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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.
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