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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
Suite 301
Concord, NH 03301
(603) 225-9716









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STATELINE by Robert Olson

November 1999
Maine Public Utilities Commission Rules On Standard Offer Bids And Initiates New Bidding Process Combining Review Of Standard Offer And Divestiture Bids
by Robert Olson  --   Brown, Olson and Wilson, P.C.
(originally published by PMA OnLine Magazine: 12/99)

On October 25, 1999, the Maine Public Utilities Commission (MPUC) issued an Order Provisionally Designating Standard Offer Providers and Rejecting Certain Bids (the Order). In this Order, the MPUC provisionally approved two standard offer bids for customers in the Maine Public Service Company (MPS) territory, a relatively small area in northern Maine. This approval is subject to the MPUC’s review of bids for MPS’s non-divested generation assets, including a qualifying facility (QF) contract. The Order also rejected standard offer bids in the territories of Central Maine Power Company (CMP) and Bangor Hydro-Electric Company (BHE) on the basis that the bids were unreasonably high. In a new bidding process, the MPUC will permit proposals of standard offer bids combined with bids on the utilities’ non-divested generation assets. In its Order, the MPUC also solicited comments on its implementation of rate-establishment procedures in the event no reasonable bids are received. Among the comments solicited, the MPUC asks whether it should consider exercising its authority to prevent divestiture of QF and other generation assets in favor of their use as part of standard offer service.

Maine’s restructuring legislation, enacted in 1997, scheduled competition to begin on March 1, 2000. Under the legislation, standard offer service providers (those serving consumers who have not selected a competitive electricity supplier) are chosen by the MPUC through a bidding process. The bidding process requires suppliers to commit to a fixed price for a twelve-month period. Bidders are to bid within a utility’s territory on three customer classes (residential and small non-residential, medium non-residential, and large non-residential). The MPUC rules require the MPUC to select the lowest priced bidder for each class, but the MPUC may consider higher bids if at least three providers do not meet the lowest price. The MPUC must select standard offer service providers in such a way that total electric rates do not increase by more than 0.5% in any given class.

The Order designated two standard offer providers for the MPS territory. The standard offer prices for each class are $0.042906/kWh for residential/small non-residential, $0.042549/kWh for medium non-residential, and $0.040038/kWh for large non-residential. The MPUC conditioned this approval upon review of the results of MPS’s auction of its non-divested generation asset, a QF contract. As the acceptance of standard offer bids must be in the public interest, and as the MPUC may reject the bids for the QF contract, the MPUC’s final designation of standard offer providers in the MPS territory will include a determination of whether the public interest would be better served by MPS’s retention of the QF contract to serve a portion of the standard offer load. The Order solicited comments regarding the MPUC’s evaluation of bids from the two processes to determine whether the public interest is served by acceptance.

In its Order, the MPUC rejected all the standard offer bids received for the CMP and BHE territories, either because the proposals were not in conformance with the rules or because it found the prices to be unreasonably high and not in the public interest. The MPUC used the chosen MPS territory standard offer prices to determine that the bids submitted for the CMP and BHE territories were unreasonably high, stating the rejected bids exceeded MPS bids by a substantial amount.

The Order terminated the initial bidding process for soliciting standard offer service and initiates a new selection process. Under the new process, the MPUC will send letters to all bidders in the initial request for bids for CMP, BHE, and MPS and to all bidders in the utilities’ pending auctions of generation assets. The MPUC is limiting the pool of bidders to make a timely assessment of the bids. Bidders may submit a proposal to provide standard offer service to a whole class or a portion of each class in 20% increments in the CMP and BHE territories up to the provisionally accepted standard offer prices in the MPS territory. Alternatively, bidders may submit proposals to provide standard offer service to a class or portion of a class in the CMP and BHE territory in combination with a bid on the output of the utility’s non-divested generation assets. Such a combination proposal may exceed the prices provisionally accepted for the MPS territory, although the MPUC expressed a strong inclination to accept prices at or below the MPS territory prices. The MPUC stated it will review the bids CMP and BHE are considering for divestiture of generation assets in combination with its review of bids for standard offer service, in light of the MPUC’s authority to review and approve bids for the sale of generation assets.

The Order contemplates the ramifications if no reasonable bids are received for standard offer service in the CMP and BHE territories. In that event, the MPUC will direct the utilities to provide the standard offer service and will establish rates for that service, until standard offer providers may be selected. The utilities would be directed to provide service through wholesale arrangements or from the spot market during that time.

The Order states the MPUC expects to announce the results of its new standard offer provider selection process by December 1, 1999.

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 | (603) 225-9716

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