ELLSWORTH — Keeping the lights on is about to get more expensive for some customers in Hancock County and surrounding areas.
After accepting bids from suppliers, the Maine Public Utilities Commission (PUC) announced Dec. 4 that the standard offer for electricity supply for customers in the Emera Maine Bangor Hydro District will increase just under 16 percent beginning in January.
The increase in a standard offer customer’s monthly bill is expected to be around 6.5 percent because the cost of supplying electricity is only one part of the bill.
The “standard offer” for customers in the district, which includes Hancock, Washington and Piscataquis counties, will be 8.37 cents per kilowatt hour beginning in January.
“This increase is about a penny” over last year, said Harry Lanphear, spokesman for the PUC. For an average residential customer using around 550 kilowatt hours, that’s an extra $5.50 per month.
“It’s not quite as big as some people might think,” Lanphear said. “And if they don’t like that price they can shop around and get a better deal.”
Around 60 percent of customers in Emera’s Bangor Hydro district take advantage of what’s called the “standard offer,” the default rate option approved by state regulators. The rest buy their power from another company.
There is a range of options, although the standard offer is often lowest. A customer in Ellsworth could choose from dozens of providers, including AmbitEnergy (9.20 cents per kilowatt hour as of December 11), North American Power (8.99) or XoomEnergy (11.29), among numerous others.
“This standard offer price is for people who either think it’s the best deal or who just don’t get around to or don’t want to shop,” Lanphear said.
Mainers haven’t always had such choice in their power providers. Until 2000, when the state restructured its energy market, customers were mostly restricted to the provider in their area. That provider usually controlled all aspects of the supply chain: it owned the generation (such as power plants and dams), transmission (high-voltage power lines) and distribution (lower voltage lines).
Legislation passed that year opened the electricity market to competition and forced power companies to sell off their “generating assets,” the facilities where electricity is produced, such as dams and power plants. Maine was one of many states that deregulated its energy market in hopes of lowering rates and breaking up the near-monopolistic holds of some companies.
Expectations were high that creating competition would result in far lower energy costs for consumers. But although standard offer rates in the Emera Bangor Hydro District have fluctuated over the years, in 2019 they will be nearly double what they were at the beginning of 2000. And researchers at the University of California, Berkeley have argued that energy markets in deregulated states have been more vulnerable to fluctuating natural gas prices, the predominant source of fuel in New England.
“There are lots of competitive options,” said Lanphear, when asked whether deregulation has been effective in lowering rates.
“It’s worked both ways since restructuring happened.”
Marcia Blomberg, a spokeswoman for ISO New England, said in an email that while rates are set by state regulators and may fluctuate due to state-specific factors, wholesale electricity prices around the region are down since 2003.
(An ISO press release shows the cost of wholesale electricity dropping nearly 35 percent between 2004 and 2017.)
“Retail rates include many different elements,” said Blomberg.
Depending on the state, rates could be affected by elements such as “the wholesale cost of power; the cost of transmitting power over long distances; the cost of distributing power locally; the utility’s costs; and the cost of state energy policies, such as energy-efficiency programs or support for renewable energy.”
“Before restructuring,” said Blomberg, “utilities built and owned the power plants, the transmission lines and the distribution system.”
This meant that companies recovered their costs “plus a rate of return approved by regulators, in the retail rates charged to customers,” Blomberg said.
“That system did not encourage efficiency and innovation, and when utilities made poor investment decisions, ratepayers paid for those decisions,” Blomberg continued.
“Now, power plants are built by investors who bear all the financial risk of their decisions and who are incentivized to improve efficiency to maintain a competitive position.”
Although its effect on rates may be difficult to discern, deregulation may have made generating power more efficient, decreasing operating costs at dams and power plants, according to a 2008 report to the U.S. Department of Justice.
And while rates have risen nationally, they have done so more slowly in states that deregulated their markets, according to a 2015 report prepared for the New England States Committee on Electricity.
“Electric industry restructuring has brought significant benefits to New England,” said Blomberg, “in the form of lower wholesale prices, cleaner generation, newer and more efficient generation that is more reliable and opportunities for new technologies to compete for revenues.”
But while generation may have become more efficient, the region’s reliance on natural gas and an overburdened pipeline network has meant price increases during extreme weather.
Natural gas is the primary fuel for around 45 percent of New England’s electricity generation.
But the network of pipelines carrying the fuel is limited, and when the supply is constrained (as it was during last year’s cold snap) many companies turn to oil reserves to generate electricity, causing wholesale energy prices to rise. The problem is only likely to get worse as more coal, oil and nuclear power plants are retired in coming years.
Will there be enough power to meet demand and keep oil and natural gas prices from spiking, as they did during last January’s deep freeze? ISO New England, an independent nonprofit that maintains the region’s energy grid, says yes.
The group forecast in November that “Electricity supplies should be sufficient to meet New England’s consumer demand for electricity this winter.”
Correction: A previous version of this story misstated Emera Maine’s role in the bid process. Emera Maine did not place a bid to provide standard offer service.