Central Maine Power Outlines Why Government Seizure is Bad for Mainers

Augusta, ME — May 20, 2021 — Leaders from Central Maine Power (CMP) testified today against LD 1708, a bill that would authorize the state seizure of private utility assets, in a hearing before the Legislature’s Energy Utilities and Technology Committee. 

“All Mainers deserve reliable power service at reasonable rates,” said David Flanagan, Executive Chairman of CMP. “For more than 120 years that has been our mission—now on behalf of 646,000 customers.  Our company was founded by Mainers and employs more than 990 people in the state—from lineworkers to engineers to finance experts—and each of us is committed to doing what we can to ensure safe and reliable service to our neighbors and communities. Those of us who have deep experience running a utility know that this bill – to seize private assets and politicize the management of electric service—is a bad proposition for Mainers.”  

Testimony offered by CMP and others today touched on several topics:

Risk:  The proposed political agency would seize the assets of CMP and Versant at an estimated minimum cost of $13 billion if, as the Maine Constitution requires, the companies are compensated fair market value. This would be the largest proposed utility seizure ever in the US and the risk would be assumed solely by electric customers in Maine, unlike now, where company shareholders assume investment risk. The acquisition cost would only increase – as asset values increase—over the many years required to complete this takeover. Most importantly, the scheme would transform the utility into a political organization, run by an elected board, dependent on campaign financing and vulnerable to bureaucratic bloating, crony appointments, and favoritism in contracts and investments.

Cost and Rates:  A study conducted by LEI, commissioned by the legislature and overseen by the Maine Public Utilities Commission estimated that in a government-controlled seizure, there would be a net cost to customers of $4.7 billion over 30 years. However, that study assumed a cost of acquisition of 1.5x book, whereas 21st century takeovers have in fact run from 2x to 5x book. Concentric’s projection of $13.5 billion is based on a conservative 2x book figure.

As to rates, a separate study based on Energy Information Agency (EIA) data concluded that on average, CMP’s residential electric delivery rates have been lower than the comparable rates paid by customers in New England and New York over the past 5 years.

Reliability:  Maine is the most heavily forested state in the USA.  About 80% of CMP’s annual power outages are caused by tree damage. CMP invests more than $25 million annually in tree care and trimming; our trimming practices are regulated by the MPUC, and the vast majority of tree outages are caused by trees outside our trimming rights of way.  A change in ownership is likely to reduce the amount of money invested in prevention leading to more tree-related outages.

Jobs and Community Investment:  The takeover bill proposes to retain the roughly 650 union positions at CMP meaning that another 340 employees who are not unionized --  operations supervisors, field professionals, regulatory staff, finance, administration and other employees – could see their positions cut. Not only would Maine people lose jobs, Maine customers would lose their expertise and local experience in running a highly complex operation. 

CMP also has a long history of investing in our local communities with our shareholder returns. In 2020 alone, we contributed over $450,000 in funding to help Maine nonprofits address food insecurity and skills development in the face of COVID-19.  

Meeting Maine’s Climate Goals: CMP has been an active participant in the Maine Climate Council and in other strategic discussions on how to help Maine meet its renewable portfolio and climate goals. We can flexibly ramp up our workforce to do our part and call on broad corporate experience to pilot new programs in Maine to move toward beneficial electrification.  

The solution to ensuring that Maine people continue to be best served by their utilities is to maintain close regulatory oversight and transparency. From rate cases to customer questions, investor-owned utilities conduct business more transparently than most other sectors in the state and we are held accountable for addressing any issues of cost and service.  

Maine should not make the financial mistake of authorizing the government to spend more than $13 billion to undertake the largest utility seizure ever attempted and assume the unnecessary risks of increases in monthly bills and service, investments, and political control of this vital asset to the people of Maine.

#  #  #