February 19,2022 By Ramona du Houx The Maine Public Utilities Commission (Commission) opened an investigation on February 17, 2022 into the management practices of Central Maine Power (CMP) and its parent, Avangrid. The investigation will focus on how earnings considerations drive decision-making by CMP and Avangrid, the potential consequences for CMP’s customers, and how to better align incentives through regulatory oversight. An […]
By Ramona du Houx
The Maine Public Utilities Commission (Commission) opened an investigation on February 17, 2022 into the management practices of Central Maine Power (CMP) and its parent, Avangrid. The investigation will focus on how earnings considerations drive decision-making by CMP and Avangrid, the potential consequences for CMP’s customers, and how to better align incentives through regulatory oversight. An apparent desire to increase earnings may have affected its operations and investment in Maine
“It does not take a regulator or a rocket scientist to see that the monopoly management of CMP is fundamentally flawed,” said Rep. Seth Berry, House chair of the Energy, Utilities and Technology Committee. “CMP is not controlled by its own board. It is not even controlled by Avangrid, which is a mere holding company. As Avangrid’s filings with the Securities and Exchange Commission make clear, the controlling interest in all decisions is Iberdrola, which itself is owned by shareholders that include the governments of Norway and Qatar. Our public utilities’ management should have a fiduciary obligation to Maine customers. Instead, CMP’s are beholden solely to foreign – even foreign government – shareholders.”
In Avangrid’s most recent 10-K filed with the SEC (pp. 34-35), as well as previous filings, independent investors are warned that Iberdrola maintains a controlling interest in the Avangrid board, and that Avangrid is a “controlled company” under New York Stock Exchange definitions.
“Maine people are struggling to pay their electricity bills, with recent massive rate hikes both to supply and delivery charges,” said Grohoski, a member of the Energy, Utilities and Technologies Committee. “It is a travesty that the PUC would increase CMP’s guaranteed profits from 8.25 percent to 9.25 percent at this time, adding millions to their corporate coffers, particularly based on largely self-reported performance data. As of January 2022, CMP and Versant’s delivery charges already averaged 49 percent more than Maine’s consumer-owned utilities, per kWh delivered.”
In September 2021, the Commission initiated a summary investigation of management issues concerning CMP as described in the management audit report filed in Docket No. 2018-00194. The Commission directed CMP to file a plan for addressing the matters and concerns raised in that report by November 30, 2021. CMP filed the report, which included significant changes in its management structure.
“CMP is directly impacted by Avangrid’s decision-making and investment planning. While we have seen improvement in CMP’s performance, we want to be sure that it is sustainable,” said Commission Chairman Philip L. Bartlett. “Central to that question is whether decision-making by Avangrid about how to direct resources to CMP is misaligned with ratepayer interests and whether regulatory changes are needed to protect CMP’s customers.”
In a separate case, the Commission ordered the conditional removal of a substantial reduction to CMPs return on common equity of 100 basis points. Under the prior Order, CMP could seek to have the disallowance lifted once it met all service-quality metrics for at least 18 consecutive months, which Commissioners agreed today the utility had.
The Commission noted that CMP would still be required to report on Service Quality Metrics on a quarterly basis and that the penalty could be reimposed should the utility fail to meet the standards. This disallowance, totaling approximately $12.5 Million, was the largest ever imposed by the Commission on a transmission and distribution utility due to poor management.
All documents related to these cases can be found at: https://www.maine.gov/mpuc/online-services. Please reference Docket #2018-00194, #2021-00303 and #2022-00038.