Is replacing RG&E the best solution?

Source WGME:

Demands to replace Rochester Gas & Electric(RG&E) follow months of incorrect billing, inflated pricing, and delayed billing. So, is a public utility company the answer?

In an attempt to foster competition and establish a free market for electricity supply, many states, including Maine, mandated that electric utilities sell off their power plants in the late 1990s. However, the delivery of electricity, which involves the infrastructure and equipment necessary to bring power to homes and businesses, remains closed to competition.

This restriction exists for a valid reason. Multiple companies operating separate sets of power lines in the same service area would be highly inefficient and potentially dangerous. Although this did occur in the early days of electric service — it was quickly recognized as unsustainable. As a result, only one electric utility is allowed to operate in any given territory. For example, if you live in Central Maine Power’s service area, they are your only option for electricity.

Approximately 70 percent of the country receives electricity from private, for-profit companies owned by investors. The remaining 30 percent are served by consumer-owned utilities, which include municipal utilities owned by towns or cities, as well as rural cooperatives that were established in the early 20th century to provide power to rural areas that were not profitable for investor-owned utilities to serve.

When it comes to cost, consumer-owned utilities tend to have lower rates compared to investor-owned utilities. On average the United States, residential customers of consumer-owned utilities enjoy rates that are 13 percent cheaper than those of investor-owned utilities, according to the American Public Power Association. However, in Maine, the situation is reversed, with the two investor-owned utilities having lower average rates than the state’s nine consumer-owned utilities.

There are several reasons for the cost difference. Consumer-owned utilities do not have a profit component, they are exempt from federal income taxes as nonprofits, and their executives receive lower salaries compared to their counterparts in investor-owned utilities. These factors contribute to the overall affordability of consumer-owned utilities.

However, comparing the reliability of consumer-owned and investor-owned utilities is challenging due to various factors such as physical terrain, population density, and weather conditions. Municipal utilities, on average, tend to be more reliable than investor-owned utilities, while rural cooperatives are generally less reliable. In Maine, the reliability data from three utilities show that CMP has been the most reliable over the past three years, but this is partly due to serving the densely populated part of the state. Eastern Maine Electric Cooperative — despite covering a more rural area has shown better reliability than Emera Maine in some metrics.

While it is possible for a government entity to take over a private electric utility, it requires compensation for the investors of the business. The process of determining a fair price can lead to lengthy legal battles. Throughout history, there have been debates over whether consumers should own their power, with some politicians advocating for municipal takeovers of utilities. However, such takeovers are rare, and proposals for publicly owned utilities have faced significant opposition in Maine.

In conclusion, the electricity industry is complex, with various factors influencing the cost and reliability of utilities. Both consumer-owned and investor-owned utilities have advantages and disadvantages, and there is no definitive answer as to which model is superior.

Staff Writer