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About The Author:

Robert A. Olson is a partner in the law firm of Brown, Olson & Wilson, P.C. which maintains a nationwide practice in energy law, public utility law and related commercial transactions.

He can be reached at:
Brown, Olson & Gould, PC
2 Delta Drive, Suite 301
Concord, NH 03301 rolson@bowlaw.com | (603) 225-9716

 

 

 

 

 

 

 

 

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STATELINE by Robert Olson


December 2002

Maine PUC Skeptical of Competition in Electric
Distribution Service

by Robert Olson  --   Brown, Olson and Wilson, P.C.
(originally published by PMA OnLine Magazine: 2002/12/30)

The Maine Public Utilities Commission (“PUC”) has rejected the petition of a municipal utility for approval to compete for the sale of electric distribution services in a region of the municipality already served by another utility.  See Kennebunk Light & Power District, Docket No. 2002-196 (Maine PUC October 4, 2002).  The PUC found that municipal utility could not make the requisite showing of “public need.” Furthermore, even were it possible to make such a showing, the PUC questioned whether broader considerations of “public convenience and necessity” could be satisfied. In particular, the PUC pointed to the potential for duplication of distribution facilities, or the displacement of one utility by the other, with resulting higher costs.

Kennebunk Light & Power District (“KLPD”) provides electric distribution to one portion of Kennebunk. Central Maine Power (“CMP”) provides electric distribution service to the rest of the city. KLPD sought an order to allow it to distribute electricity throughout the city without removing CMP’s authority to continue to service its existing service area, and on condition that any transfer of facilities from CMP to KLPD would be by voluntarily negotiated sale or lease. KLPD did not dispute the adequacy of CMP’s service, or question whether CMP’s rates were reasonable. Rather, KLPD argued that a “public need” existed for citywide service by KLPD based on public demand. KLPD indicated that all citizens of the city currently support KLPD with their tax dollars, are potentially liable for KLPD’s debts, and “justifiably desire to unite their responsibilities” for KLPD “with the benefits of receiving service by KLPD.” KLPD further argued that KLPD’s service was of a different type from that provided by CMP because of differences between the two organizations and because of KLPD’s “greater responsiveness and responsibility” for the service area. KLPD also asserted that it could provide higher quality service at lower cost than CMP.

The PUC rejected these arguments, stating that, absent a claim that CMP’s service was inadequate, demonstration of “public need” required KLPD to offer service not currently provided by CMP at all. Arguments based on lower price, public demand and differences between the entities providing the service, without more, were not enough. Rather, the PUC required KLPD to demonstrate that the service that KLPD proposed to provide was, itself, different from the service already provided by CMP. The PUC reasoned that to hold otherwise would “simply abolish the concept of the franchise entirely.”

The PUC went on to state that even if KLPD were able to make the requisite showing, the PUC would still have to consider the broader question of overall “public convenience and necessity,” including the impact of allowing competition in electricity distribution. The PUC distinguished KLPD’s case from a prior case which authorized the resale of telephone service. See Standish Telephone Company v. Public Utilities Commission, 499 A.2d 458 (Me. 1985). In particular, the PUC argued that such telephone service did not involve any duplication of facilities, whereas KLPD’s petition would potentially result in either the duplication of facilities or the displacement of CMP, with resulting inefficiencies and higher costs. The PUC reasoned that “[i]t is undoubtedly more efficient to have only one set of facilities, which suggests that only one utility would provide service, even though there could be no legal compulsion for either utility to cease providing service,” and “[i]f KLPD were to become the sole provider, it would either have to build its own facilities (and CMP would remove its facilities, presumably at some cost to [KLPD’s] customers) or [KLPD] would have to purchase CMP’s facilities,” which CMP was unwilling to sell. Morevoer, the PUC stated that “[a]t the current time, there is no national or State policy favoring the promotion of competition for electric distribution service,” and “[t]here is no reason to believe that electric distribution service is not still a natural monopoly.”


Robert A. Olson is a partner in the law firm of Brown, Olson & Gould P.C. which maintains a nationwide practice in energy law, public utility law and related commercial transactions. He can be reached at:

Brown, Olson & Gould, PC
2 Delta Drive, Suite 301
Concord, NH 03301

rolson@bowlaw.com | (603) 225-9716

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