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Maine Public Utilities Commission

NEWS RELEASE 

Maine Public Utilities Commission
242 State Street
Augusta, Maine 04333-0018
Website: http://www.maine.gov/mpuc/, Email: maine.puc@maine.gov
CONTACT: Phillip Lindley, 207.287.1598, phil.lindley@maine.gov

 


FOR IMMEDIATE RELEASE
December 14, 2004

Electric Standard Offer Price Increases for Residential and Small Commercial Customers  
Reflects Recent Energy Market Fluctuations

 

AUGUSTA, MAINE – Today, December 14, 2004, the Maine PUC accepted bids for new standard offer energy prices for residential and small commercial customers of Central Maine Power Company (CMP) and Bangor Hydro-Electric Company (BHE), for the period beginning March 1, 2005.  The new prices for the period March 2005 through February 2006 will be 6.95 cents/kWh for CMP customers and 7.1 cents/kWh for BHE customers.  These new prices reflect current energy market prices at the wholesale level, which have risen substantially since the current standard offer prices (4.95 cents/kWh for CMP and 5 cents/kWh for BHE) were set three years ago.   

The PUC also accepted bids for a portion of this load for the period March 2006 – February 2008 and will procure the remainder prior to the start of each period.  The prices for the portion of supply purchased for these future periods are somewhat lower than the price for the initial year, reflecting the expectations in the market that rates will gradually decline from their current historically high levels.  The PUC chose to accept bids now for a portion of the load for future periods to “smooth” the impact of any further changes in wholesale prices; the rates for future periods will reflect a blend of bids for one-third of the load each year.

Because the PUC will adjust rates to reflect changes in stranded costs before the new standard offer rates go into effect, the exact “all-in” price is not yet known.  If the portion of the rate to recover stranded costs were to remain the same, the total rate (standard offer plus current delivery rates) for CMP customers would increase from 11.7 cents/kWh to approximately 13.7 cents/kWh, and the total rate (standard offer plus current delivery rates) for BHE customers would increase from 14.8 cents/kWh to approximately 16.9 cents/kWh.  Because stranded costs are generally declining, we expect that the increase in the total price will be somewhat less than these calculations indicate.

Like other energy costs recently, electricity supply prices have been rising.  Recent reports indicate that heating oil and kerosene prices are almost 50% higher today than last year at this time, and dramatically higher than three years ago when the current standard offer price was set.  Natural gas prices, which powers five generating plants in Maine, have also increased significantly.  The current three-year standard offer price for residential customers allowed Maine to enjoy price stability at a favorable rate and, when combined with declining delivery rates, caused real electric prices to decline.  Even with the increase in standard offer generation rates, the total electric price for CMP residential customers is, when adjusted for inflation, below the rate just prior to electric restructuring, which was approximately 15 cents/kWh.  For BHE customers the new total price of 16.9 cents is slightly higher than the inflation-adjusted price for 1999 of just over 16 cents/kWh.

Tom Welch, chairman of the PUC, said: “We recognize that price increases are always a burden for customers.  We are confident, however, that the bid process we employ to secure standard offer service provides a competitive rate.  The increase customers will see reflects the significant rise in energy costs generally since we last secured standard offer prices.  As stranded costs continue to be paid down, competitive opportunities and the standard offer in Maine will allow prices for electricity to continue to move toward the underlying cost of bringing electricity to Maine consumers, something that should improve our competitive position relative to where we have been in the past, when we found ourselves paying a significant premium over market.”

Names of the supplier(s) chosen to provide the standard offer service will be released after a two-week period to allow supply arrangements to be completed.  CMP and BHE are the largest transmission and distribution utilities in Maine.  Both operate within the ISO-NE (Independent System Operator for New England) region.  Last year, 2003, electricity sales to CMP and BHE residential and small general service customers were 4.6 million megawatt-hours; with more than 99% of this load currently supplied by standard offer service. 

Under Maine’s retail electric access rules, the Commission must ensure that standard offer service is available to all customers in the State.  Maine’s rules require that the Commission solicit suppliers to provide standard offer service through a competitive bid process.  Standard offer service is the default supply for electricity customers and the winning bidder is usually the one with the lowest price.  Today, electric service is made up of two parts – supply and delivery.  The price for supply is not regulated but rather is based on the wholesale competitive markets for electricity.  The ISO-NE administers the market in New England, pursuant to rules and regulations overseen by the Federal Energy Regulatory Commission.  The Maine Commission regulates the delivery rate.  Delivery rates are not affected by yesterday's action.

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For more information: 

All PUC News Releases may be found on our website at: http://www.maine.gov/mpuc/newsreleases2004.htm 

To arrange an interview with Chairman Welch or Commissioners Diamond or Reishus, please contact Phillip Lindley at 207.287.1598 or by e-mail at phil.lindley@maine.gov.  The Commission’s website may be accessed through the Maine School and Library Network at all public libraries in Maine.