Central Maine Power’s most recent debacle, attempting to charge solar developers millions more for grid interconnections despite signed contracts, was shocking but not surprising from a utility that has sought for decades to undermine renewable power.
Only after public outcry and a call from Gov. Janet Mills for a Maine Public Utilities Commission investigation did CMP reverse course, sending the PUC a mea culpa letter with what energy consultant and former Maine State Planning Office director Richard Silkman called a “very telling juxtaposition.”
CMP executives David Flanagan and Douglas Herling claimed that staff initially calculated costs using “a traditional utility approach.” Weeks later, they acknowledged, “we instructed our team to re-evaluate this (conservative) approach,” and instead work toward “cost-effective solutions … that could be deployed more quickly.”
This stark admission that the utility’s MO doesn’t typically factor in customer costs or timeliness underscores how deep its management challenges run. The incident, which diminished Maine’s reputation nationally, “does raise the question of how well CMP understands its own distribution system and the larger trends underway in the power sector,” observed Ken Colburn, an energy consultant and co-chair of the Maine Climate Council’s energy working group.
To build a grid nimble enough to handle distributed renewable power, resilient enough to withstand more extreme weather, and robust enough to power electrified heating and transportation will be a huge and expensive undertaking.
The “traditional utility approach,” which tends toward the costly and over-engineered, won’t deliver that flexible and responsive grid. A clean energy economy demands swift and significant utility reform.
A quick switch to manage electricity demand
Maine’s grid transformation must occur rapidly to cut carbon pollution, foster energy independence and capitalize on the economic savings that renewable power offers.
Constructed in an era of one-way energy flows, the electric grid now needs to accommodate energy going in two directions since consumers are increasingly energy generators as well. The challenge is to move markedly more electricity from generation and storage sites, and to manage demand – leveling out system loads by providing rate incentives to use energy in off-peak times.
Traditionally, utility profits have come primarily from a rate of return pre-established with state utility commissions (typically upward of 9 percent) on investments made in new infrastructure. That business model now runs counter to what Maine needs. “Steel-in-ground solutions will be less and less necessary, and more and more costly moving forward,” Colburn noted, “especially compared to managing electricity demand effectively.”
Challenges of an underperforming but influential utility
Yet CMP is still focused on new infrastructure, like its contentious transmission corridor that threatens significant wildlife habitat in western Maine. Forcing that project forward despite widespread opposition has exacerbated public frustration with the utility – already high due to protracted billing problems, and extended power outages attributable to chronic understaffing.
In recent surveys by J.D. Power involving residential and business customers at more than 80 electric utilities nationwide, CMP ranked lowest – falling even below PG&E, the reviled California utility cited for causing wildfires and forced to pay more than $13 billion in wrongful death settlements. (Versant, Maine’s other investor-owned utility, got a ranking similar to PG&E.)
Another CMP failing – less well known to ratepayers – is the utility’s decades-long effort to defeat renewable power initiatives. The resulting policy instability has wreaked havoc on Maine’s clean energy industry, slowing its growth relative to other states.
CMP is “undermining democracy in the state of Maine, through their use of lobbyists at the Statehouse, and the influence they wield,” observed Vaughan Woodruff, CEO and founder of Insource Renewables (until this past week, when the company merged with ReVision Energy, where he is leading workforce development efforts).
Getting utility reforms through the Legislature is invariably challenging due to the “huge sway and influence CMP has,” noted David Littell, an environmental attorney and former PUC commissioner. The utility “is very adept at seeding the public and legislative discussion.”
That dynamic surfaces at the Maine PUC, which by statute looks out – not just for ratepayers – but for utilities. Because CMP and Versant are heavily staffed with lawyers and technical experts, and the PUC is not, the commission often passively defers to the utilities. Lobbyists exploit the disparity, citing “safety” and “reliability” so frequently that regulators succumb to what one energy developer termed a “Pavlovian response” of approval.
