Financing Public Power and the Role of Municipal Bond Banks

In this episode, Maine State Senator Nicole Grohoski discusses an upcoming ballot measure that gives Maine voters the opportunity to replace the state’s unpopular for-profit utilities with a nonprofit public utility.

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David Roberts

Maine’s two big investor-owned power utilities — Central Maine Power and Versant Power — are not very popular. In fact, they boast among the lowest customer satisfaction scores of any utilities in the country, perhaps because their customers face some of the nation’s highest rates, suffer more and longer outages than average Americans, and pay more to connect rooftop solar than ratepayers in almost any other state.

This November, Mainers will vote on a radical alternative: a ballot measure to replace the two for-profit utilities with a single nonprofit utility that would be called Pine Tree Power. Maine and many other states already have lots of small nonprofit municipal utilities, but this would mark the first time a whole state with existing private utilities decided to make them public en masse.

Naturally the utilities are opposed and have dumped $27 million and counting into a campaign to crush the measure; supporters have mustered just under $1 million.

To discuss this David vs. Goliath fight, I contacted one of its champions, Democratic state Senator Nicole Grohoski. We discussed why she thinks a public utility would perform better, what it would do for clean energy, how it would be governed, and what other states can learn from the effort.

With no further ado, Maine State Senator Nicole Grohoski. Welcome to Volts. Thank you so much for coming.

Nicole Grohoski

Thank you so much for having me. I'm thrilled to be with you today.

David Roberts

I am super excited to talk about this issue. There's a lot of ins and outs I want to cover, but maybe let's just start with a brief history of this thing. So the idea here is, as I said in the intro, to replace Maine's two big investor-owned utilities, Central Maine Power and Versant Power, with a single publicly owned main utility called Pine Tree Power. Tell me who first had that idea? Where did it first pop up? I know it was legislation and then it got vetoed. Just tell us a little bit about how we got to where we are now.

Nicole Grohoski

The history is really interesting, and I'll try to not spend too much time on it, but I think it's really important to start with the reality here in Maine as a backdrop. So a couple of things that are important to know for listeners is that we, as Mainers, find that our electricity isn't really affordable or reliable and our utilities aren't trustworthy. So we have, for many years running now, the worst customer satisfaction in the country, some of the highest rates in the country for electricity, and those just keep going up. We have experienced a 20% increase this summer, with another increase coming in January.

And we also have the most frequent outages in the country. And there are a couple of other reliability metrics that we're not doing so well on, including the length of outages and how long it takes to restore power. So basically what we see here in Maine is that the status quo of these for-profit multinational corporations is just not working for us. About a tenth of our residents in Maine received disconnection notices earlier this year because they just couldn't afford to pay their bills. And it's not working for companies or big corporations that really rely on low cost and reliable electricity to compete.

So that's kind of the background. So a number of us were wondering, does it have to be this way? Is there an alternative to worst of the worst? We are Maine, we are very proud and independent, and we like to be leading, but this is not the way that we wanted to be leading. So there was a lot of grassroots pressure. In 2017 we had a big storm, and the power was out for days. But at the same time, there was a billing fiasco, which resulted in billing errors for over 100,000 customers, which is in a state of 1.3 million people, that's a very big percent.

So there was a lot of pressure, a lot of phone calls to legislators, to the Public Utilities Commission, to the public advocate about these utilities. And so I think that really planted a seed for a number of folks. Specifically, Maine's first public advocate pointed out to some members of the legislature, including Representative Seth Barry at the time, myself, and a few others, that there were other options and that the financial and local control aspects of those options might be really helpful for Maine. So we started meeting in 2019 with the previous public advocate, economists, labor, legislators, people that were part of a group called CMP Ratepayers Unite.

And that's when we formed this idea of creating a consumer-owned utility for Maine that would be non-profit and similar to the ten other consumer-owned utilities we have in Maine. I don't know that we had a name for it at that time, but we do now call it the Pine Tree Power Company. So those were the early days. And then to sort of fast forward, the Legislature commissioned a study which was done by London Economics International in 2019 to learn more about the economics and also legal pathway here. Then, of course, 2020, everybody knows what happened then, things kind of went on pause. And then in 2021, we wrote a bill. And that bill passed in both chambers in Maine with bipartisan support. As you mentioned, the governor did veto that bill.

David Roberts

And that bill was to create the utility or to put the question to voters.

