Legislative Leaders Call For More Cost Accountability Within the Electric Industry
Electricity
Bangor Daily News
Vicki Ekstrom
Boston University Washington News Service
3/13/2008
WASHINGTON – Legislation that would force Maine’s electricity grid overseer, ISO New England, to provide reliable service at the lowest cost to consumers was introduced in the House March 6 by Rep. Tom Allen, D-Maine.
“The proponents of utility deregulation promised lower electricity prices, but in far too many cases, the costs of operating the new regional market-based electric systems have resulted in billions of dollars in rate increases for consumers large and small, residential and business,” Allen said.
Electricity prices increased 55 percent since 1990 in Maine and New England, compared to a 35 percent increase nationwide, said a report by the Maine Public Utilities Commission, the state agency that regulates utilities for Maine. A majority of that increase occurred since Maine restructured its electric industry in 2000, according to the commission’s report.
ISO New England oversees the entire New England power grid, including generators and high-voltage transmission infrastructure. The cost of generation and most of the cost of transmission are shared by customers throughout the region, despite where they live. Maine’s customers pay an 8 percent share of the costs. So, if new transmission lines are built in Connecticut, for example, Maine taxpayers pay 8 percent of the cost.
ISO New England said this allocation makes sense because the new infrastructure helps assure the overall reliability of the system. Opponents argue that ISO New England’s price allocation unfairly places cost on consumers who don’t benefit.
“The way ISO New England is set up, Massachusetts and Connecticut need more generating capacity, but Maine is getting stuck with much of the costs, forcing the need for more accountability,” Allen said. “We don’t want unnecessary generating capacity to be built without understanding the cost. We want this agency to do what any other agency will do to balance the benefit and cost.”
The Consumer Protection and Cost Accountability Act would amend the Federal Power Act to require the Federal Energy Regulatory Commission to assure that electricity rates provide consumers with benefits that outweigh costs through a cost-benefit analysis submitted by the Independent System Operators (ISOs). The ISO also would be subject to biennial audits to assess its performance and to recommend ways to improve costs.
“ISO New England has increased rates to expand generating capacity, but hasn’t given a thought to consumers,” Allen said. “Whenever I travel around the state of Maine I find individuals who wonder why their electric bills are going up so quickly. The answer is complicated, but to put it simply, if Maine’s businesses are going to be competitive, we need to watch the electric prices.”
Rep. Michael Michaud, D-Maine, is a cosponsor of the bill.
Similar legislation was introduced in the Senate in February by Sen. Bernard Sanders, I-Vt. Cosponsors of the bill include Sen. Olympia Snowe, R-Maine, and Sen. Susan Collins, R-Maine, as well as Sen. John Kerry, D-Mass., Sen. Ted Kennedy, D-Mass., and Sen. Pat Leahy, D-Vt.
“It is absolutely essential that we ensure that consumers’ resources are being economically maximized to ensure the lowest reasonable cost to our ratepayers,” Snowe said. “I believe this legislation will greatly assist in long-term planning for our nation’s electricity grids.”
ISO New England views the legislation as “unnecessary,” spokeswoman Ellen Foley said.
“This proposed legislation is unnecessary because wholesale objectives already achieve the purpose of providing electricity at the lowest possible cost,” Foley said, and it “could jeopardize achievement of New England’s energy, economic and environmental policy goals.”
Foley said the system is very transparent, as ISO New England posts its prices on its Web site. She also said that any rising electricity costs must be attributed to an increase in natural gas prices.
Still, the commission and legislators said ISO New England lacked the incentive to provide cost-effective rates because its main mission is to assure reliability. But Foley said the competitive nature of the wholesale market assures the cost-effectiveness of the system.
“Wholesale competition is a marketplace similar to a stock exchange for electricity,” Foley said. “So the price is arrived at through the competitive nature of the marketplace. Generating companies place bids and ISO New England selects the bid with the least cost. So competition brings the least cost solution and we balance it with reliability.”
Because of the high costs Mainers have suffered under ISO New England, the Maine legislature asked the utilities commission to research solutions, suggesting that the best move may be to pull out of ISO New England.
The utilities commission came up with three solutions, according to its report to the legislature. Maine could pull out of ISO New England and create its own independent ISO or enter into Canada’s electric grid. Both options the commission considered risky, but more cost effective. Or Maine could work to repair the current system. Allen’s legislation is a step toward that goal, Kurt Adams, chairman of the commission, said.
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