Despite CMP’s clout, simmering disgruntlement is driving public discussion of what recourse Maine has. How long are we going to “lament that the utility doesn’t do what we want it to do?” Silkman asked. Maine has already lost valuable years in which our utilities should have been reorienting the grid toward reliable, cleaner and cost-effective renewable power.
The state needs to make that transition now, with or without utility cooperation.
Taking functions away from utilities
Maine’s electric utilities used to generate, as well as distribute, electricity, but following Congressional action that allowed independent providers to compete, the Maine Legislature in the 1990s passed a restructuring law that took utilities out of electric generation. Similarly, in 2009, the Legislature created the Efficiency Maine Trust to administer energy efficiency programs that utilities long neglected.
An essential prerequisite for a high-functioning modern grid is strategic system-wide planning. Since CMP and Versant have not undertaken this task, planning should be done by a different entity such as the PUC (with a legislative mandate to expand the commission’s role and provide additional staffing).
Such a recommendation may come soon from the Maine Utility Regulatory Reform and Decarbonization Initiative (MURRDI), a group of stakeholders convened by The Nature Conservancy of Maine and facilitated by the nonprofit Great Plains Institute. It has been meeting since last fall to consider ways to better align electric utility regulation with Maine’s climate goals.
The PUC has “no ability to be anything but reactive now,” observed MURRDI participant Steve Weems, director of the all-volunteer Solar Energy Association of Maine, adding that if it had a mandate and resources for strategic grid planning, the PUC could prioritize Maine’s decarbonization goals and dictate what grid investments and management practices to implement.
Holding utilities to account
But before any expansion, the PUC needs to strengthen its regulatory role – requiring more accountability from utilities. The Commission has opened some important reform-related investigations and inquiries, but a broader change in organizational culture is needed – such as pushing utilities toward greater transparency.
When utilities bill customers for interconnection work, they can charge large sums without listing line-item expenses. Even PUC commissioners can have difficulty getting clear and accessible information from the utilities. Basic data needed by energy developers, such as locations that can best accommodate new power generation, are not publicly available. Acknowledging these deficits, MURRDI is expected to call for major improvements in data quality and transparency.
Utilities could also be held to a higher standard if the state adopted “performance-based regulation,” which would reward utilities for advancing clean energy goals rather than building infrastructure. This approach requires careful incentives and enforcement, but in Littell’s view “it would be better than what we have now,” where the primary driver is “economic self-interest in building more utility lines and substations.”
Significant change at the PUC will hinge in large part on who Mills appoints this spring as the next commissioner, and the mandate given. The new commissioner must reflect the future of the energy field – being an “energy efficiency aggregator, technologist or innovator” with experience managing electricity demand, Colburn said. “You do not want someone who suffers from traditional utility-think or is too strongly wedded to the existing utility industry.”
Overhauling utility ownership
Greater regulatory oversight could start to move Maine’s utilities from 19th-century approaches to a 21st-century grid that offers greater cost-savings, reliability and resilience while cutting carbon pollution. Throughout the region, states are pushing for this transformation, and the “will to make change is growing,” noted Jeremy McDiarmid, vice president of policy and government affairs for the Northeast Clean Energy Council, a trade association.
States like Massachusetts are already engaged in discussions about how best to share the cost of those grid upgrades equitably among energy developers, ratepayers and the state itself. Rhode Island is undertaking major reforms as part of an initiative hosted by the National Association of State Energy Officials and the National Association of Regulatory Utility Commissioners.
Grid modernization will take significant capital and require working with maximal efficiency, which CMP has admitted is not part of its “traditional utility approach.” Maine might benefit economically by replacing its two investor-owned utilities – which prioritize shareholder returns – with a consumer-owned utility.
Whether or not it pursues that path, Maine needs to embark soon on other reforms – from a PUC more engaged in strategic grid planning to performance-based regulation and increased transparency.
If “Maine won’t wait” on climate action, neither can it wait on utility reform.
Editor’s Note, March 29, 11 a.m.: A previous version of this column stated that utility profits traditionally come from a guaranteed return on investments in new infrastructure that is often upward of 11 percent. This column has been has been updated to reflect that the return is not guaranteed but is typically more than 9 percent.