Nicole Grohoski

That bill put the question to voters, and it's very similar to the language that we'll be voting on this November. So we did revise the language based on some feedback from the governor, and that is the language that is now in front of us to vote on this November, November 7. And in order to get the question on the ballot we had hundreds of volunteers working together to collect around 80,000 signatures in total, which is a little bit above the requirement needed to get a question on the ballot in Maine.

David Roberts

I'm a little curious why — this is a Democratic Governor Mills. What was her rationale? I mean, I guess I can imagine her rationale for opposing the public utility, but what was her rationale for opposing asking voters what they thought? Did she have a good rationale?

Nicole Grohoski

Not in my opinion. I'm sure in her opinion it was great. But we read the veto letter for the most part. There was very little in there that was substantive. Some of those minor changes that we made are all things that we would have happily made in advance had we had outreach from her office about them. You know, the unfortunate thing with governors in Maine is that we have yet to elect one that has campaigned using our clean elections, publicly funding campaign option, which is something that most legislators use. So you can draw your own conclusions there about the — money in politics may have been at play.

I can't say for certain.

David Roberts

Yeah, we should just make a note here because a couple of podcasts we've done here on Volts are about state laws prohibiting utilities from using ratepayer money to lobby and pay off politicians. Maine does not have one of those laws.

Nicole Grohoski

Well, we actually did just pass a law. We were one of four states earlier this year to be sure that ratepayer dollars are not going for lobbying. You know, industry membership, group memberships.

David Roberts

Oh, interesting.

Nicole Grohoski

You know, Edison Electric, for instance, Chambers of Commerce, et cetera. So that is a new law. It will be in effect in about a month. So we'll see if that improves things.

David Roberts

Just in time or actually just a smidge too late. So the bill of particulars here then, against these two utilities, as you say, they have really low ratepayer satisfaction scores, lots of power outages, more than usual, higher rates, some of the highest rates in the country. Like every state, Maine has a Public Utility Commission that is meant to regulate its utilities. That has members appointed by the governor or elected? I'm not sure how it goes in Maine.

Nicole Grohoski

In Maine, the commissioners are appointed and then subject to Senate approval.

David Roberts

So why not just use the PUC to sort of get these utilities in line? That seems like it would be the sort of first order of business.

Nicole Grohoski

It's a great question. I mean, I think everyone kind of wants to default to using the systems we have in place, but I have a couple of thoughts about that. Our Public Utilities Commission I do think is full of folks who are hardworking and really trying to get under the hood with utilities. But there's a lot of information there that the utilities really understand best. And so when you have questions, you're going to ask the utilities and there is sort of a long term back and forth relationship there. Some people might call how that turns into regulatory capture sometimes.

Additionally, we do have the ability to fine the utilities if they're not performing up to snuff and that has happened. It doesn't happen that often, and the most recent fine, I think was around $10 million. At the same time they had a significant rate increase and are pulling out over $100 million in profit every year. So it's not really proportional and we could theoretically increase those fines a bit. But there is hesitance. I think the legislature has interest in doing some of that but the utilities are of course not interested and I think we would see another veto pen action is my guess.

But all that being said, this effort to create a consumer utility has led to a lot of us just digging down into what is the history of utilities in this country and regulation. And what we found is that utilities are natural monopolies so it makes sense for there to be regulation because there isn't competition. But the folks who sort of started the effort to create public utilities commissions were those who were going to be regulated. And so there has been this hand in glove relationship since the start around the regulators and the regulated.

David Roberts

It's not ideal.

Nicole Grohoski

That's probably a subject of a whole other podcast but —

David Roberts

It doesn't work quite like you would want it to.

Nicole Grohoski

Exactly. And additionally, I would say I have recently been talking to folks in other states and other people have served as public advocates. And what I find remarkable is the backflips and cartwheels that we go through with regulation to try to outfox the utilities when, by no fault of their own, the investor owned utilities are created with their number one mission to be maximizing repair profit. So it's like we could keep trying to think of creative and clever ways to balance this out. But at the end of all of it, I keep coming back to the fact that we don't have our roads, which are critical to our economy and our safety and our way of life in the private sector; and nor are our schools, nor is our military.

Why does it make sense for something as important as our electricity grid to be subject to for-profit motivations?

