State utility regulators order investigation into CMP’s management

The Maine Public Utilities Commission decided Thursday to open a full investigation into how a demand for profits by Central Maine Power’s parent company Avangrid may have affected operations and investment in Maine.

But the PUC also decided to lift an ongoing financial penalty imposed on CMP two years ago, citing the company’s recent customer service improvements. The earnings cap cost CMP roughly $12.5 million.

In 2019, a Press Herald investigation found that officials at CMP and its parent company cut corners, skirted best industry practices and failed to adequately test a new error-prone billing system launched in fall 2017. The meltdown of the $56 million billing system, paradoxically named SmartCare, revealed a pattern of corporate mismanagement and unfulfilled customer promises spanning much of the preceding decade.

PUC Chair Philip Bartlett, in a meeting Thursday, said a management improvement plan submitted by CMP under a previous commission order held promise. But he was still concerned about the extent to which budgeting decisions by Avangrid were driven by a desire to increase earnings instead of meeting the needs of Maine customers.

“Its focus on financial performance and the related expectations in the investment community appear to be paramount in determining how it establishes investment levels and budgets for each of its Avangrid Networks operating companies,” Bartlett said. “These Avangrid processes and financial drivers appear to be a root cause in many of CMP’s service and performance-related problems that have already been observed, and (they) present an ongoing risk to Maine ratepayers in the future.”

CMP VOWS TO COOPERATE

Avangrid Networks, a subsidiary of Avangrid, owns and operates eight electric and natural gas utilities, including CMP, and serves more than 3.3 million customers in New York and New England. Avangrid is owned by Iberdrola, a Spanish multinational utility owner and operator.

A wider investigation would build on the work already conducted last year by an independent auditor. That report found CMP was not “irredeemably flawed,” but had management problems related to meeting investors’ earnings expectations.

The wider probe also would recommend new regulations to make sure CMP receives sufficient resources through Avangrid’s budgeting process, Bartlett said.

In a statement, CMP said it has consistently improved customer service over the past four years and consolidated management under Maine-based company leaders.

“(CMP) will cooperate with this additional area of inquiry from the commission while we remain focused on meeting – and exceeding – our customer needs every day,” it said. “The Maine PUC focus on future regulatory strategies will better serve Maine customers and support clean energy goals.”

Maine Public Advocate William Harwood, a lawyer appointed by the governor to represent consumers in utility matters, supports the management investigation.

“Avangrid is responsible for looking out for its investors, not Maine ratepayers,” Harwood said. “If we are successful in holding CMP accountable, we must be sure that CMP management is in full control of the utility and its operations.”

EARNINGS PENALTY DROPPED

In the same meeting, commissioners voted to suspend a financial penalty placed on CMP in January 2020 for mishandling billing and customer service.

That penalty limited the amount CMP could earn until it met specific customer service benchmarks over an 18-month rolling average. Earning limits have cost CMP roughly $12.5 million, the largest financial penalty ever imposed on a transmission and distribution utility in Maine for poor management.

While the earning cap will be lifted, CMP still has to deliver quarterly performance reports, Bartlett said. The commission could limit its earnings again or pursue other remedies if those show service degradation.

“I make no findings about whether CMP’s institutional and cultural changes will or will not lead to sustained improvement in its ability to deliver reasonable customer service,” Bartlett said.

Commissioner Patrick Scully, however, said the PUC should have made dropping the penalty retroactive to September, when CMP requested it lift the penalty based on its performance improvement. That would have reduced the penalty by $2.5 million, Scully said.

“I believe it is more important to increase the financial impact on CMP in response to an actual degradation in service, rather than out of fear of a future degradation of service,” he said.

CMP has worked hard to improve its service and responsiveness to customers and has demonstrated consistent improvement to the commission, the company said in its statement.

“We continue to look for ways to improve service and we will hold ourselves accountable to these industry best practices moving forward,” it said.

SOME ADVOCATES OBJECT

The Office of Public Advocate objected to removing CMP’s penalty. In a January filing, the office said three of the four key benchmarks for the company’s performance showed nearly consistent retrogression since last February.

The office opposed lifting the penalty because it inferred that the intent was to show substantial compliance to service standards across the board, said Harwood, the public advocate. Commissioners instead took the average of all four benchmarks across a year and a half.

Harwood said his office accepts the commission’s decision but isn’t taking its eyes off CMP.

“We will be watching closely to see if CMP service continues to improve and consistently satisfies the statutory definition of ‘safe, reasonable and adequate’ service,” he said.

Once a widely respected Maine company, CMP has lost public confidence in recent years. On top of its customer service and billing problems and multiple investigations by regulators, its parent company lost a bruising political battle last year when voters rejected a high-voltage transmission line it was building in western Maine. Opponents continue working on at least four legal fronts to decisively kill the embattled project in 2022.

Dissatisfaction with the company’s performance led legislators last year to propose a consumer-owned utility to take over from CMP and Versant Power, which serves customers in eastern Maine. That effort passed the Legislature but was vetoed by Gov. Janet Mills. A campaign to put the issue on this year’s November ballot failed to get enough signatures, but organizers said they intend to keep going.

Mills expressed her views on the PUC’s decision through a spokesperson Thursday.

“The governor supports the PUC’s investigation into Avangrid’s decision-making and its effects on Maine ratepayers,” Lindsay Crete said in a statement. “While she welcomes CMP’s recent improvements, she also encourages the PUC to be prepared to reimpose its penalty if they deem it necessary to sustain those improvements.”

Rep. Seth Berry, D-Bowdoinham, a vocal CMP critic and chair of the Legislature’s Energy, Utilities and Technology Committee, said it was inappropriate to release CMP from a financial penalty at the same time Mainers are dealing with high energy prices.

“I think it is a travesty that CMP’s guaranteed profits will increase at this crucial time based largely on self-reported performance data,” Berry said.

He also was skeptical that a state investigation of CMP and Avangrid management would have a meaningful impact. Berry co-authored the consumer-owned utility bill.

“The U.S. regulatory system is rigged against utility consumers and in favor of utility owners,” he said. “This will always be a game of whack-a-mole until we change the business model.”


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