About The Author:
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
Concord, NH 03301
Maine: Restructuring Plan Recommends Full
Recovery Of Stranded Costs
by Robert Olson -- Brown, Olson and Wilson, P.C.
(originally published by PMA OnLine Magazine:
On December 31, 1996, the Maine Public Utilities
Commission ("PUC") issued a "Report and Recommended Plan" (the
"Plan") on the restructuring of the states electric utility industry.
Under the Plan, by January 1, 2000, all ratepayers should have the option to select their
power suppliers. The Plan provides utilities with the opportunity to recover stranded
costs to the same degree that they recover their costs under the current regulatory
framework. The Plan also requires two of the three investor-owned utilities located in
Maine to completely divest their generation assets by 2006.
Effective January 1, 2000, all customers will have the option to select their power
supplier and the PUC will no longer regulate persons who generate or sell electric power.
The Plan provides, however, that the PUC will require suppliers to register with the PUC.
The Plan also states that the PUC will adopt minimum standards of conduct for suppliers
including notice requirements for changes in rates or terms of service and conditions for
service termination by suppliers. The Plan requires competitive suppliers that serve a
significant portion of the public or that offer services to the general public to file
rates and terms of service with the PUC. The PUC will not, however, regulate the rates
charged by these suppliers.
The Plan allows a standard offer of service for customers who do not choose a competitive
supplier or who cannot obtain power from a supplier on reasonable terms. Under the Plan,
the transmission and distribution ("T&D") company is not the supplier of
last resort, rather the T&D company administers a bidding process and, subject to PUC
approval, selects the entity that will provide power under the standard offer. The Plan
caps the level of standard offer price at the total cost of power charges that existed
prior to the introduction of competition under the Plan. If the total standard offer price
exceeds this level, the PUC will investigate whether the introduction of competition at
that time is in the public interest.
The Plan also provides that by January 1, 2000, all three of the investor-owned utilities
presently operating in Maine must transfer all their generation-related assets to a
company separate and distinct from the remaining T&D companies. The three utilities
will be permitted to engage in generation activities through these affiliated companies
until January 2006, when Central Maine Power and Bangor Hydro-Electric Company will be
required to completely divest their generation assets. The remaining investor-owned
utility, Maine Public Service Company, will be permitted to retain its affiliated
generation company after 2006, but after that time will be permitted to provide generation
services only to ratepayers located in its franchise territory. The Plan reasons that
divestiture of generation is required because common ownership of generation facilities
and T&D assets is an impediment to competition and that functional separation alone is
inadequate. In the area of qualifying facility ("QF") generation, the Plan
states that the contractual obligation between QFs and utilities will be an obligation of
the T&D company, which will periodically sell QF power to third persons using a
The Plan also provides utilities with a reasonable opportunity to recover legitimate and
unmitigatable stranded cost. The Plan notes that this recovery opportunity is comparable
to the recovery of costs under the present regulatory framework. The Plan justifies this
recovery approach by stating that changing the cost recovery rules after investments have
been made could impair the states credibility and deter long-term investments in
The Plan also states that the PUC would estimate each utilitys stranded cost prior
to the introduction of competition and that the PUC would reexamine these estimates and
make corrections, if needed, in 2003 and in 2006. The PUCs reexamination of
estimates for QF related stranded cost charges will continue through the term of the QF
obligation. The Plan provides that stranded costs will be recovered through a
non-bypassable wires charge.
Robert A. Olson is a partner in the law firm of Brown, Olson &
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
firstname.lastname@example.org | (603) 225-9716