The price of energy was a top issue in Maine’s 2010 gubernatorial election, and earlier this week the Maine legislature’s Committee on Energy, Utilities and Technology took up Governor LePage’s energy bill, LD 1570 “An Act to Reduce Energy Prices for Maine Consumers.” The bill would cap the state’s renewable portfolio standard (RPS) at 4% of sales in 2010: as currently enacted, the RPS is set to climb to 10% from new renewable resources by 2017. The bill also would cap the alternative compliance mechanism to 110% of the cost of RECs from the previous year.
LD 1570 also revises 35-A M.R.S. § 3210-C, the Maine Public Utilities Commission’s (MPUC) long term contracting authority, preventing the MPUC from approving any long term contract whose price is greater than 90% of the average market price for capacity resources, and requiring the MPUC to obtain approval of the legislature before entering into any long term contracts. The existing law does not include a hard cap on price.
The bill appears likely to move to the full legislature for a vote, where its future is uncertain: support for the bill from the Maine business community was somewhat tepid, and Maine’s renewable energy companies have been vocal in their opposition.
If anything, the bill serves to highlight the limits on a state governor’s ability to lower energy prices in a regional market for electricity. Though the costs of compliance with Maine’s RPS will likely rise as the target percentages increase, to date the costs to individual ratepayers have been minimal. Earlier this year, the MPUC released its annual report to the Legislature on the RPS for the 2009 compliance year, which described the cost of complying with the new renewables target:
During 2009, the cost of [Class I] RECs used for compliance ranged from approximately $6.50 per MWh to $44 per MWh, with an average cost of $26.28 per MWh and a total cost of $4,587,052. A minority of suppliers (4 out of 47) choose to satisfy the portfolio requirement through the ACM at the rate of $60.92 per MWh for a total cost of $319,233. Thus, the total cost to ratepayers during 2009 was $4,906,285, which translates into a rate impact of .06 cents per kWh (or about 35 cents monthly increase to a typical residential bill).
More than 85% of those Class I RECs came from facilities in Maine, the vast majority of which were biomass. Many of these facilities are on-site at mills and pulp and paper facilities, where revenue from RECs and the use of biomass boilers (including the sale of excess energy) have helped to provide an additional income stream and some level of insulation from high energy prices. The story with long term contracts is similar: the MPUC has approved just two long-term contracts under § 3210-C, the most recent of which was intended to enable Verso’s Bucksport mill to convert from fossil fuels to biomass.