David Roberts

Listeners will be rolling their eyes right about now because this is something I say I find a way to say it almost every episode no matter what we're talking about. But utilities, they are structured such that they make money insofar as they spend money. So all they really want to do is deploy more big infrastructure. And so as you say, like PUCs find these elaborate Rube Goldberg mechanisms to sort of beg and plead with them to do things like efficiency or distributed energy, know on and on, inter, regional transmission, name it, all of which are sort of just counter to the basic incentive.

So as you say, you can spend the rest of your life coming up with more and more elaborate ways to try to trick them into doing something against their interests. But at a certain point you just got to grapple with the central issue which is that they're set up wrong, they're set up badly, they're set up to not want things that are in the public interest and at a certain point you got to just deal with the root cause. Anyway, sorry to go off on my standard canned rant there. So then a skeptic will say these two utilities, just so people are clear about this, these are not vertically integrated utilities.

These are just distribution utilities. They just have wires, they just distribute power. They do not own generation. They're dealing with a certain set of supply issues, a certain set of power plants, a certain geography. Maine is very heavily forested which is a nightmare for transmission lines for all the obvious reasons. So it just has a sort of set of things that it's dealing with. And so I guess the skeptic is going to ask what reason do we have to believe that given the sort of same resources that Pine Tree, a public utility, would perform any better?

Nicole Grohoski

Well I think we have a lot of evidence that it would because we already have ten consumer owned utilities in Maine. Just for an example, there is one that's called Eastern Maine Electric Co-op. That's a traditional co-op. It is more rural than most of Maine. You might find it interesting that it is serving about 1.2% of the state's load in kilowatt hours but it is in an area that's twice the size of Rhode Island. Now EMAC, which is in rural downeast Maine is directly adjacent to the territory of Versant that I live in and the cost for delivery in EMAC is nine cents and the cost for delivery in Versant is 13.1 cents per kilowatt hour.

So I don't think that's just some kind of magical happenstance that when you take profit out of the equation you're just paying less. We know that together CMP and Versant are sending out about — was last year was $187 million a year in profit. So I think if Mainers are in charge of our utility we can decide do we want to use that money to lower rates? Do we want to use it to reinvest in the grid to increase reliability? And I think it would probably be a mix of both of those things.

David Roberts

And that amount of money you think is material enough that it would show up as improved performance, show up as measurably improved performance?

Nicole Grohoski

I do think so. I mean I think for your listeners, while Maine is large and rural we do have 1.3 million people. So, when you sort of divide those numbers out it does make a difference. And we've had some independent economic analysis that shows us that Mainers would be saving on average $367 a month, excuse me, a year, because of the fact that we're basically going from expensive rent for the grid to a lower cost mortgage. So I think it's easy to explain it to folks in terms of, like, "What's better when you're looking for housing, dropping your money down a rent hole, black hole for the rest of your life, or swapping out to a mortgage where you've got a lower interest rate than what we see now with the guaranteed return on equity that happens for our for-profit utilities."

David Roberts

Yeah, this was another piece I wanted to ask about. So part of why you think this will be cheaper for ratepayers is just you take that huge slice of profits that are going, as you say, out of state to the owners of these utilities and keep that in state and that alone will buy you some better service. There's also the issue of investor-owned utilities expect and want and are guaranteed relatively high rates of return on their investments and often resist making investments if the rate of return is lower than that. But as you say, a public power utility can be more patient with its capital, right?

Can make investments with lower returns as long as they pay off eventually, right?

Nicole Grohoski

Yeah. So we see here in Maine that the utilities are getting a ROE of 8% to 12%. And we know that firstly that's kind of astounding because it's not all that risky. Most people are paying their bills.

David Roberts

Crazy. It's guaranteed. It's huge and it's guaranteed. It's wild what it is. This is like the safest business on the planet as being a regulated utility.

Nicole Grohoski

Couldn't agree more. And on the flip side, the Pine Tree Power Company can access low-cost capital through revenue bonding at 3-5%. So when we think about paying off that debt over many years with compounding interest, when we think about the fact that our grid really isn't ready to electrify our economy and experts expect it's going to need to be, increased two to three times. Now is the right moment in time, I think, to move away from high cost, low-risk investment to low cost, low-risk investment before we literally triple our grid.

David Roberts

Tell us a little bit about how the utility would be governed or structured and what implications you think that might have.

Nicole Grohoski

I love this question. I am a public servant and so I believe in local governance and people getting to vote and go to public meetings and have a say and all that is built into the ballot question. So the Pine Tree Power Company would have elected board members and there are seven of them, one for each grouping of five Senate seats, state Senate seats. And those members then turn around and appoint six members who have specific expertise in things like utility law and management, concerns of workers, concerns of economic, environmental and social justice, things like that, that we really want to make sure those folks are at the table.

