Support of LD 1959, An Act To Ensure Transmission and Distribution Utility Accountability

Senator Lawrence, Representative Berry, and members of the Joint Standing Committee on Energy, Utilities, and Technology, my name is Rebecca Schultz. I am the Senior Advocate for Climate and Clean Energy for the Natural Resources Council of Maine. I am testifying in support of LD 1959, with suggested changes to strengthen the legislation. We believe that, if it is made stronger in several key ways, this bill could play an important role in improving the quality of service for Maine ratepayers and helping the state cost-effectively meet its climate requirements.

The case for legislative action to improve utility accountability is clear. Maine’s electric utilities, Central Maine Power (CMP) and Versant, have repeatedly ranked at the bottom of the JD Power customer satisfaction survey, and CMP has ranked dead last among all national utilities in the survey for four years running. A recent independent evaluation based on public data from the Energy Information Administration ranked Maine 50^th out of 51 jurisdictions for reliability and 41^st for affordability.¹ Maine people deserve better.

Maine deserves electric utilities that are leaders across the full range of performance measures, including reliability, customer service, and affordability, but also clean energy, modernizing the grid, and climate action. This bill takes a step in the right direction. With key changes, it can help establish a framework that requires utilities to perform, face penalties, or be replaced.

My testimony will describe three areas where the bill needs strengthening:

• The accountability metrics need to reflect the state’s greenhouse gas reduction requirements;
• The pathway to divestiture needs to be viable; and
• The planning obligations need to include integrated transmission and distribution planning for climate mitigation.

Accountability Metrics

To be meaningful, utility performance evaluation must apply to the full breadth of regulatory oversight with which the Public Utilities Commission (PUC) has been charged. We recommend that the bill require that the performance standards adhere closely to “the basic purpose” of the utility regulatory system as prescribed by law: reliability, safety, affordability, and achievement of Maine’s climate goals.²

Beyond responsiveness to interconnection requests, which is included in the bill for generators, affordability, cost control, resilience, load management and flexibility, distributed resources, beneficial electrification, etc., are integral to the service provided by T&D utilities in our current era and should be reflected in service standards.

The PUC has an ongoing inquiry into the issue of performance metrics, in which it has identified seven performance categories.³ We recommend building on that work with LD 1959 by requiring the PUC to open a rulemaking to develop a grading scheme based on metrics within each of those seven categories:

1. Service Quality
2. Customer Service
3. Field Services
4. Affordability and Cost Control
5. Distributed Energy Resource Interconnection and Deployment
6. Grid Modernization and Technologies
7. Energy and Environmental Policies.

Quantifiable metrics have been adopted to monitor performance in these areas in other jurisdictions, in Minnesota, Hawaii, Illinois and New York for example, which has a deregulated market like Maine’s, and once baseline data are assembled, assessments can be routine. Indeed, Versant and CMP have demonstrated a willingness to think creatively and assume responsibilities that go beyond a narrow understanding of their jurisdictions, advocating for the use of metrics that “encourage T&D alignment with efforts to achieve Maine State energy and environmental policies,” to quote CMP’s comments in that case.⁴

The PUC should be charged with assigning penalties and report-only conditions for each metric, set to relevant reporting periods for each, for example, quarterly or annually. Report-only metrics have been used in other jurisdictions to improve transparency, help track progress in more complex areas of power sector transformation, and as an interim step to establish benchmarks against which penalties may be levied in future.

Critically, the grading scheme should result in automatic penalties for a subset of metrics deemed essential service standards. These metrics must result in transparent, objective, and punctual decisions regarding the public interest. If too much discretion is given through an adjudicatory proceeding, for example, as the bill currently proposes, utilities will not receive clear signals to realign their profit motives and may be encouraged to try to game the system. The PUC currently has the discretion to assess penalties and rarely exercises that authority. For this additional regulatory tool to be effective, the score card should be formulaic, and penalties should take effect automatically. For financial penalties, the current dollar limit is arbitrary, and we recommend the bill set both a ceiling and a floor as a percentage of revenue. Additionally, only electric utilities that serve more than 50,000 customers should be subject to the score card and related penalties.

We recognize that many key details and decisions will be made in rulemakings, but strong statutory language will be critical to steering those outcomes. We encourage the Committee to incorporate the above suggestions to both limit the PUC’s discretion and empower the PUC to act boldly.

