Pine Tree Power

9/28/23 – The push for a homegrown electric utility in Maine

White Pine needles / credit: Johndan Johnson-Eilola/Wikimedia Commons/CC BY 2.0

Hello everyone:

Something a little different this week. There’s an opportunity at the ballot box this November to better prepare Maine for the necessary shift in the U.S. electrical grid. The rest of the country should be paying attention.

As always, please remember to scroll past the end of the essay to read some curated Anthropocene news.

Now on to this week’s writing:

The purpose of a public utility is to be useful.

That’s more or less been the definition of “utility” since the Romans. The history of the word goes back to the Old French utilite “usefulness,” then to the Latin utilitatem, “usefulness, serviceableness, profit,” which was rooted in the verb uti, “make use of, profit by, take advantage of.” (Our everyday word “use” comes from the same source.)

There’s an inherent tension behind the idea of utility. It’s the difference between “making good use” of something and “taking advantage” of it. It’s the difference between usefulness and profit-taking. And that’s the tension that underlies an important question on the Maine ballot this November 7^th. It’s Question 3, the “Pine Tree Power Company Initiative.” The question will be worded like this:

Question 3: Citizen Initiative

Do you want to create a new power company governed by an elected board to acquire and operate existing for-profit electricity transmission and distribution facilities in Maine?

Ballotpedia explains a Yes or No vote this way:

• A "yes" vote supports creating the Pine Tree Power Company, an electric transmission and distribution utility governed by an elected board, and would allow the company to purchase and acquire all investor-owned transmission and distribution utilities in Maine.

• A "no" vote opposes creating the Pine Tree Power Company.

Though this is a state ballot, the questions being raised are relevant to the entire country. The world is entering a deeper relationship with electricity. As oil, gas, and coal are phased out of the energy market, and as we shift to “the electrification of everything,” civilization needs a more rational and thoughtful approach to the beefier, renewably-powered electrical infrastructure that will shape the 21^st century.

Three-quarters of Americans (and 96.4% of Maine residents) receive their electricity through a grid managed by for-profit, investor-owned utilities. These companies exist in nearly every state in the U.S. (more on the one exception later), yet they are unusual in the capitalist landscape. For-profit utilities are regulated monopolies, which means that with state oversight they sell products (electricity transmission, distribution, and/or production) to the majority of citizens, but without competition and at a guaranteed profit.

No one disputes the wisdom of having monopolies run the grid. Electricity is so fundamental to our daily lives that we don’t want it subject to the chaos of the market. But should the monopoly be profit-driven? Do profits without competition incentivize good service or simply a desire for more profit? It depends in part on the quality of state oversight and regulation, and to what extent that regulation forces a utility to serve the public benefit. And so the debate behind Question 3 in Maine is in part a debate about whether these utilities are actually the kind of public service we don’t want to privatize at all, like firefighting.

You can think of for-profit, investor-owned utilities as monopolies on a leash. The problem is that the leash sometimes isn’t short enough, or isn’t used effectively.

It’s worth asking: Why should a state have a profit-skimming entity running the electrical grid at all? There’s no free market to protect, and no competition to drive innovation or bring down prices. Why shouldn’t a state cut out the middleman and focus purely on providing a service that’s useful to the citizens? To date, voters seem to assume that there’s no viable alternative to large for-profit utility companies.

Enter the Pine Tree Power initiative, which would create a nonprofit consumer-owned utility (COU). A COU is a pragmatic alternative to the for-profit model, and while much remains to be seen in this particular case, I think it’s an excellent idea.

The motivation behind Pine Tree Power is a widespread, longstanding, multi-issue, bipartisan frustration and dissatisfaction with Maine’s two electrical utilities, Central Maine Power (CMP) and Versant. Here’s a quick partial hit list of what’s behind that frustration and dissatisfaction:

• CMP, which supplies power to 80% of Maine residents, and Versant (16.4%), have been at or near the bottom of national customer satisfaction polls by J.D. Power for many years.

• A 2022 comprehensive state-based review of utilities around the U.S. rated Maine 49^th in reliability, 39^th in total utility performance, and 31^st in affordability.

• CMP in particular has a legacy of billing errors that have upended the lives of Mainers

• Maine electricity customers suffer more power outages than any other state, and the state is next-to-last in reducing the duration of those outages.

• CMP and Versant receive a guaranteed 8-12% profit, but it’s widely felt that they send too much of that money to their foreign owners and invest too little of it into reducing electricity costs and improving grid infrastructure.

• 1n 2022, CMP and Versant sent $187 million in profits out of state – and out of the U.S. – while also asking state regulators for permission to increase electricity rates by 30%.

