March 29, 2024
BANGOR DAILY NEWS (BANGOR, MAINE

State panel backs bill for Hydro loans

Actions this week by Bangor Hydro-Electric Co. and state legislators brought approval of a controversial buyout of two electric power plants closer to reality.

Tuesday afternoon, the Legislature’s Utilities and Energy Committee in a 10-2 vote endorsed a bill that would authorize additional state-backed loans that would be used by Bangor Hydro to buy out contracts with Babcock Ultrapower. Babcock operates biomass plants in Enfield and Jonesboro and sells electric power to Bangor Hydro, the state’s second-largest power company.

The bill still needs approval from the full Legislature, but the electric company is seeking $100 million from the Finance Authority of Maine as part of its $160 million Ultrapower buyout approved by the Public Utilities Commission on May 1.

Meanwhile, in a move that concerned at least one legislator, Bangor Hydro struck a deal with the towns that would have the power company offsetting some financial losses expected by the towns because of the buyout. In exchange, the towns agreed not to oppose the bill or to appeal the PUC’s decision. The deal was reached last week but wasn’t announced until Tuesday.

The full Legislature is expected to vote on the bill in the next week or two and FAME is supposed to vote on the loan May 18.

“It is a security blanket for the town as far as lost taxes resulting from the buyback,” said Enfield Town Manager Peggy Daigle. Should the electric company fail to obtain FAME financing, the financial deal would be off, although Daigle said the town still could seek legislative relief for the tax loss in the form of an immediate adjustment of state values.

Charles Gilbert, the towns’ attorney who released details of the agreement Tuesday, said the agreement did not require payments unless tax revenue from the two biomass plants actually dropped between 1996 and 1999.

“We think that is the likely scenario, but if it doesn’t happen for whatever reason, so much the better,” he said.

That the power company reached the agreement last week and failed to inform legislators angered Portland Rep. Herb Adams, one of the two committee members to vote against the bill.

Adams said the company had an obligation to inform the Legislature of such deals and that he didn’t think it was right that the two towns signed away every avenue they had for any appeal. With the state having to pick up the tab should the loans be defaulted — which has happened to Pennsylvania, New Jersey and New York — legislators need to have as much information before them as possible.

“That’s not the way to make public policy and it’s not how to handle public money,” Adams said about the Bangor Hydro’s agreement.

The bill that was endorsed by the committee would allow FAME to lend an additional $120 million, for a total of $220 million, to power companies to buy out expensive power contracts.

Central Maine Power Co. already had used most of the initial $100 million for CMP’s purchase of Fairfield Energy Venture last year, leaving only about $33 million, according to Charlie Mercer of FAME.

Bangor Hydro spokesman Bill Cohen said the company expects to save $58 million by buying back the contracts. And going through FAME, the company expects to save another $15 million to $20 million over 10 years of financing. Cohen said the company would be going ahead with the purchase regardless of whether it gets the FAME financing.

As for the agreement with towns, Cohen said Bangor Hydro wanted the towns not to contest the bill because any appeal could end up in court for more than a year, reducing the company’s chances for FAME financing and passing on savings to its customers.

As part of the agreement, the electric company will pay 80 percent of the loss in tax revenue to each town the first year and will pay 60 percent of the lost tax revenue the second year. After two years, the state property tax equalization will increase state aid under the school funding formula.

In approving the buyback proposal last week, the PUC strongly urged the electric company to consider making payments to help Enfield and Jonesboro with the economic consequences of the possible shutdown of both biomass plants.

Both towns had expressed concern about the job losses and potential tax losses. This year Babcock paid Enfield $614,000 in taxes, about 37 percent of the town’s total tax bill. Babcock paid $492,000 in taxes to Jonesboro, about 76 percent of that town’s total taxes. With no power contracts and no revenue, town officials say the current $48 million value they place on each plant will go down resulting in a loss of tax revenue, which means the local tax rates would increase.


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