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 Kurt Adams, Chairman, and Commissioners Vendean Vafiades and Sharon Reishus - 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 http://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 three 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. 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). The conservation assessment funds energy efficiency iniatives.  FERC determines transmission prices. The PUC is currently determining CMP's distribution prices and how such prices will be set in the future.
What is the Alternative Rate Plan 2000?	The Alternative Rate Plan 2000 (ARP 2000), which was approved by the PUC in September 2000, 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 2007. Under ARP 2000, low inflation and other costs are resulting in delivery price reductions that are saving CMP customers millions of dollars.   CMP is presently before the PUC requesting a new ARP for the seven-year period beginning in 2008.
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. Handling future price changes required developing a successor to the original ARP. 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 original ARP and its successor, ARP 2000, is: 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.