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Fortnightly Magazine - November 15 1999

But does anyone know the real price of power?

You've read the headlines from Maine - how regulators asked for bids for competitive electricity but got prices higher than the old regulated rate.

But it gets worse. The more open the market, the higher the bid.

Central Maine Power and Bangor Hydro-Electric operate within ISO New England, which now is open for competition. Yet according to the Maine Public Utilities Commission, the bids from suppliers offering to serve those two utilities came in higher than bids for Maine Public Service Co., in the Maritimes control area in Canada. That market is not yet open. New Brunswick Power is the dominant utility there. What gives?

"We would not expect significantly higher prices for the CMP and BHE areas," said the PUC. "It is possible that the immaturity of the ISO-NE markets, the changing nature of the market rules, the extremely high spot market prices at certain times over recent months, and uncertainty regarding transmission pricing and other matters in the region may all be contributing factors."

Maybe it was bad timing. As the PUC noted, other states in New England were soliciting offers at the same time, "possibly impacting the bids in Maine."

Nearby, in Connecticut, regulators mulled the opposite problem. Should they accept a low-priced bid if there is no competitive bidding? In late July, United Illuminating Co. had reached a tentative settlement whereby Enron would furnish power for those UI customers electing to take the standard offer instead of choosing a competitive supplier. That settlement offered a residential generation service charge (GSC) of 4.05 cents per kilowatt-hour, which met the 10 percent cut mandated by Connecticut law. Moreover, under the four-year deal, UI customers would bear no risk of future price changes in fuel or wholesale energy.

But the state attorney general wasn't happy. The Enron/UI settlement had not emerged from competitive bidding. Was it the lowest available? The AG argued, "If GSC rates are not reflective of the market price, then they are likely to either stifle competition or impose [an] unnecessary stranded cost burden upon consumers after 2003." The PUC also weighed in: "UI and Enron do not necessarily have conflicting positions on some issues included in the agreement."

So which is it: Price or process?

In Maine the PUC accepted two bids for MPS (including a bid of 4.29 cents for residential generation), but rejected the bids for CMP and BHE. Instead, it announced a new solicitation that would allow suppliers to combine their offers with bids on the output of a utility's non-divested generation assets. The PUC set no price ceiling, but warned bidders that it had "a strong inclination" to accept only those bid prices offered at or below the winning MPS levels. (Docket No. 99-111, Oct. 25, 1999.)

Back in Connecticut, the PUC set standard offer rates for United Illuminating in a decision issued Oct. 1, but asked the parties to rework their deal, which they did on Oct. 15, according to UI spokeswoman Myra Stanley. When contacted on Oct. 28, PUC rep Beryl Lyons