• This spring, CMP sent out disconnect notices to 60,000 customers – approximately 10% of its customers – and eventually shut off power to about 3,100 of them.

• CMP used its money and influence to kill a popular bipartisan rooftop solar bill back in 2017.

• CMP and Versant have been reluctant to invest in local clean energy like rooftop or community solar. CMP, for example, had to pay $700,000 in a settlement because it had been slow-walking the solar transition.

The plan from Pine Tree Power, then, is to replace the two unpopular private corporate utilities with a single public, nonprofit company run by Mainers. As a consumer-owned utility, it plans on focusing on better customer service, lower costs, more resilient infrastructure, an enthusiasm for renewables, and a motivation to complete the broadband build-out to even the most rural areas. There’s no guarantee that the transition will go smoothly, but they can’t do worse than CMP and Versant.

In fact, since Pine Tree Power will acquire both companies entirely – equipment and workers (who keep their jobs, contracts, and pensions), but not upper management – they’ll be doing the same job with the same workers but putting the money it gets from ratepayers back into infrastructure and rate decreases. Creating Pine Tree Power will essentially cut the heads off of the two private companies (severing their connection with their profit-driven owners and investors), and replace them with a local elected team of managers and their appointed experts.

Pine Tree Power would be the first example of a modern full-state transition to the consumer-owned model. “If that happens,” writes Bill McKibben in The Nation, “it would be a huge step toward dealing with the climate crisis, and a model for other states.”

But you should know that there’s nothing new about an electrical utility that’s neither profit-driven or investor-owned. They’re incredibly common. More than a quarter of Americans, 49 million people, get their power from publicly-owned utilities (POU) and cooperative/consumer-owned utilities. Two of these serve populations larger than the entire state of Maine (1.37 million). According to the U.S. Energy Information Administration,

The United States has 1,958 POUs with an average of 12,100 electricity customers each. The largest POUs are the state-run Puerto Rico Electric Power Authority (PREPA), with 1.47 million customers, and the Los Angeles Department of Water and Power, a municipal utility with 1.43 million customers.

As for how common co-ops or consumer-owned utilities are in the U.S., the EIA says

Co-ops are located in 47 states but are most prevalent in the Midwest and Southeast. The United States has 812 co-ops with an average of 24,500 electricity customers each. The largest co-op is Pedernales Electric Co-op, in Johnson City, Texas, with 333,809 customers…

The heart of the resistance to investor-owned utilities is Nebraska, where they were abolished in the 1940s. The entire state, with 1.8 million people, is powered by a collection of 121 POUs, 10 co-ops, and 30 public power districts. And it apparently works very well. Nebraska’s utilities rank in the top 10 nationwide for affordability, reliability, and overall performance.

 As a Yes! magazine article explained, “Nebraskans pay one of the lowest rates for electricity in the nation and revenues are reinvested in infrastructure to ensure reliable and cheap service for years to come.” Nebraskans suffer few outages, despite frequent tornadoes, and despite being a conservative state it has established a net-zero clean energy goal (because clean energy is good business).

“There are no stockholders, and thus no profit motive,” the Nebraska Power Association proudly proclaims. “Our electric prices do not include a profit. That means Nebraska’s utilities can focus exclusively on keeping electric rates low and customer service high. Our customers, not big investors in New York and Chicago, own Nebraska’s utilities.”

Back here in Maine, 3.6% of Mainers in 97 towns already get their power from nine small consumer-owned utilities. Four of these are island communities who have no choice. But among the others, Eastern Maine Electric Cooperative serves a small population over a large forested corner of the state, yet still sells its power several cents cheaper per kilowatt hour than Versant, whose service area is right next door.

Let’s look at the rationale for supporting Pine Tree Power:

Savings:

• Without a profit motive, the profits now being lost ($187 million last year) will stay in Maine, to be put back into a) rate reduction for ratepayers, b) infrastructure improvement, c) climate resilience, and d) paying down the purchase price of the CMP and Versant.

• Pine Tree Power claims that savings for its customers will reach $367 per year. Already, customers of Maine’s small COUs pay about 50% less on their utility bills than the rest of us.

• Pine Tree Power won’t have to pay excessive pay packages for top corporate executives and, more importantly, will have no out-of-state shareholders demanding higher returns and steeper cuts in services.

• As a nonprofit, Pine Tree Power will be able to borrow funds to finance infrastructure improvement at only 2% to 3% interest, using tax-exempt revenue bonds. That’s much cheaper than the 8% to 12% profit CMP and Versant earn based on their infrastructure investments.