And this group of 13 people, they serve six-year terms each of them. And of course, there's like a little bit of a lead-in time because they'd all be elected at once, where some of them served shorter terms at the start. But point is, they are people in our communities. They have to be living in Maine. They have open meetings that are subject to freedom of access laws. And in order to best serve the public, I think they would be doing a lot of public outreach. And that's something that in talking to managers and board members from other consumer utilities in the country, I've been really impressed with how much local engagement they have. I think Sacramento Municipal Utility District, they said they're hosting 1300 community meetings a year.

David Roberts

Good grief.

Nicole Grohoski

A couple a day on average. But they have, I think they said 95% customer satisfaction. So people feel like they're valued, their experience matters and they also have a plan to get to 100% clean energy by 2030. So our Pine Tree power governance is very much in the spirit of "It's a public good. It should be publicly governed."

David Roberts

There's a little bit of a controversy in Maine a few years ago. I don't remember all the details, but it was about a big transmission line that would have brought hydro from Canada down through the woods of Maine. It was fought and I believe killed by popular resistance. And there was a lot of, at least nationally there was a lot of talk of like here again we have environmentally minded locals blocking things for environmental reasons, but in a short-sighted way that's going to be worse for the environment overall. In the long term, they're NIMBY's. We've got to figure out a way of dealing with this problem, et cetera, et cetera.

So this leads to my question, which is: if you have a governing board that is elected by local people, and it is the local people who are often the source of the NIMBYism, do you not have some fears? That this would lead to a more NIMBY rather than less NIMBY operation of the utility, which is going to be difficult when, as you say, this is the time when every state everybody needs to be increasing and bolstering their transmission systems. Do you worry that local control is going to translate into more rather than less NIMBY opposition to new lines?

Nicole Grohoski

I'll put it in a way that I think makes sense to me as a person in Maine who's intimately familiar with what you laid out, which is at the root of that decision, was a fundamental lack of trust in Central Maine Power. A trust that it would be doing anything in our best interest, that it would be giving us appropriate benefits, that it was really after anything more than profits. And so I think it wouldn't be true that as soon as Pine Tree Power was created that everyone would immediately trust the company. But I do think it would be a fresh start.

And on top of that, with elected and appointed leaders spending time in communities and just energy literacy, I think in general would increase because it's something we would be talking about more if we had to elect the board. I'll say I think that people's interest in energy policy has gone through the roof this year compared to where it was in the past. And people are asking just really great questions, a new curiosity around electricity that I hadn't seen before growing up here. So I think that the outcome would actually be that folks would feel like they had a say in how the transmission was cited, who was benefiting if we remove the profit motive.

Imagine if that money that would have gone to profit was actually going to community benefits. That might really change how people feel. And I think that here in Maine we are sort of skeptical of what's being pushed on us by people from away, quote unquote, is a saying we have. I don't always love it, but it is accurate in this case. You've got Central Main Power, owned by Avangrid, then owned by Iberdrola, based in Spain, telling us, "Oh, we've got this great deal for you." And people are skeptical of that. So I think we have a greater chance actually of doing transmission right and in a way that people can accept if there was this broader community process and a lack of for-profit skepticism that comes naturally to us here.

David Roberts

One of the criticisms of the two existing utilities is that they're kind of slow-walking clean energy in particular. So I wonder if you could just say a word about what that means and why and how we think Pine Tree would be better on that score. Because it's not obvious. These are just wires utilities, right? So they're not dealing directly with clean energy generation. So what are the issues around clean energy and how will Pine Tree be an improvement?

Nicole Grohoski

So, historically, we have seen that the utilities do spend a lot of time and money in the State House, not just behind the scenes, but also right out publicly testifying against clean energy bills. Now, that has slowed in recent years, but certainly in the previous gubernatorial administration, that was a very common practice.

David Roberts

If I could just pause there, I guess I just don't fully understand why, like, if you're a company that's just running wires, what's it to you?

Nicole Grohoski

Right back to the return on equity question. So, these utilities make more money when they build transmission lines than when they upgrade the distribution system. They get a higher rate of return, right? So it is in their best interest to continue with the model of large far-off generation facilities compared to local rooftop solar type solutions or microgrids or battery storage. So that's the first part of the problem, I think. And secondly, I think some of these utilities just really are not very nimble. They're sort of in the business that they've been in for a long time and thinking about how to create a dynamic grid that has time of use rates that actually work, for instance, or bidirectional power.

