the state’s landmark electricity restructuring act. That law barred electricity transmission companies like Bangor Hydro from owning electricity generation because it was seen as anti-competitive and contributing to high electricity prices.
But in their approval of the deal, the PUC commissioners determined that “the risks of harm to ratepayers do not exceed the benefits if substantial conditions on the approval of the transaction are imposed.”
The Supreme Judicial Court’s opinion, issued Tuesday, came more than a year and a half after the court heard the case. Chief Justice Leigh Saufley wrote that, “Primary among the concerns raised by the interveners” is the potential that the companies would, “through these shared economic and business connections, obtain a competitive advantage over other generators in access to transmission and distribution … thus potentially defeating the purposes of the Restructuring Act.”
Saufley acknowledged that the Act contained “ambiguous language” regarding the relationships between affiliated companies that transmit and distribute power and companies that generate it. But her analysis concluded that the PUC’s approval was based on an erroneous interpretation of that language.
Saufley wrote that the PUC had determined that the transaction should be approved because the relationships between the companies did not amount to one company having a “controlling interest” in the other.
But, a “controlling interest,” wrote Saufley, wasn’t the standard set by the law.
“If the relationship among the entities results in the T&D (transmission and distribution) utility having a financial interest that would provide an incentive to favor certain generators over others, the proposed corporate restructuring is prohibited…
“The commission misinterpreted the statute,” wrote Saufley. “The Commission must reexamine the transactions proposed here,” using the court’s interpretation of the statute’s meaning.
PUC Chairman Tom Welch said Tuesday that “the commission never enjoys having the law court reverse and negate our decisions.”
The court’s decision puts into question the validity of the deal among the four companies. The deal was undertaken after getting PUC approval; if that approval is invalid, can the deal still stand?
“It does create a certain moment of awkwardness as to exactly what the status quo is at this point,” said Welch. “We’re certainly going to be soliciting the views of all the parties in the case as to what they think the implications of this are.”
First Wind spokesman John LaMontagne said that the company was “reviewing the decision and its implications to First Wind and our joint venture with Emera. First Wind will work with Emera as the PUC determines next steps. We remain committed to the joint venture with Emera, as it provides Maine and the Northeast with substantial benefits from development and continuing operation of new renewable energy assets.”
An Emera spokeswoman did not respond with comment by deadline.
Eric Bryant, the attorney in the state Public Advocate’s office who filed one of the appeals of the PUC decision, said that the court’s decision reaffirmed the purpose of the Restructuring Act. The Public Advocate represents the interests of ratepayers in state utility proceedings.
“The Restructuring Act was a balancing of the interests of the utilities and ratepayers, and the act’s separation of generation from the regulated utility was a significant piece of that and it served to protect ratepayers, because all the financial risk associated with generation was turned away from ratepayers,” said Bryant. “I’m gratified that this decision recognizes the goals of the restructuring act, it’s a victory for ratepayers.”