Mainers Face Double-digit Shock in 2022 Electricity Supply Rates

in November 10th, 2021

By Tux Turkel, Staff Writer, Portland Press Herald.

Experts say the expected increase is primarily a result of rising prices for natural gas. Maine's solar policies also could increase rates in the coming years.

A majority of Mainers could see the rate they pay for their home’s electricity supply jump between 60 and 80 percent next year, based on assumptions provided to the Legislature by the state Public Utilities Commission, as well as wholesale prices observed by energy experts.

Home customers of Central Maine Power and Versant Power who buy their electricity via the PUC’s “standard offer,” or default power supply, now pay roughly 6 cents per kilowatt-hour, or $33 for the typical 550 kWh of use a month. Assuming a 60 percent rise to 9.6 cents per kWh, the cost of power would climb to nearly $53 a month. Such an increase would push an average residential customer’s bill, which also includes a distribution charge, from about $90 to $110.

“It’s not only possible, it’s almost certain,” Rich Silkman, chief executive of Competitive Energy Services in Portland, told the Portland Press Herald on Tuesday.

Silkman, whose company negotiates power contracts for companies and institutions, said wholesale electricity prices for delivery over the winter in New England are more than twice what they were last year. Those prices form a foundation for the higher retail rates home customers will have to absorb in 2022.

Complicating the outlook is an ongoing debate over the potential impact of state incentives that have triggered a multimillion-dollar boom in solar energy projects. Silkman and others say the impact – while real – will be modest in the near term and has nothing to do with the pending standard-offer rate hikes.

Rising energy prices are a global trend, linked to supply and demand imbalances in petroleum and natural gas markets during the pandemic. But the recent calculations by the PUC provide a first glimpse of the magnitude of supply rate increases facing Maine electric customers in 2022.

The exact impact will become clear next Tuesday, when the PUC commissioners are set to vote on supplier picks for Versant service areas in northern and eastern Maine. The following day, they’ll select the suppliers for CMP’s service area. The rates will take effect Jan. 1 and be in force for one year.

Asked Monday about PUC estimates of a 4- to 6-cent-per-kWh rise in standard offer rates, a PUC spokesperson said those numbers were used only as examples for information requested by members of the legislative committee that handles energy matters. She said the agency can’t comment or speculate on what the final rates will be.

“However, as is generally known, energy prices, including wholesale market electricity prices, are currently well above historic levels” PUC spokesperson Susan Faloon said.

NATURAL GAS PRICES DOUBLE

While some residential customers sign individual contracts with retail energy suppliers, the vast majority of Mainers get their electricity supply via the standard offer service and the annual bids overseen by the PUC. Both CMP and Versant distribute electricity over wires, but they don’t generate it and aren’t responsible for the ups and downs in the supply cost.

Supply currently makes up roughly 40 percent of a total residential bill from CMP. Supply rates have been falling the past two years – the standard offer supply prices for homes and small business fell by 12 percent last year compared with 2019 rates.

But that welcome lull now faces a sharp reversal. In New England, the jump is being driven by the price of natural gas.

Despite the ongoing transition to renewable power, natural gas-fired plants still generate half of the electricity in New England. They also set wholesale prices.

Average wholesale gas prices in September were 208 percent higher than a year earlier based on an index linked to pipeline delivery points in Massachusetts, according to the region’s grid operator, ISO-New England. And so-called “forward prices” for wholesale gas to be delivered this January and February are exceptionally high.

A contributing factor is inadequate pipeline capacity in the region to serve both heating needs and power plants on the coldest winter days. Environmental groups and public opposition have stalled pipeline expansion in recent years.

To keep the lights on during hours of peak demand, the grid operator may need to call on backup power plants that burn oil, such as Wyman Station in Yarmouth. The region also may take more deliveries of liquefied natural gas from an import terminal in New Brunswick, Canada. Both options are more costly and drive up market prices, Silkman said. Ultimately, they are reflected in the supply bids offered to the PUC.

“I assume the bids will be competitive,” Silkman said. “But that doesn’t mean the prices will be low – just the best prices in the market.”

Compounding the economic impact for customers is a recent  increase in transmission and distribution rates linked to carrying power over wires to homes and businesses.

In July, a PUC-approved rate hike tied to federally mandated transmission investment charges in New England boosted the average monthly bill for a CMP residential customer by roughly 11 percent, to $90 a month. The pending hike in supply rates will be on top of that.

SOLAR POLICIES A FACTOR

If fallout from natural gas prices and transmission investments weren’t enough, Mainers will, over time, face rising rates tied to another factor – the state’s solar energy policies.

Depending on various assumptions that are open to debate, current rules could add a penny or two per kWh to the distribution portion of an electric bill. But the precise impact won’t be known at least until July, when the PUC adjusts CMP and Versant transmission and distribution rates based on annual utility cost filings.

The solar impact and standard offer estimates were contained in an email sent Monday to members of the Legislature’s Energy, Utilities and Technology Committee. The calculations were in response to queries some panel members made about the impact of the state’s net energy billing policy, which has created robust incentives for developers to invest hundreds of millions of dollars in solar projects.

That policy remains the subject of partisan bickering in Maine. Republicans in general say rules that encourage scores of smaller, community solar farms are more costly for ratepayers than building larger, so-called grid-scale projects. Democrats largely support existing net energy billing policies and point to a study done last spring for the industry that shows broad economic benefits from community solar, including job creation and grid investment.

On Monday, the head of the state agency that represents utility customers said that while he shares concerns about the impact of net energy billing, it’s inaccurate to blame solar policy for the pending increase in electricity supply rates next year.

“In my view, the impact of net energy billing is very small,” said Drew Landry, Maine’s acting public advocate. “The increase in the standard offer is all about the natural gas markets.”

Until now, Mainers have been somewhat insulated from major rate hikes, according to Rep. Seth Berry, D-Bowdoinham. While transmission and distribution rates have gone up, they’ve been offset by very low supply rates.

“We have enjoyed a remarkable period of cheap natural gas,” said Berry, who co-chairs the energy committee. “And it has masked a steep increase over the last several years in transmission and distribution. Now the market is correcting, and we will see some very challenging electricity prices as a result.”

Berry, an architect of state solar policy and a longtime utility foe, also questioned a key assumption in the PUC’s net-energy billing analysis – that only 25 percent of projects due to come online next year will be delayed or canceled. Actually, Berry said, Maine’s solar industry estimates that roughly half the projects won’t come online as planned. That would greatly reduce near-term rate impacts.

After seeing the PUC data, Berry asked the PUC to take a second look at its estimates and factor in the assumption that fewer projects will be producing power next year.

Whatever the precise impact of Maine’s solar policy, it’s going to hurt Maine electric customers, according to Rep. Nate Wadsworth, R-Hiram. A member of the energy committee, Wadsworth said he thought it was “pretty scary, pretty serious,” when he read the PUC estimates Monday morning. He expects them to be a topic of discussion next Wednesday, when the committee has scheduled an out-of-session meeting to review outstanding business.

“Republicans have never supported the net energy billing concept,” Wadsworth said. “We heard that Maine ratepayers are going to pay these costs. And now with these projects coming online, the bills are coming due.”

Read the original article HERE.

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