While CMP profits, critics say cost of widespread outages will be borne by ratepayers

Maine Beacon

The first major snowstorm of the season hit Maine over the weekend and 230,000 customers of Central Maine Power (CMP) lost electricity. The storm will also cost consumers in the long-run, advocates say, due to a financial incentive structure that rewards CMP more for fixing storm-damaged infrastructure than engaging in preventative maintenance.

Customers will likely pay for much of the financial burden created by the storm because CMP is allowed to recoup the cost of a weather event — such as the one over the weekend — from its ratepayers, explained former Maine Public Advocate Gordon Weil.   

“It’s essentially a pass-through,” he said. “If you have unusually high operating expenses, which are caused by an event out of your control — CMP didn’t cause the storm — then you are entitled to collect from your customers the costs that were incurred to restore service on the system.” 

Weil said CMP has done a poor job maintaining its infrastructure to be resistant to storms.

“There is little incentive in the way utilities are regulated for them to make a great deal of effort to reduce their vulnerability to storms because the people who pay the consequences of their lax maintenance are the customers, not the shareholders of the utility,” he said. 

State Rep. Seth Berry (D-Bowdoinham) said CMP also profits because of rules around interest payments for infrastructure improvements. 

“So if they’re replacing a pole that they say needed to be replaced anyway — or perhaps a wire, or a transformer, or insulators — they are guaranteed typically between 8 and 14 percent annual interest on that expenditure over 20 years,” he said. “They make a profit that way.”

Berry said the problem is that lawmakers’ hands are largely tied by the courts when it comes to the profits that investor-owned utilities like CMP can make off capital investments. 

“It’s what the Supreme Court says, so Maine regulators can’t change it, the Maine Legislature can’t change it, the Maine governor can’t change it, Congress can’t change it and the Federal Energy Regulatory Commission can’t change it,” he said. “It’s built into U.S. constitutional law.” 

Berry said another way CMP has boosted its profit margins is by bringing in workers from affiliate utilities in other states to help repair power lines after a storm. 

That’s exactly what CMP did after last weekend’s storm. David Flanagan, executive chairman of CMP, told the Portland Press Herald that the company brought in about 850 workers from utilities in New York, Connecticut, Vermont and Quebec along with 200 of its own workers to repair the damage caused.

Compensation for that practice is very high, Berry said. He explained that when utility workers from other companies are brought into Maine, customers end up paying in the long-run for the trucks coming in and for meals, lodging and overtime for out-of-state crews. 

That money, Berry said, is paid out to affiliate companies of CMP. The utility is owned by Avangrid, which is a subsidiary of the Spanish multinational company Iberdrola. 

“So Iberdrola, which is owned by a couple foreign countries and big banks, is able to make more money in that way off a storm,” Berry said. The foreign countries that own the company are the sovereign wealth funds of Qatar and Norway, he added. 

In an email, CMP spokesperson Catharine Hartnett said storm-cost recovery rules are approved by the Maine Public Utilities Commission (PUC). She said for Tier 1 storms — which have restoration costs under $3.5 million — and Tier 2 storms — which have restoration costs greater than $3.5 million but less than $15 million — CMP shares the cost of the storm damage, with its share of the cost capped at $2 million a year. For Tier 3 storms, which have restoration costs over $15 million, CMP will share the cost with customers up to $3 million per storm event, Hartnett said. 

“In all cases, the storm costs considered for rate recovery are only incremental operating expenses (OT, contractor costs, etc.) not already reflected in CMP’s rates,” she wrote, adding that costs related to infrastructure repair or improvements “are not considered and would only be reflected in rates following a general rate case.” A general rate case is when an investor-owned utility goes before the state to request funding, as CMP did earlier this year

“In 2020, we spent a total of about $220 million on system improvements of various kinds — and over the past ten years the company has invested about $3 billion of shareholder earnings into the Maine grid,” Hartnett added.   

Critics say poor service from CMP the norm as company eyes corridor

Advocates say the mass power outage caused by the storm over the weekend is not surprising given that CMP has been ranked last in the U.S. three years in a row among utility companies when it comes to customer satisfaction. 

“[CMP] has never been particularly good, and it has deteriorated in recent years,” Weil said. 

In some cases, CMP’s reputation precedes itself. Bill Dunn, who lives in Yarmouth and is a semi-retired consultant with nearly 50 years of experience in the electricity industry, said one of the first things he did when he bought his house was install a generator because of the frequent outages CMP customers experience. 