We have had smart meters in this state for over a decade and I can't see how they're being used in any kind of smart way. I mean, people are still calling the utilities to let them know the power is out.

David Roberts

It's just baffling to me. Like, if I'm in the utility business, this is like my time to be a hero, you know what I mean? After 100 years of sleepy operation in the background, all of a sudden the world is calling upon me to be cutting edge and be the hero and save the world and instead, I'm just going to "I just want to keep doing things the way I've been doing." I don't know, people are disappointing.

Nicole Grohoski

No comment.

David Roberts

Yeah. So I read in one of the stories about this. One of the opponents of this measure said, quote, "The people behind this proposal have no actual plan to lower rates, improve reliability and enable a swifter energy transition." The implication being that the fans of this measure just think that making the utility public is going to be sort of automagically, make everything easier and cleaner and cheaper, but there's no actual plan to do so. Is there a specific plan for how Pine Tree would operate and how it would do these things? Has anyone modeled out sort of you know what I mean?

Is there more than just hope that the structure will do the work for you?

Nicole Grohoski

Well, I think that the person who said that spent some time cherry-picking certain things in the ballot language but missed the bigger picture here, which is we have to start by saying yes on November 7 and then at that time then we have an election for the board of directors and it goes on from there. But until that time the Maine Public Utilities Commission cannot compel the utilities to give over their very private data to do that kind of in-depth modeling that is going to be the very next task for the Pine Tree Power Board once it exists and that is spelled out in the ballot question. You know, these utilities, I'm just going to be level about it: They don't have a plan either.

And I can tell you that because the legislature last year had to pass a law requiring them to do integrated grid planning and think about how is it going to work to increase renewables on the grid, to increase demand as people install more heat pumps and use electric vehicles. They're not doing that or if they are doing it they're not doing it in any kind of way that is transparent or subject to review. So I think it's like a great bait and switch tactic.

David Roberts

Aren't they supposed to create integrated resource plans? I thought that was something that all utilities had to do.

Nicole Grohoski

I think they have some planning, but it is clear from the way that the interconnection queues are looking, the very high cost they're pushing onto developers for even just what turns out to be basic grid maintenance, there isn't really — maybe they have something that says "plan" at the top, but I'm not sure that all the nuts and bolts are actually there.

David Roberts

Yeah, I meant to hit on interconnection before because that's one of the critiques also is that they are slow-walking interconnection of distributed resources, etc. Presumably they're doing that, or at least they say they're doing that to protect the grid. Do we have reason to believe they're slow-walking that on purpose such that Pine Tree could substantially speed up the interconnection queue?

Nicole Grohoski

We do have reason to believe that specifically because of all the complaints that we've received as legislators. We did ask the Public Utilities Commission to look into this and they hired the Interstate Renewable Energy Council, or IREC, to do a study. And the IREC findings were basically especially around Versant, which is in eastern and northern Maine. These guys are some of the worst actors we've ever seen in the United States. They are requiring things that they can't justify why they're requiring them, and we can find no reason from an engineering perspective to require them. And your listeners might find it fascinating to know that for Versant customers, the average cost of interconnecting your rooftop solar to the grid is $10,000.

David Roberts

Jesus.

Nicole Grohoski

That is not normal is what I'm told. Another great story that I've heard from a couple of constituents is that they need a transformer upgrade to interconnect their rooftop solar. Okay, that might be true, and that upgrade is going to cost you $1,000 - $1,500. But we can't get the parts for two years.

David Roberts

Oh my goodness.

Nicole Grohoski

Now the same solar installers that are working in my area are also working in CMP's area Central Maine Power. Because I live my district includes both, and the installers are saying "CMP says they can get it in two months." So then I asked my constituents "Can you file a formal complaint at the PUC using this process we had to create because this is such a rampant issue?" And when they do that and go through the whole process, then that transformer has arrived and been installed within two to three months time. So I don't know what to say about it.

I can only say what I see from the outside and the experience that I have heard about from people that pick up the phone and call me. But it seems shady to go from two years to two months.

