Deep Dive into CMP’s Rate Case:

If approved, Central Maine Power’s (CMP) latest bid to increase rates would transfer $62.2 million in excessive profits from the pockets of Maine families and businesses to the company’s corporate owners, according to expert testimony in the case.

In its defense, CMP argues that reducing its profits will add to customer costs through higher borrowing rates, but these concerns are overblown, according to experts in the case, and the benefits to customers through bill savings would far exceed any potential impact resulting from a potential credit rating downgrade for the company.

CMP’s ask to increase rates comes amid heightened affordability concerns and a growing body of evidence that utilities nationwide are allowed to earn billions more in profits than they need. In fact, experts before the Maine Public Utilities Commission (PUC) agreed that in today’s market with zero market risk premium, investors don’t require returns higher than 30-year Treasury bonds. 

With Maine families and businesses struggling under the weight of inflation, tariffs, and rising energy prices, and a new mandate at the PUC to prioritize consumer affordability, reducing CMP’s corporate profits to fair levels is not something state regulators can afford to leave on the table.

How much does CMP want to increase its corporate profit?

In the current rate case before the PUC, CMP is asking to charge Maine customers an extra $189 million per year, adding $216 per year or $18 per month to the typical residential customer’s bill.

The company wants to use this money to pay for extensive tree trimming, new wires, equipment upgrades, and other investments. Some of this spending may be necessary, but it needs to be scrutinized carefully to make sure any approved expenditures are needed now and will result in real benefits to customers.

But a sizable portion of the rate hike — nearly $61 million — would go toward increasing CMP’s corporate profits.

CMP already takes home an average of $169 million a year, according to Federal filings going back to 2021. A recent report highlighted by Maine’s Office of the Public Advocate (OPA) found that roughly 14% of the average CMP bill already goes to corporate profits.

If the company gets what it wants, 18% of all the revenue it collects from Maine customers would go to service its profit.  

With so many Maine people struggling to pay their electricity bills, among the highest in the country, it’s no wonder that CMP wanting to charge customers more — not to improve service, but to pad its profits — has become a flash point in the proceeding.

In the current rate case, CMP’s investment plan would increase its total operating property by more than half a billion dollars, or nearly 30%.  

Additionally, since its last rate case in 2022, CMP overspent relative to approved levels by $239 million, spending 50% more than the company had forecasted for 2022-2025. Now, CMP is seeking to fast track a portion of its request through temporary rates to expedite recovery of this incurred expenditure.

Because CMP is allowed to recover its prudent expenditure and earn a return on it, from the perspective of affordability, which the Maine PUC is now bound to consider thanks to 2026 legislation, it is doubly important that this overspend be scrutinized carefully.  After all, it will be generating profits for CMP for decades to come.

The Natural Resources Council of Maine (NRCM) is opposed to approving any temporary rates for CMP in this case, and in a recent filing, the OPA also makes a powerful argument to that effect. This issue is next up for consideration in the current rate case, with the Commission expected to decide the matter on October 6. If they decide in favor of CMP, customers will see their rates go up this fall.

How do regulators determine a fair profit level for CMP?

In theory, the ROE needs to be sufficient for the company to attract capital investors.

But what constitutes a fair profit for public monopolies has been the subject of debate for a long time.

The PUC’s decision will be guided by Federal law, specifically as interpreted by two Supreme Court rulings referred to as Hope and Bluefield that date back to 1944 and 1923, respectively. These rulings set a legal standard that recognizes that a fair return allows comparable returns to what could be earned on other investments of similar risk and be sufficient for the company to maintain its credit and attract capital investors.

A utility typically argues that for its ROE to be fair it must be competitive with other utilities, thereby pointing to each other’s ROEs to bolster the case for its own high ROE.  

This circular logic has apparently been successful in persuading state regulators. Across the U.S. in recent decades, ROEs have become increasingly generous, no longer tracking interest rates and other similarly low-risk investments like Treasury bonds.

For more than 25 years, utility stocks have traded 1.5-2 times higher than their book values, a clear indication of the disproportionate earnings allowed through excessive ROEs.

Equally worrisome is the indirect effect that high ROEs have by creating a perverse incentive for utilities to overspend through wasteful capital investments.  

Amid widespread affordability concerns, consumer advocates around the country are searching for ways to keep electricity prices affordable.  

A growing body of evidence from proceedings around the country gives strength to the argument that ROEs are systematically higher than they need to be to attract capital and foster competitive companies.

