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July 11, 2016
Politics & Co.

A $13.4M question: Will the PUC biomass bidding process be competitive?

The Maine Public Utilities Commission has set a deadline of July 29 for bids seeking to tap a $13.4 million allocation created by the 127th Legislature to pay for above-market, two-year contracts for electricity created by biomass generators. Funding would come from the state's rainy day fund, which was reported to have $111 million in it earlier this year.

The solicitation is guided by LD 1676, an emergency bill approved by lawmakers to help Maine's struggling logging industry, which has been rocked by closures at several paper mills and at Covanta Energy's biomass power plants in West Enfield and Jonesboro. In supporting that bill, the Professional Logging Contractors of Maine noted that 15% or more of 2,500 logging and trucking jobs in Maine could be lost due to those double-whammy blows. The biomass power RFP is intended to save some of those jobs.

Under that law, the PUC is authorized to direct one or both of Maine's transmission and distribution utilities, Central Maine Power and Emera Maine, to enter into two-year contracts to purchase up to 80 megawatts of biomass-generated power at above-market rates. The solicitation sets several requirements for prospective bidders, including that the biomass power plant must provide "in-state benefits, such as capital investments to improve long-term viability of the facility, permanent direct jobs, payments to municipalities, payments for fuel harvested in the state, payment for in-state resource access, in-state purchases of goods and services and construction-related jobs and purchases."

But what if the only biomass company in Maine still operating — i.e., ReEnergy Holdings — is the only bidder? Does the solicitation then fail to meet the law's requirement that the bidding process be competitive?

That's the question raised in a May 31 filing submitted by the Industrial Energy Consumers Group, which argues that the "competition-in-fact" definition should be applied to the process, requiring multiple bidders.

"The commission has itself determined that the basic premise of competition in bidding is to have more than one bidder," wrote Tony Buxton, a Preti Flaherty lawyer who serves as counsel to the IECG. Citing a 2006 PUC ruling, Buxton quotes the PUC as previously stating "[a] solicitation process that yields only one bidder cannot be considered competitive" and that "lack of competing bids makes it extremely difficult to determine whether the prices are reasonable and in the public interest."

But other interested parties express confidence in their written comments to the PUC that the process would be competitive even if there's a limited number of bids.

"Emera Maine does not believe, however, that the statute meant to convey that the solicitation could not be competitive in the event only one or two entities submit bids," wrote Sarah Spruce, the utility's associate counsel.

In its filing, ReEnergy Holdings argued that the law's two-year contractual limit and the 80-megawatt cap on the amount of power that can be purchased provide "assurance that any bidder's proposal must maximize the total in-state economic benefits their project provides at the lowest cost practicable."

"The new law further requires that the successful bidders verify on an annual basis that projected in-state economic benefits generated during the term of the contract," wrote Charles Soltan, ReEnergy's attorney. "If not achieved, the commission may reduce the contract payment by the percentage difference between actual in-state benefits achieved and the projected in-state benefits. This is another of the many ways that the Legislature and PUC are assured of a competitive solicitation, and that contracts successfully achieve the intended goal of supporting the wider biomass and taxpayer communities."

It's not an academic debate: If PUC concludes its solicitation is not competitive, it reserves the right to select no bidders and is not obligated to authorize any contracts.

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