High Tension: Is Maine Facing an Energy Crisis?

May 26, 2016

Gov. Paul LePage says Maine’s single biggest problem is the cost of energy. And compared to the rest of the nation, Maine and New England do struggle with higher prices for electricity.

But some observers say prices in the region are trending downward, and that there are some important cost drivers that go beyond the simple rules of supply and demand.

This story is the first of two on the forces that determine what we pay for the energy we use.

Pretty much any time LePage speaks before a crowd these days, he can be counted on to hammer away at one particular topic.

“The energy crisis in Maine, which is, folks, the biggest crisis we face,” LePage said recently at the Republican Party convention in Augusta, where he bashed the advocates of alternative energy programs that he says will drive Maine’s energy costs even higher. “I have to deal with companies who tell me every single day, we can’t afford to be in Maine.”

While railing against wind and solar, LePage has touted hydropower and expanded natural gas pipeline service to Maine and the region as the solution.

But here’s the thing: In the past several years, the cost of electricity supply, driven by natural gas, has gone down. And it’s a trend noted by LePage’s own energy chief, Patrick Woodcock.

“Our wholesale pricing is in a much more competitive place than it was two or three years ago,” he says.

Electricity supply prices in Maine have been sliding steadily downward since highs seen in 2010 — although there was a big upward swing in the winter of 2014 that has since abated.

For most residential and small business users, supply prices are the the lowest they’ve been since 2005. Industrial rates just awarded for June mark the lowest energy supply rate manufacturers have seen in several years.

And while that’s just a one-month snapshot, Woodcock says the trend is looking pretty good for the next several years. That’s because energy markets are recognizing that new investments in natural gas pipeline technology and capacity in Southern New England and Canada will ease supply constraints throughout the region.

“So the constraints in our gas capacity are being relieved,” Woodcock says. “And we’re starting to see very, very competitive wholesale and natural gas pricing in the future. And that is a good story to tell for people who are looking to invest in the states, who are existing facilities. We have obviously a lot more to do.”

Including more natural gas, LePage says, brought in through new supply lines paid for by consumers. That would hedge against future volatility in gas prices, against the retirement of other cheap power sources in New England such as the Vermont Yankee and Yankee Pilgrim nuclear plants.

And it could help the region compete with other parts of the country that have benefited from their proximity to coal and gas fields, or to hydroelectric generators that the federal government subsidized decades ago.

And if those pipelines through New England aren’t built?

“We will not have enough gas — and this is an absolute certainty — to eliminate the price differential between New England and the rest of the country,” says Anthony Buxton, a lawyer and lobbyist who represents some of the biggest energy users in the state, mostly paper mills.

His view is vehemently opposed by environmentalists who say big investments in new gas infrastructure will only lock the region in to over-reliance on the fossil fuel, at a time when costs for renewable energy are going down.

A recent report by Lawrence Berkeley Laboratories shows that the proportion of an electricity bill in Maine that goes to cover mandated incentives for renewable energy is dropping, from more than 1 percent in 2012 to well less than one percent in 2014. It’s a trend state regulators say continued in 2015, even as more renewable energy is added to the mix.

Galen Barbose, one of the report’s authors, says Maine’s renewable energy portfolio costs consumers here less than similar standards in many other states. And he says in any of the 29 states that have such requirements, these incentives play a relatively small role in overall electricity prices.

“There are just so many other factors that impact electricity prices that it’s hard to see this one policy being a driving force in differences across states,” he says.

Costs for efficiency measures in Maine have been stable, meanwhile. And put together, the burden of all of Maine’s environmentally oriented policies is being more than offset by payments the federal government is making to Maine for past costs of storing nuclear waste from the now shuttered Maine Yankee plant in Wiscasset.

So if the cost of electricity supply, and of renewable and efficiency policies in Maine and New England are becoming more competitive with other states, why are the region’s overall electric power prices routinely rising 25, 50, even 100 percent higher than those in most of the rest of the country?

Tim Schneider, the state’s public advocate, argues there is one very big factor that doesn’t get a lot of public attention in Maine.

“The thing that makes our costs higher than anywhere in the country is the prices we pay for transmission,” he says.

Credit Consumer Liaison Group

There are historic, structural reasons for that — and some federal and regional policies that states, including Maine, are trying to change.

In part two, we’ll take a look at the cost of energy transmission in Maine, and beyond.