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Leonard Hyman & William Tilles

Leonard Hyman & William Tilles

Leonard S. Hyman is an economist and financial analyst specializing in the energy sector. He headed utility equity research at a major brokerage house and…

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Maine Voters Reject State Takeover Of Private Utilities Companies

  • Maine voters rejected a state takeover of electric utilities.
  • Cost estimates for this plan cited in the local press varied from $8-13 billion.
  • The conventional wisdom regarding Maine will focus on the exorbitant sums spent by its two utilities on lobbying, advertisements, social media etc.
Power Grid

Maine voters yesterday overwhelmingly rejected a ballot measure, Question 3, proposing a state takeover of its two investor-owned utilities, Central Maine Power and Versant. Public power advocates proposed a new state entity, Pine Tree Power, that would be authorized to issue debt for this utility takeover. Cost estimates for this plan cited in the local press varied from $8-13 billion and could take a decade to implement. The plan essentially would use the principles of eminent domain to establish a fair value for utility assets and then prosecute. We should hasten to add that this has not proven to be a winning strategy very often. Attempting it on a more extensive, statewide platform made the public power advocate’s task even more daunting. For example, the city of Boulder, CO, voted to municipalize its electric utility in 2010 and to abandon the unsuccessful effort in November 2020 after a decade-long fight and spending almost $30 million. They ultimately reached a settlement agreement with the Public Service Company of Colorado about increasing renewables. These are very hard fights for public power advocates to win, especially when lacking the support of the governor and other key state officials, as happened in Maine.

The conventional wisdom regarding Maine will focus on the exorbitant sums spent by its two utilities on lobbying, advertisements, social media etc. The public power advocacy group Our Power, was supposedly outspent by a ratio of 30:1, and the vote was 70% against public power versus 30% in favor. In addition, voters also approved a measure that any new state debt in excess of $1 billion requires voter approval. This also further limits the likelihood of future attempts to take public the privately owned state electric system.

These types of anti-utility movements do not occur in a vacuum. The incumbent utilities had four main criticisms: 1) rates were too high, 2) outage response was too slow, 3) poor customer service, and 4) Central Maine Power’s problem-plagued billing system. As for the fourth allegation, the state’s public utility commission levied a $10 million penalty against the company for deficiencies. But the state utility commission also noted that the state's electric customers faced annual rate increase from 34-49% due mainly to higher natural gas prices. Natural gas drives wholesale electricity prices in New England as it is the boiler fuel for much of the power-generating fleet. For example, residential electric customers of Central Maine Power paid 11.8 cents per kwh in 2022 and 17.6 cents per kwh in 2023, a 49% increase. Versant’s two operating utilities, the former Bangor-Hydro and Maine Public Service experienced residential rate increases of 34% and 41%, respectively.

This explains why the issue could gain enough traction to be taken to the voters.

We guess that Maine’s voters made the right decision. If the state eventually took over its investor-owned utilities at a generous price, utility shareholders would benefit, while the state’s taxpayers would be responsible for the billions in new debt to accomplish this ownership transfer. Depending on the price ultimately paid, it’s not clear whether the new state public power entity could have meaningfully lowered residential electric rates. A new state public power entity might be more responsive to the public’s concerns, but if rising natural gas prices and New England’s gas-heavy electric generation mix are the real problem, then questions of public vs private ownership, while symbolic, are largely irrelevant.

As we’ve noted previously, there is one odd thing about the electricity business. Although its product is essential for modern existence, very few customers care that much about how it's produced (assuming it’s environmentally benign) or who sells it. Electricity is a commodity, and there is no brand loyalty. This is an industry ripe for disruption, as 30% of Maine voters indicated. But why spend billions buying old, legacy utility assets when the state can pay far less providing cheaper renewable power as it's been doing? 

By Leonard Hyman and William Tilles

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