Some Maine electricity prices fall

Tuesday, March 20, 2012

According to the Maine Public Utilities Commission, the price of electricity is falling for some customers. The Maine PUC recently set prices for standard offer electricity service for large commercial and industrial customers for next month. These prices - 3.2 cents/kWh for Central Maine Power customers and 3.1 cents/kWh for Bangor Hydro-Electric customers - are 10% lower than prices in March and 25% to 35% lower than prices one year ago.  Observers point to even lower wholesale power prices, driven largely by the availability of inexpensive natural gas.

In the late 1990s, Maine restructured its electricity market into two components: supply and delivery. Previously, Maine utilities operated both facilities for generating electricity (generation) and for delivering it to consumers (transmission and distribution). Today, thanks to the deregulation of generation and restructuring of the market, these functions are separate. In today's Maine marketplace, energy supply refers to buying the electricity itself from a competitive wholesale market, while delivery is the service provided by transmission and distribution utilities in delivering the energy to consumers.

Maine consumers are free to select a competitive electricity provider for their energy supply. As an alternative, customers can choose not to choose, instead automatically participating in a utility-wide pool of "default service" or "standard offer" electricity purchases. 

Maine recently revised the structure of standard offer service for large commercial and industrial customers.  Standard offer customers in these classes now pay a 2-part price for their energy supply: an energy charge indexed to wholesale power market prices, plus a capacity charge based on each customer’s peak usage.  On top of these standard offer charges, customers also pay their local utility to deliver the power.

Many larger consumers have found that they are able to procure electricity at a lower cost than the standard offer, either through a competitive supplier or by participating in the wholesale market directly. For others, the standard offer provides some certainty and medium-term price stability for energy purchases, although standard offer prices change monthly and can be more volatile than some competitive alternatives.

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