The costly power supply will add $ 30 to a household’s monthly CMP bill in 2022

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In an undesirable but not unexpected development, the Maine Public Utilities Commission selected an offer Wednesday that will increase electricity tariffs by 83 percent for most customers in the Central Maine Power supply area.

The 2022 supply tariff will shake up customers who purchase their electricity from the state’s “standard supply” or standard electricity supply. About nine out of ten CMP home and small business accounts are standard.

The increase will increase the utility price from about 6.4 cents per kilowatt hour to 11.8 cents, adding nearly $ 30 per month to a household with a typical consumption of 550 kilowatt hours, the PUC said. That dollar surge is almost identical to what is estimated for Versant Power customers over the next year, it announced on Tuesday.

The current average household CMP bill, which includes both shipping and delivery charges, is $ 96.50. The change will bring a typical home bill to about $ 126 a month as of January.

These increases only apply to the utility portion of a customer’s electricity bill, not the distribution costs of bringing electricity to homes and businesses via cables. CMP only distributes electricity; it doesn’t create it.

For the context, the delivery rate of CMP for private households is 11.1 cents / kWh. It was last adjusted in August and will be reset again next July.

The new supply tariff is valid for one year.

EVALUATE SPIKE TRIGGERS DEBATE

This length of time sparked a debate about whether the PUC’s policy of collecting bids only once a year serves the stability of the trading price in order to get the lowest prices. On Wednesday, the Office of Public Advocate, which represents consumers in utility matters, suggested that this year’s negative experience should prompt a broader review of the state’s standard bidding process.

These developments come a day after PUC selected standard offering providers for Versant Power customers in east Maine, who will increase supply rates by more than 88 percent and add $ 30 a month to a typical bill.

CMP has approximately 560,000 residential customers in south and central Maine and distributes approximately 78 percent of the state’s household electricity.

In addition to private customers, companies that supply themselves with electricity via the standard offer are also faced with steep tariff increases.

During the deliberations, PUC chairman Philip Bartlett lamented the higher prices but said they were the best available at this point.

As on Tuesday, Bartlett blamed the sharp rise on high wholesale prices for natural gas, which generates half of New England’s electricity and typically sets the market price for electricity in the region. Dan Burgess, director of the governor’s energy bureau, described the new tariffs as “a direct consequence of New England’s excessive reliance on natural gas to power the electricity grid.”

Regarding natural gas reliance, Commissioner Patrick Scully suggested that the impact of natural gas be lessened as the region shifts to more renewable energy production, particularly solar and wind, in the coming years. That will mean less volatility and less price fluctuations, he said.

But Drew Landry, the acting Maine public attorney, said the sharp surge ahead had another dimension.

The current PUC policy requires standard offers to be obtained every year. This has several advantages. It is consistent with the way vendors set market prices. And when the wholesale markets are low, as they have been in the last two years, it ensures attractive tariffs for customers in the coming year.

But this practice carries risks. If wholesale prices suddenly rise like they did in 2021, consumers will have to bear the effects over the next year. Customers face this in 2022.

“The obvious downside to the current process is price stability,” Landry said. “Price stability is one of the core principles of tariff structuring.”

However, there is another strategy for getting bid bids. Energy experts call it “ladder”.

The PUC collects offers more than once a year. That way, if wholesale prices change suddenly, the effects will be spread out over time and not be as noticeable. It’s a way to hedge bets. Consumers may not always enjoy the lowest prices, but record highs won’t hit them either.

The Maine PUC worked this way in the past. Here is a summary from the PUC’s 2005 annual report:

“The PUC continued to procure standard supply deliveries in accordance with the protection program launched in 2005. The program is based on a “laddering” structure, which enables the PUC to secure parts of the required supply at different times and thus reduce customer risk. “On the volatility of the wholesale market. At the beginning of the protection program, offers were requested for a third of the load segments for terms of one, two and three years. This set the pace for subsequent purchases of a third of the segments annually after the original terms had expired. “

This technique is used in many states that have restructured electricity markets, said Barbara Alexander, energy consultant and former director of consumer assistance at PUC. Maine is an outlier in running annual tenders, she said.

“It would be the equivalent of buying a stock that looked good for your portfolio and just riding the wave of everything that affected that stock,” said Alexander.

Like Landry, Alexander said current policies are sacrificing the stability that many customers rely on to pay monthly bills.

“As a consumer advocate who has been active in this area for 30 years, I am appalled,” said Alexander. “We have had low prices for a number of years. But now we’re going to pay for it. “

When asked if he was concerned that the PUC might have chosen annual bids at the height of the current wholesale price trend, Bartlett defended the current practice.

Bartlett stressed the low prices Mainers enjoyed in 2020 and 2021 and that they would not have seen prices that low with hedged bids. He said the Commission’s current view is that customers will get a better deal over time with a large annual procurement.

“There’s no silver bullet here,” said Bartlett.

COMPETITIVE PRIZES ALSO AVAILABLE

The companies selected to serve standard offering customers in CMP’s service space for 2022 were not immediately identified. In recent years they have been subsidiaries of NextEra Energy, New Brunswick Power and Constellation Energy.

In 2020, the electricity mix of these generators was dominated by natural gas, which according to PUC disclosure statistics made up 70 percent. The mix was rounded off by 11 percent hydropower, 9 percent oil and 4 percent biomass.

In terms of climate impact, this energy mix emits an average of 885 pounds of carbon dioxide per megawatt hour, 15 percent above the New England average, the PUC reported.

The increase in the standard offer does not affect customers who purchase their electricity from competitive energy suppliers, although a price increase is also expected for these contracts. Most private and small business customers rely on the standard offer – according to PUC statistics from 2020, around 92 percent in the service area of ​​Versant and 87 percent in the area of ​​CMP.

During the Versant meeting on Tuesday, Scully suggested that electricity customers unsatisfied with standard tariffs could consider offers from competitive energy providers. Those tariffs, which are not chosen or regulated by the PUC, could go down in a few months, Scully said if conditions change in the wholesale market.

That idea was also brought up by Landry, who said it was possible that wholesale electricity prices could fall in the spring after peak demand for natural gas this winter.

The Office of Public Advocate has a website with some examples of competitive energy supplier contracts. A full list of retail energy providers is available on the PUC website.

But this strategy also carries risks. Customers who enter into contracts with competing providers need to know the term and terms and possible early termination fees. The practices of one major supplier, Electricity Maine, resulted in a multi-million dollar class action lawsuit and settlement in 2020.

The impending increase in electricity tariffs is part of a trend of rising energy prices that hits consumers as winter approaches.

Average gasoline prices in Maine hit $ 3.43 a gallon this week, according to GasBuddy, nearing a 10-year high. That’s 15 cents more than last month at this point and $ 1.29 from a pandemic break from driving before Thanksgiving last year.

However, a slowdown in wholesale petroleum prices can mean that prices at the pump drop in time for vacation trips, says GasBuddy.

Heating oil, which warms six out of ten Maine households, rose from $ 2.85 per gallon at the start of the heating season to $ 3.16 in the latest weekly survey by the Governor’s Energy Office.

This story will be updated.


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