The sale of most of Central Maine Power generating capacity for an enormous sum to the Florida-based FPL Group was a well-timed deal for customers’ pocketbooks. But the sale should also be a warning to lawmakers still crafting the state’s deregulation laws for electric utilities: Power companies here are about to be replaced by the nation’s giants, and Maine’s utilities are going to look like mom-and-pop shops compared with their competitors.
The $846 million deal is the largest of its kind. It is expected to lower rates by 10 percent if CMP applies approximately $500 million from the sale toward its stranded costs, the expensive investments CMP made or was required to make that will not be competitve in a deregulated market. The purchase also will allow the FPL Group to enter Maine’s emerging gas industry, both through its plans to convert its oil-fired Wyman Station to use either gas or oil and by building new gas-only capacity.
FPL Group of Juno Beach, Fla., which owns Florida Power & Light, is one of the nation’s largest power conglomerates. To get a sense of its size, consider that on the same day it was setting a record for a power deal in Maine last week, it also purchased a plant in Massachusetts and another in New Jersey. Its earnings in 1996 was $575 million. Yet FPL is only one of several huge power companies that will enter the New England region as deregulation proceeds. The region is particularly attractive because its high prices have forced it to lead the country in becoming more open to competition, and because of the shutdown of nuclear power plants, including Maine Yankee, which will require the region to seek new sources of electricity.
This means that lawmakers and state regulators need to stop viewing CMP and Bangor Hydro-Electric solely as big-foot companies that could stomp out competition and also start viewing them as employers of Maine residents and longtime local companies.
In the Legislature’s last session, the utilities were limited in their ability to market power after 2000, and were allowed to sell no more than 33 percent of their power in their service territories and may not provide a standard offer to more than 20 percent of their electric load within their service territories. Because of these restrictions, some current customers may find that they will be prevented from signing up with their old company and, in the spirit of competition, may find themselves served by a mega-corporation from Texas.
There is plenty of time to fix all of this. But let the good news from CMP’s sale be a warning to deregulators. The big guys are coming to New England and Maine needs to be prepared for them.