Divestiture and the Consumer-owned Utility Option

Similar to the monetary penalties, the bill should require the PUC to determine through rulemaking a clear and unequivocal threshold of poor performance that automatically triggers an adjudicatory proceeding for divestiture. What constitutes “consistent failure” should be made explicit based on the performance standards and review cycles. This could be based, for example, on a specified number of failed grades in a subset of metrics deemed essential service standards. Further, the determination by the Commission in any divestment proceeding must explicitly take into account the achievement of the state’s climate requirements and facilitation of greenhouse gas emissions reductions.

In the event of a divestiture order, the bill should provide for legislative oversight, including an opportunity to ensure that private sale is not the only option. We view the current process laid out in the bill to establish a committee to assemble a competing bid on behalf of a potential consumer-owned utility as unfeasible given the legal, financial, and contractual complexities that establishing a consumer-owned utility would entail. We recommend Section 5 subsection 2 be stricken from the bill to prevent potential confusion and/or conflict with the ongoing consumer-owned utility referendum effort. Additionally, language especially pertaining to standards and planning should be screened for compatibility with the consumer-owned utility referendum language.

Climate Change Planning

Any discussion of utility accountability at present must include a recognition of the crucial role transmission and distribution utilities plan in addressing climate change. The resilience planning that the draft legislation currently requires is insufficient. It is vital that this section be expanded to include integrated transmission and distribution planning for climate mitigation as well. These strategic plans would allow the PUC to consider whether and to what extent utilities under its purview are meeting and advancing state goals and, where necessary, take action to steer the utilities in the right direction. These periodic plans should be used to ensure that operations and investment align with state climate requirements and to inform the development and revision of the performance metrics.

The bill should be revised to put an obligation on the utilities to undertake integrated transmission and distribution planning, including load forecasting that internalizes beneficial electrification, distributed energy resources, flexible load management, and emission reductions. These plans should be filed in a public docket at the PUC and subject to public comment and scrutiny before approval. A new operational planning division should be established at the PUC to support this work, staffed and resourced accordingly, to ensure that utility plans are consistent with long-term public policy objectives.

Concluding Remarks

Utility accountability in Maine has never been more urgent. If utilities in Maine are granted the privilege of operating here with a monopoly franchise, then we should have the highest expectations for their performance. Further, given the urgency of transforming our power sector to address climate change and enable beneficial electrification, their performance should be judged by traditional service standards, but must also enforce the utilities’ crucial role in advancing this transition in a rational and cost-effective manner. We support the core concepts of accountability motivating this bill but believe that it must be significantly strengthened in the ways described above to achieve its purpose.

Appendix

NRCM Recommended Changes to LD 1959 

• Performance Report Card:
  •  Bill should require PUC to open a rulemaking to develop grading scheme based on metrics within each of the following seven categories:
  • Service Quality
  • Customer Service
  • Field Services
  • Affordability and Cost Control
  • Distributed Energy Resource Interconnection and Deployment
  • Grid Modernization and Technologies
  • Energy and Environmental Policies
  • The PUC will assign penalties and report-only conditions for each metric. Report-only metrics may be used as an interim step toward developing benchmarks in relevant areas.
  • Grading scheme should result in penalty by default for a subset of metrics deemed essential service standards.

• Financial Report and Audit:
  • Inter-period audit should follow formulas and practices vetted and agreed to as a matter of the adjudicated rate case.
  • Financial review should be more frequent than 5 years and the 10% threshold removed.
  • Findings and adjustments should be publicly reported.

• Divestiture and the Consumer-owned Option:
  • Bill should require the PUC to determine through rulemaking a clear and unequivocal threshold of poor performance that triggers an adjudicatory proceeding for divestiture. This could be based for example on a specified number of failed grades in a subset of metrics deemed essential service standards.
  • Criteria for determination by the Commission should explicitly include achievement of the state’s climate requirements and facilitation of greenhouse gas reductions.
  • Section 5 subsection 2 should be stricken from the bill to prevent potential confusion and/or conflict with the ongoing COU referendum effort. Language pertaining to standards and planning should also be screened for compatibility with the COU referendum language.

• Climate Change Planning:
  • The utility obligation should be expanded to include integrated transmission and distribution planning for climate mitigation, including load forecasting that reflects beneficial electrification, load flexibility and distributed energy resources.
  • Periodic plans should be used to ensure that operations and investments align with state climate requirements and to inform development and revision of the performance metrics.
  • A new operational planning division should be established at the PUC to support this work, staffed and resourced accordingly, to ensure that utility plans are consistent with state policy goals.

[1] Electric Utility Performance: A State-by-State Data Review, Citizen’s Utility Board, Feb 2022.

[2] Sec. 1. 35-A MRSA §101

[3] Docket No. 2020-00344

[4] CMP response to Notice of Inquiry, Docket No. 2020-00344, Feb 18, 2021.