• As a rule, it’s cheaper to own the grid and pay a mortgage on it than it is to pay a high rent to absentee landlords.

• Consumer-owned utilities are eligible for federal disaster assistance funding, unlike investor-owned utilities. That’s federal money that will prove useful as severe weather increases.

Improved customer service:

The entire purpose of a consumer-owned utility is to focus the utility’s efforts on serving the public benefit. Maine’s tiny consumer-owned utilities have a better service record than CMP and Versant. With increased investment in infrastructure and staffing, Pine Tree Power should be able to perform as other COUs and POUs around the country perform: with fewer and shorter outages, and with better customer service. And, hopefully, with lower electricity rates fewer customers will struggle to pay their bills.

Governance:

Pine Tree Power will be run by an independent board of seven elected directors (each one representing five state senate districts), and six experts appointed by the board. As with any nonprofit, the board has a single purpose described by the organization’s mission statement. In this case, it’s to serve the ratepayers. Here’s a schematic of the organization.

And here are a few more details from the Pine Tree Power site:

PTP will be run by private sector experts and current workers. It will not be run by the state, as CMP falsely claims. Specifically, the elected Pine Tree Power board and management staff will solicit competitive bids for one or more qualified, private-sector operating companies to oversee day-to-day operations, such as billing, metering, and customer service. The board will set the terms of contracts, such as duration and pay, and will choose the best operations company for the job. The operations company will replace CMP and Versant’s top executives, but all other CMP and Versant workers will stay on — keeping their jobs, their contracts and their pensions.

Local control:

Many of the benefits of a consumer-owned utility are rooted in local control. The entire organization (leadership, management, and staff) is local. The economics remain almost entirely local. There’s no profit-skimming or influence from investors and corporate managers in Qatar, Canada, Norway, or Spain. Pine Tree Power would be a large nonprofit managing a statewide grid, but it would still be a nonprofit made up of Maine residents working to better serve their neighbors.

More responsive and responsible investment:

Pine Tree Power advocates insist that there will be tens of millions of dollars available annually to cut rates and build out infrastructure, especially those parts of it necessary for the shift to solar, wind, and a more widely distributed array of clean energy. As Bill McKibben writes, “with cheaper borrowing costs than the 10 or 12 percent return on equity that private companies demand, a public utility would be better prepared to build out the larger electric system that Maine will require as its residents give up oil furnaces and gas cars in the ongoing green transition.”

And make no mistake, investor-owned utilities see a lot they don’t like in the clean-energy revolution. Rooftop solar, for example, is seen as a threat to their business model. Why? Because, as I understand it, IOUs profit off the transmission of energy over distance, and because they don’t want the expense of paying customers for their contributions to the grid. There’s much more to this that I haven’t researched, but there’s a reason Maine’s utilities are known for slow-walking the transition, and for making it hard for Maine residents to hook up their solar arrays.

A nonprofit COU, on the other hand, is only working for a stable, affordable, greener grid that serves its customers well. There’s no financial conflict when a utility only wants to be useful.

The commonsense solution of a consumer-owned utility:

Consumer-owned utilities are not a scary new thing that Maine voters should be nervous about. Again, more than a quarter of Americans get their power from public and cooperative utilities. Nebraska banned investor-owned utilities 80 years ago. And the 3.6% of Maine residents already living with one of the state’s nine small COUs are paying on average about 50% less on their utility bills than CMP and Versant customers.

So what’s the opposition to Pine Tree Power? Judging by the ad campaigns and their financial disclosures, much of the opposition seems to be a very expensive confection spun up by CMP and the parent companies of both utilities. Nearly 100% of funding for the two anti-Pine Tree Power entities, “Maine Affordable Energy” and “Maine Energy Progress,” comes from those parent companies (Avangrid and Enmax). Avangrid has committed $18.5 million of the $27.4 million in the pockets of the opposition, which is not a surprise, given that Avangrid owns utilities in CT and NY, and is probably fearful that this consumer-owned virus might spread.

Their ads are everywhere, and they have two main themes: Pine Tree Power will “give the grid to the politicians,” and the purchase price for CMP and Versant will cost over $13 billion and thus break the back of hardworking Mainers who will choke on extremely high electricity bills. But the governance of the new utility, elected by Maine people, is insulated from the influence of state government. Only the Public Utilities Commission, which currently regulates CMP and Versant, will regulate Pine Tree Power. This is the usual (often effective) government-as-boogey-man fear tactic that has little basis in fact. As for the cost to purchase CMP and Versant, their value on paper right now is about $5.4 billion. I can’t speak to what the final valuation might be, but $13 billion is another scare tactic based on an extreme worst-case scenario.

