How are CMP prices set?  

Who decides Central Maine Power's prices?	The prices, practices, and level of profitability of CMP and other Maine public-utility companies are regulated primarily by the Maine Public Utilities Commission (PUC). The PUC was created by Maine law and began work in 1914. Its three commissioners - currently, Sharon Reishus, Chairman, Commissioners Vendean Vafiades and Jack Cashman - must be nominated by the Governor and confirmed by the Maine Senate. The Commissioners are assisted by legal, technical, financial, and consumer-assistance staff. PUC proceedings use court-like standards of evidence, procedure, and decisions, and include opportunities for interested citizens or groups to participate as formal intervenors or to receive information updates. PUC offices are at 242 State Street, Augusta ME 04333-0018. Telephone (207) 287-3831. The PUC's Internet address is www.maine.gov/mpuc. CMP's transmission prices are determined by the Federal Energy Regulatory Commission (FERC).
How does the PUC set CMP’s delivery prices?	The PUC separately sets the five pieces that make up CMP’s delivery prices. The distribution piece covers the costs of local power lines, meter readers, bucket trucks and so forth. For most customers, this is the biggest piece of CMP’s delivery price. The transmission piece covers the costs of large power lines and substations and is regulated by the Federal Energy Regulatory Commission. The stranded cost piece covers costs of power contracts with small hydro, biomass, waste-burning and nuclear plants that are left over from before CMP became a delivery-only utility (CMP ceased selling energy when that part of the electric business was de-regulated in March 2000). Stranded costs continue to decline. The conservation assessment piece funds energy efficiency initiatives.  The Electricity Lifeline Program (ELP) provides assistance to residential customers who qualify for the Home Energy Assistance Program.
What is the Alternative Rate Plan 2008?	The Alternative Rate Plan 2008 (ARP 2008), which was approved by the PUC in June 2008, is a price cap mechanism that is expected to help keep changes in delivery prices for most CMP customers below the rate of inflation through the year 2013. The ARP 2008 replaces the previous ARP 2000, which resulted in delivery price reductions that saved CMP customers millions of dollars.  As with previous ARPs, ARP2008 seeks to provide price stability using an inflation-based annual price adjustment mechanism, requires CMP to meet several service-quality targets, and implements a reliability improvement program.
Why is an ARP needed?	The original Alternative Rate Plan (ARP) held changes in CMP prices below the rate of inflation from its launch on Jan. 1, 1995 through its expiration on Dec. 31, 1999. On March 1, 2000, CMP customers received a significant, one-time price cut funded by the State-mandated sale of CMP’s power plants. Also at that time, a new ARP was put in place to build on the success of the original plan.  ARP 2008 continues this successful approach for another 5 years.  ARP2008 calls for an initial distribution price decrease of $20 million on July 1, 2008, followed by implementation of a new five-year price-cap plan that begins January 1, 2009 and continues through December 31, 2013, with price changes occurring on July 1 in the years 2009 through 2013. The PUC adopted the original ARP to improve on traditional methods for setting prices. Other states have used indexed price-cap plans like the ARP to regulate telephone-utility prices. Maine was the first state to apply such a plan to electric utilities. Before the ARP, price changes could require months of litigation, and no one could predict the number, amount, or timing of resulting price changes. This made it hard for customers (and CMP, for that matter) to plan or budget.\ The intent of the ARPs has been and will continue to be: to hold price changes below the rate of inflation,  to adjust prices only once a year and make them more predictable than under traditional regulation,  to offer more incentives for efficient utility operation while monitoring service quality, and  to give CMP pricing flexibility to respond to competing energy sources that might otherwise draw electric load off the system and raise pressure on prices for remaining customers.