“And I use it all the time,” Dunn said, adding that the outage at his house from the latest storm lasted almost 24 hours. 

Others, such as Tom Saviello, a former Republican state senator, had to wait even longer. 

Saviello said when the storm first hit, he told his partner they’d likely be without power for at least 30 hours. Saviello’s power didn’t come back on for 36 hours. 

“It’s not the linespeople,” said Saviello, who is involved in a campaign opposing the proposed 145-mile transmission line CMP wants to build to bring power from Quebec to Massachusetts. “They have put their lives at stake for us. It’s their management.”  

Damage in western Maine from the storm over the weekend | Courtesy of CMP via Facebook

As of Tuesday afternoon, CMP’s Hartnett said most of the damage from the weekend storm was concentrated in western and northern Maine, where the company has shifted all available resources. Specifically, Hartnett pointed to falling trees as a significant factor in many outages. 

“We are only allowed to trim 15 feet above our lines and 8 feet to the side. In storms with high winds and ice there are plenty of trees outside that zone that fall into the system. We trim every mile of our service area every 5 years and will take care of diseased or threatening trees in between,” she wrote.   

While longer outages were concentrated in certain regions, Sandi Howard, executive director of No CMP Corridor PAC — the group spearheading the campaign against the CMP’s proposed corridor — said she heard from a variety of people across the state Monday who were still without power. Howard said that included one person in Portland who was told by CMP that they would be getting their electricity back Jan. 11. 

CMP has had more egregious issues with its systems in the past. After a storm in 2019, a website error led to some CMP customers being told their power wouldn’t come back on until 2068. A 2018 report by the Public Utilities Commission found the company had made more than 100,000 billing errors since the launch of a new billing system in 2017.

Howard said because CMP has such difficulty serving its current customers, it has no business taking on a large-scale project like the 145-mile transmission line.

“There’s a lot of concern about why should they be distracted by this project when they need to be serving their current ratepayers,” Howard said. 

As a result, No CMP Corridor is collecting signatures with the goal of putting an initiative on the November 2021 ballot that, if passed, would require legislative approval for high impact transmission lines — such as the one CMP is proposing — reinforcing the requirement that the legislature approve projects that go over public lands. Howard said it would also protect the upper Kennebec Gorge area, a region that part of the corridor would go through. 

The group has a deadline of mid-January to collect the necessary signatures.

The case for a consumer-owned utility

Berry said a solution to the problems with CMP is to buy out the company and other for-profit utilities to create a consumer-owned utility for Maine. 

Without shareholders to deliver a profit to, Berry said a consumer-owned utility would be able to focus on the consumer. 

“Their only interests are the customer,” Berry said. “There’s no higher calling for the board and the managers of those utilities.” 

Because of that lack of profit motive, consumer-owned utilities generally provide more reliable service than utilities that are driven by profit, Berry said.

“If you are trying to maximize profit, you might cut back on your tree trimming budget a bit. Likewise, you might focus more on the most lucrative projects, like the CMP corridor,” Berry said.  

He added that the higher reliability of consumer-owned utilities was demonstrated in the aftermath of the weekend storm, when customers of Maine’s eight local consumer-owned utilities did better when it came to power outages than those of investor-owned utilities. 

Berry, who put forward a bill to create a consumer-owned utility last legislative session, said he plans to introduce a new and improved version of the bill in the upcoming session. 

Rep. Seth Berry speaks at a press conference at the Maine State House in 2019 introducing legislation to replace Maine’s investor-owned power companies with a consumer-owned model. | Dan Neumann, Beacon

Weil pointed to the example of Nebraska, which is served entirely by consumer-owned utilities, as an example of how such utilities provide more reliable service. While Maine ranks near the bottom of power grid reliability among the states, Nebraska ranks in the top ten. 

“Where you have the customers being the owners, that is to say a consumer-owned utility, systems are much more reliable,” Weil said.

Dunn added that consumer-owned utilities are generally cheaper. He said while a consumer-owned utility typically has to put in more money upfront, “they save it in the long run” by avoiding costs like having lots of outages and therefore having to pay their crews overtime or bring in crews from other states to help make repairs. 

Dunn pointed to a paper published earlier this year by the group Maine Power for Maine People that showed the cost-savings a consumer-owned utility can provide to customers. 

“With the exception of consumer-owned utilities on Maine islands, which face unique (and expensive) logistical challenges, ratepayers pay less, on average, to consumer-owned utilities than to CMP or Emera [now Versant],” the paper found.

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  • Sandi Howard
    published this page in News 2020-12-10 10:21:08 -0500