The Maine Supreme Court has cast into doubt a business deal between a Canadian utility and a wind generating power company. The court has ruled that the joint venture between Canadian-based Emera and Boston-based First Wind should never have been approved by the Maine Public Utilities Commission because it applied the wrong standard. Patty Wight reports.
At issue is the role of each company in the electricity market. Emera distributes electricity. First Wind generates it, through wind turbines. When Emera joined with First Wind in 2012 to create a new power generating company, that presented a problem, says Eric Bryant, senior counsel with the Maine Public Advocate.
“Because it controls the poles and the wires, it could do things to its grid that would favor one type of generator over another,” Bryant says.
Which could threaten the competitive market. That was the purpose of what’s known as the Restructuring Act of 2000. It created a competitive electricity market, says Bryant, by requiring Maine’s electricity companies to get out of the generation business.
“It used to be, before the Act, that ratepayers bore a lot of risk related to generation – cost volatility and so forth was often passed right through to rate payers,” Bryant says. “The Restructuring Act took that risk away and put all that risk on generators.”
The Supreme Court decision on Tuesday preserves that protection for rate payers, says Bryant. But the chairman of the Public Utilities Commission, Tom Welch, says he viewed the deal between Emera and First Wind differently when he approved it.
“It represented a significant investment in Maine – some hundreds of millions of dollars that might not otherwise occur,” Welch says.
Under the business deal, Emera invested more than $300 million into the joint venture and would have pumped in $1 billion over the course of a decade. That would secure a 49 percent share in the business, called JV Holdco. Welch says that does not violate the Restructuring Act.
“The prohibition did not extend to the particular set up they were proposing here,” Welch says.
That’s because Emera – the distribution company – didn’t own a controlling stake in the new power generation company. In addition, the PUC imposed conditions on the deal to insulate rate payers from any adverse affect.
But the Maine Supreme Court disagreed, saying in its opinion that a financial interest doesn’t have to be a controlling interest for a deal to be rejected. Basically, Welch says, the decision says the PUC used the wrong standard to evaluate the deal.
“The court actually did not say that this transaction could not go forward,” Welch says. “So the issue of whether the transaction, even as it’s currently in place, can survive is actually an open question.”
The court directs the PUC to revisit the business transaction. Welch says the PUC will first ask all parties in the suit what they think the decision means moving forward. Eric Bryant, with the Public Advocate, says one thing is clear to him:
“As of right now, this joint venture lacks regulatory approval, because the law court did strike down the order that allowed the joint venture to close,” Bryant says.
Andrew Landry is an attorney with Preti Flaherty, which represents the Industrial Energy Consumer Group, one of the challengers of the PUC decision on the business venture.
“There may be aspects of the transaction that are salvageable, and there may be aspects of the transaction that have to be unwound,” he says. “I think it’s, frankly, too early to say for certain.”
Opponents of wind power, like Chris O’Neil of the Friends of Maine Mountains, says he wonders what ripple effect the Supreme Court decision will have on all of First Wind’s projects in Maine.
“Will they be able to go out and just replace Emera’s bank roll with somebody else’s bankroll? What does it mean for their power purchasing agreements? What does it mean for their pending license applications?” O’Neil says. “As much as we hate to see any business fail, if there was one in Maine I’d like to see fail, it would be First Wind.”
Calls to First Wind and Emera were not returned by air time.
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