Sadly, though, even Maine’s Governor has adopted these arguments, for reasons that haven’t been made clear. She vetoed the first attempt to create Pine Tree Power two years ago, despite having passed the legislature with a bipartisan vote. Now she’s making comments about how Pine Tree Power could reverse the state’s shift to renewables, and allow the fossil fuel lobby to run the state’s grid. It doesn’t make a lot of sense, but it works well as fearmongering.

The high-dollar opposition strategizing doesn’t end with mere ads, though. Maine voters should note that Question 1 on this year’s ballot was created and funded by Avangrid, which owns CMP, as a possible roadblock to Pine Tree Power should Question 3 pass. Question 1 asks “Do you want to bar some quasi-governmental entities and all consumer-owned electric utilities from taking on more than $1 billion in debt unless they get statewide voter approval?” If passed, this will provide Avangrid and the other parent companies of CMP and Versant another chance to flood the airwaves with fear-messaging to scare voters away from the purchase price. You might like the idea of asking voters for permission to borrow big money, but however you vote, know that Question 1 was spun up specifically as a poison pill for Pine Tree Power.

For further resources, I highly recommend an excellent podcast by David Roberts at Volts, who interviews Maine Senator Nichole Grohoski, a Pine Tree Power advocate. It’s an hourlong in-depth interview by someone who knows the utilities and the grid very well.

Also, this Guardian article offers a good introduction. In particular, I like this quote about how Pine Tree Power has made the investor-owned utility industry nervous:

“This is one ship they don’t want to see launched,” said Kenneth Colburn, a former consultant with the global energy policy firm Regulatory Assistance Project, speaking about investor-backed utilities across the US. “Because it could turn into an armada.”

Finally, there’s one more shade of definition for the Latin verb uti that I didn’t mention before: “to enjoy.” With some luck, the Pine Tree Power initiative will pass, the transition will go well, and in the years to come Maine will finally have a useful electric utility they can enjoy.

Thanks for sticking with me.

In other Anthropocene news:

From the Climate Coach column at the Post, how to get rid of nearly all your junk mail. An estimated 80-100 million trees are cut down every year for junk mail production. Let’s see if we can reduce a bit, shall we? If you can’t read the column because you don’t have a Post subscription, you can start the anti-junk-mail quest by registering with DMAchoice, which may reduce promotional advertising by 80%. To opt-out of credit and insurance offers, either temporarily or permanently, visit OptOutPrescreen.com. For catalogs and other junk, Heather and I have had good luck in the past with Catalog Choice, a nonprofit devoted to helping the U.S. reduce junk mail.

From Mongabay, how NASA is helping researchers understand the astonishing landscape restoration powers of beavers.

From Grist, new battery recycling rules in Europe may change the global landscape for EV minerals.

From The Climate Brink newsletter, this summer’s extreme heat across the globe in seven charts, each with an excellent explanation.

From Smart Cities Dive, a round-up of ten news stories on how cities are responding to the hottest summer on record.

From the New Yorker, Bill McKibben lays out the Biden administration’s “next big decision,” whether to approve a massive LNG (liquid natural gas) terminal in Louisiana. The new terminal, one of twenty or so being proposed, is part of a “late-stage petrocapitalism” gasp to sell extraordinary amounts of fracked gas to the world via Texas ports. If the Biden administration permits this kind of fossil fuel bomb to go off, McKibben writes, it will “help lock in the planet’s reliance on fossil fuels long past what scientists have identified as the breaking point for the climate system.”

And in related news from the Times, the lunatic amount of water consumption by the fracking industry, which is pumping down aquifers across the country. These deep water sources, which often underlie already drought-stricken areas, will take thousands of years to refill.

From Time, the dark side of rooftop solar. Too many U.S. rooftop solar customers, especially those with older leased systems, are having a hell of a time receiving the benefits and service they’re due from companies that keep charging them leasing fees. It’s a warning to regulators to catch up with an industry that will soon be responsible for managing a significant portion of the U.S. energy grid.

From Heather Cox Richardson’s Letters From an American newsletter here on Substack, a reminder that much of what ails American democracy is rooted in modern partisan gerrymandering, an old political strategy now angrily perfected by conservatives with little regard for the stability of U.S. democracy. Some of you recall I wrote back in July of 2022 a piece called “Save the Salamanders, Kill the Gerrymanders,” which made the case that effective environmental policy is often impossible when democratic norms are disrupted or hijacked. Or, as the League of Conservation Voters put it, “There’s no healthy environment without a healthy democracy.”