Maine Electricity Supply Costs Expected to Rise in January 2024

Most households and small businesses in Maine are poised for an increase in electricity supply costs starting in January 2024. According to an analysis by Competitive Energy Services, a Portland-based consulting firm, residents can expect a rise of approximately 15% in their electricity supply rates. This translates to an estimated additional cost of around $8 per month for the average household by 2026.

The anticipated hike in supply costs is separate from a recent request by Central Maine Power (CMP) to increase its distribution rates as part of an effort to upgrade its aging infrastructure. This proposal, currently under review by the Maine Public Utilities Commission, has faced significant backlash from consumers already grappling with rising costs. By early October, record numbers of public comments, totaling 617, had been submitted in opposition to CMP’s request.

Andrew Price, president and CEO of Competitive Energy Services, highlighted the growing concern over affordability, stating, “Affordability is becoming a big issue, a big political issue.” He noted that the impending supply cost hike will likely add to the frustration felt by consumers regarding CMP’s proposed distribution increases.

Electricity rates are not just a local concern; they are becoming a national issue as well. According to the Energy Information Administration, consumers have experienced a 13% increase in electricity prices since 2022, with further increases projected for next year. In various regions, these increases are linked to the construction of new power plants to support expanding data centers.

Maine’s expected rise in supply costs stems primarily from increasing wholesale natural gas prices, rather than external factors such as artificial intelligence or CMP’s distribution case. The U.S. has become the world’s largest exporter of natural gas, with projections indicating that liquefied natural gas (LNG) exports will double by 2030. This surge in exports is part of a broader goal to enhance American energy dominance, as outlined during the previous administration.

Unfortunately, higher natural gas prices negatively impact energy consumers in New England, where approximately half of the region’s electricity is generated from natural gas. The price of natural gas helps determine the marginal cost for other energy sources supplying the grid, which puts pressure on overall electricity rates.

The Maine PUC is set to review annual bids from electricity generators for standard supply service in 2026 next month. Philip Bartlett, chair of the PUC, stated, “It’s fair to say that electricity prices track natural gas prices.” He explained that if generators anticipate rising gas prices, they may adjust their bids accordingly.

Electricity supply rates in Maine have fluctuated significantly over recent years. They have ranged from about 6 cents to 16 cents per kilowatt-hour, with recent trends showing standard offer supply rates around 11 cents per kWh for CMP and Bangor Hydro District. This volatility has made supply costs the largest and most unpredictable component of consumers’ electric bills.

Maine’s electric rates have increased at the third-fastest rate in the country from 2014 to 2024, according to a previous analysis by The Maine Monitor. Factors contributing to this rise include a state solar reimbursement policy and storm damage repairs, but skyrocketing natural gas prices have been the predominant factor.

The region’s reliance on natural gas makes it particularly susceptible to price swings, especially during peak demand periods in the winter when pipeline capacity is strained, necessitating the use of more expensive LNG.

LNG is also influencing electricity prices across the country as older coal plants are retired, leading to a greater dependency on natural gas, which now accounts for 42% of U.S. electricity generation. The increase in LNG exports primarily aims to reduce reliance on Russian energy and meet the growing energy needs in Asia.

Recent data from the Institute for Energy Economics and Finance Analysis indicates that gas exports now exceed domestic consumption at power plants. The Energy Information Administration forecasts that a key market price for natural gas will rise from $2.20 per million BTU last year to $4.10 in January 2024.

While some industry groups, such as the American Petroleum Institute, argue that LNG exports have minimal impact on domestic gas prices, the effects on electricity rates remain a concern for many consumers. Heather Sanborn, Maine’s public advocate for utility customers, expressed frustration over limited state tools to mitigate supply costs.

Sanborn’s office regularly hears from constituents worried about electricity affordability. She emphasized the importance of exploring alternative procurement methods for standard offer contracts. A bill passed this year directs the PUC to consider soliciting bids more frequently and for varying lengths of time to address rate volatility.

Bartlett noted that while minor adjustments to procurement methods might be beneficial, no significant solutions are on the horizon that could drastically lower supply costs for consumers. An upcoming report to the Maine Legislature is expected in January 2024, which may provide further insights.

Both Sanborn and Bartlett agree that investing in renewable energy sources, such as solar and wind, could help stabilize costs over time. These resources can reduce reliance on gas plants during peak demand times. However, federal support for renewable energy projects has diminished, particularly under previous policies favoring fossil fuels.

Sanborn concluded, “To the extent we’re not building grid-scale storage or offshore wind, we are allowing natural gas to be the marginal cost setter in our region,” underscoring the need for a more balanced energy strategy moving forward.