Testimony in Opposition to LD 69, An Act to Improve Electrical Supply Cost Transparency
Senator Lawrence, Representative Zeigler, and members of the Joint Committee on Energy, Utilities and Technology, my name is Rebecca Schultz. I am a senior advocate for climate and clean energy at the Natural Resources Council of Maine, which is Maine’s leading environmental advocacy group with more than 25,000 members and supporters. I am testifying in opposition to LD 69, An Act to Improve Electrical Supply Cost Transparency.¹
There are many aspects of the hidden costs of electricity that would benefit from improved transparency to help consumers, policy makers, and markets alike deliver better social outcomes. This bill, however, would not accomplish that purpose. In fact, this bill would do little to communicate the cost of electricity supply in a way that allowed consumers to make better informed decisions and instead would risk misleading consumers with confusing information.
The proposed bill would require “a disclosure label that contains information on each energy source used in the generation service that the customer is receiving including the cost per kilowatt hour of each energy source.” The requirement would not be helpful for the following reasons:
- It is partially redundant. Maine law already requires electricity suppliers to provide disclosure labels to help educate customers about their electricity service. These fact sheets, available on the Public Utilities Commission’s website, provide a breakdown of the energy resource mix and air pollution emissions associated with the previous year’s standard offer supply.²
- Cost information would be retrospective. The standard offer supply price for electricity is set annually through a competitive bidding process overseen by the Public Utilities Commission. Electricity suppliers develop estimates for the year ahead based on a variety of factors, including forecasts of wholesale electricity prices. These estimates skyrocketed for 2023 due to high natural gas prices and our regional dependence on natural gas for electricity. The resources that suppliers ultimately use to meet their obligations, however, will only be known after the fact. Therefore, the disclosure would describe the previous year’s supply costs and not be useful for informing consumer decisions.
- “Cost per kilowatt hour per energy source” is not relevant under our current market structure.S. electricity markets are based on a “uniform clearing price auction” model. The market sets prices for electricity regardless of what type of generator produced that electricity. The least expensive resource available is dispatched first, and as demand increases, increasingly expensive resources are brought online to meet demand. The clearing price for all dispatched resources is set by the marginal unit, or the price that would need to be paid to meet the next increment of demand. Therefore, while wind and solar may provide the cheapest energy on the market, they get paid the marginal price, which in our region is often set by natural gas.³ The proposed requirement would disclose the clearing price paid to resources but not reflect the cost of producing the electricity. It is not clear what the intended purpose would be of providing customers with this information.
Cost transparency is a noble cause, one that must be pursued at each turn in our clean energy transition to ensure we are keeping rates down for Maine ratepayers. LD 69 would not serve this purpose but would run the risk of confusing consumers on a crucial topic at a time when we need an educated and engaged public to participate in our climate future.
Thank you for your consideration of this testimony.
[1] LD 69, An Act to Improve Electrical Supply Cost Transparency, available at https://legislature.maine.gov/bills/getPDF.asp?paper=HP0044&item=1&snum=131.
[2] Maine Public Utilities Commission, Standard Offer Disclosure Labels, available at https://www.maine.gov/mpuc/regulated-utilities/electricity/standard-offer/disclosure-labels.
[3] All markets in the U.S. use this uniform clearing price auction structure, which helps ensure that bids more closely reflect actual costs and creates a strong incentive to build inexpensive resources. ISO New England, How Resources Are Selected and Prices Are Set in the Wholesale Energy Markets, available at https://www.iso-ne.com/about/what-we-do/in-depth/how-resources-are-selected-and-prices-are-set.