One analysis from UC Berkeley finds customers are overpaying to the tune of $7 billion per year.Another analysis estimates excessive ROEs cost consumers $55 billion per year economy wide. In the case before Maine regulators today, $62.2 million in excess profit is at stake. All of these numbers signal an enormous transfer of wealth from consumers to utility shareholders.

What returns do investors actually require?

The level of returns that investors require, also referred to as the “cost of equity,” is not a known or measurable entity. Instead, it’s estimated from various market indicators and financial models.

For instance, parties to the current proceeding in CMP’s rate case have put forth testimony from four different utility finance experts, arguing for varying ROEs, with tens of millions of dollars in the balance for Maine ratepayers.

• CMP’s expert recommends 10-11%, but because “CMP is keeping affordability in front of mind,” it requests only 9.8%, which it asserts is at the “low end” of what’s required to attract investors.
• The PUC staff hired their own expert, who landed on 9.375%. 
• The OPA, who’s charged with representing ratepayer interests, found that an ROE of 8.27% would be fair and sufficient.

This much is more or less standard rate case fare, and we’d expect the Commission to pick a number somewhere in between these estimates.

What is unique in this case, however, is the recommendation of an additional expert, who advises a novel approach to determining CMP’s cost of equity, recommending a much lower ROE of 5.64% based on Iberdrola’s own internal accounting.  

Who would know the cost of attracting investors better than the company itself? 

CMP’s own internal accounting tells a different story.

The Maine PUC awarded intervenor funding to CMP Ratepayers Unite (CMPRU), an incorporated Facebook group of CMP customers, to hire a former utility executive, Mark Ellis, to provide his analysis of a fair rate of return for CMP.

Ellis advises that the Commission should not set authorized returns based on estimates generated by formulas and assumptions of market risk, which are skewed strongly toward the inflated ROEs levels of other utilities.

Instead, the Commission should look to the internal numbers of CMP’s corporate parent, Iberdrola, specifically the audited estimate of the cost of capital that the company develops for investors and securities regulators outside the context of influencing regulators in a rate case.  

This value — what the company itself communicates to investors — provides a much more accurate approximation of the market-based cost of capital.  

An ROE of 5.64%, verses CMP’s proposed 9.8%, would save Maine customers $62.2 million.

In a surprising turn, the Commission’s own expert, a 40-year veteran on cost of capital, Dr. Randall Woolridge, doesn’t disagree. Under cross examination by CMP’s lawyers last month, the Commission’s expert asserted:

So I don’t disagree with Mr. Ellis necessarily with his market risk premium. If you’re using market data and using Wall Street data, you can very easily justify Mr. Ellis’s numbers. And so I don’t necessarily disagree with that. Like I say, look at the Wall Street Journal. They say there’s no market risk premium. Then the expected return to market would be the 30-year Treasury rate [or approximately 5.35%].¹

Benefits to ratepayers from a reduced ROE far outweigh the risk of a credit downgrade.

In its defense, CMP argues what utilities have long argued, that cutting its profits will impact its credit rating, making it more expensive to borrow and adding to customer costs. While the trade-off is real, the cost impacts are not commensurate.

Acknowledging that a lower ROE of 5.64% would likely increase the cost of borrowing to a small degree, Ellis calculates that the trade-off would reduce customer savings by a mere $2.2 million, a figure already factored into the net savings of $62.2 million. 

On this, the Commission’s expert again agreed, asserting that,

[CMP’s] credit ratings are much better than the average electric utility so they should get a lower ROE…  [T]heir credit ratings are a couple of notches above other electric utilities. So they could afford to be downgraded and still be lower risk than most electric utilities.²

The discourse on inflated utility profits that’s unfolding before the Maine PUC today reflects a national conversation.

For CMP customers, rates have increased nearly 65% since 2021. While not as severe, electricity rates of investor-owned utilities nationwide have increased 40% over the same period, outpacing inflation.

Investment levels are similarly up. Since 2014, spending by investor-owned utilities at the distribution level has grown four times faster than in previous decades. According to Lawrence Berkely National Lab, requests to increase rates — and commission-approved requests — have reached multidecadal highs, $18 billion in asks last year alone. The Edison Electric Institute projects more than $1.1 trillion in utility capital expenditure from 2026 to 2030.

Maine regulators need to get creative and assertive in determining what’s fair, and $62.2 million in savings is not a stone that they can afford to leave unturned.

1 Aug 27, 2026, Technical Conference in Docket No. 2026-00043, Transcript p 24 at 7.

2 Ibid p 26 at 23.