David Roberts

Let's grapple here with what is probably the biggest and most difficult issue around all this, which is say Maine voters say yes to this, and it goes forward. Basically, it would involve the state of Maine buying these two utilities assets from the utilities, and depending on who you believe those assets are worth anywhere from $5 to I think CMP is now saying it could get up to $13 billion. So that's a big public expense. So how's that going to get financed? Who's going to pay it? How long is it going to take to pay it? Have we thought through in any detail how that process works?

Nicole Grohoski

Yes, definitely. And that was a big part of what the London Economics analysis included was that legal analysis of what that purchase price process would look like. We also have been able to look at this transition as has happened in other communities in the country, and we created an expedited and refereed process to determine the purchase price. And all told, from this fall to switch over to Pine Tree Power, we expect it to take three to four years. What we know from the LEI study is that this is a completely legal and constitutional effort. It's helpful to remind folks that because these are actual monopolies, they only have the right to be doing business because we give it to them.

And in the Maine statutes, it literally says the PUC can take it away.

David Roberts

Yeah, I mean, of course, again, this drives me crazy. I'm reading articles about this and of course, just once I'd like there to be a good argument had in public instead of idiots. But all the Republicans are now saying "This is a communist takeover of private business by the state. It's Communists. Why don't we call it Chinese electricity?" I've read, some of the dumbest quotes.

Nicole Grohoski

Are you in the comments section?

David Roberts

No, these are legislators. This is not even I mean, there's barely a distinction anymore. But like, the Republican legislators are saying this now. So it's worth just emphasizing the point that you just made, sort of drawing a line under it, which is these businesses have been granted a monopoly by the state and granted guaranteed returns by the state. So of course the state can take that back. Of course this is legal. Like if the state grants, the state can take away if the state is granting it on the grounds that it will be of service to the state's residents and it's not anymore, then of course the state can take that monopoly back.

It's just crazy viewing. It's not like Maine is going to go take over the potato chip industry.

Nicole Grohoski

We have no interest in that.

David Roberts

This is not a normal business. Utilities are not normal private businesses. They are state basically state created entities. And so of course, the state can uncreate them if it wants to. Sorry, I know that will not have any effect at all on the dumb things Republicans say about this.

Nicole Grohoski

Well, I do want to clarify. We do have some really strong Republican support, from certain legislators as well as just regular folks. I mean, that was the greatest thing about collecting signatures for this initiative, which I did and my family did and many other people I know was that when you remove it from a debate in a state house, regular people just get it. They get that this is really important to our economy to have an electricity grid that works for us and for our health and safety. And they also understand that maybe this is not a place for profits.

And I've had folks wearing Birkenstocks and folks wearing MAGA hats sign the petition because I think Maine people are really resilient. We are proud of our ability to solve problems and I think the majority of us believe this is something that we can do and that we probably could do it better than some far-off foreign monopoly.

David Roberts

Anyway, I interrupted you. You were talking about how these giant bills are going to get paid. Basically you say it's going to take about four years to do all the work, to transfer everything over. Would the $5 billion or however much it turns out to be, be paid off over those four years or how will it be financed?

Nicole Grohoski

No. So we did meet with some municipal bond banks. This sort of acquisition, like in the case of Long Island, has been paid off over a long period of time. And that's how we're able to see the rate reduction. You know again, similar to renting versus owning. I was able to buy a home. My mortgage is less than my rent would be, but I am still paying it off. And even with the interest, it's still less. So we have the ability through revenue bonding to borrow that money backed by the ratepayers, not actually by the state government and the general fund, but by the ratepayers.

We have the ability to borrow that money, and then pay it off over time, and borrow more as we need to build out the grid.

David Roberts

Would it being a public utility enable it to draw on state money? Because one of the points a few pods ago we were talking about a new offshore wind bill that would draw money from state coffers rather than from ratepayers. And one of the sort of arguments and defense of that is taking tax money from state taxpayers is much more progressive than taking it from ratepayers. Basically you're getting a much more progressive source of funding. Is there any talk of Pine Tree being able to draw on state money or would it still just operate as a utility and get all its money and revenue and stuff from ratepayers the same way a private utility would?

Nicole Grohoski

The enabling statute has it separate. I think that that is really important, especially to our union workers because they had concerns about becoming public sector workers and what that would mean for their right to strike, for instance. So we have ensured that they are private sector workers.

David Roberts

Oh, interesting.

Nicole Grohoski

Whether or not a future legislature might say we're able to maintain that and have the utility doing efficiency programs that are paid through the taxpayer dollars versus ratepayer dollars, I can't predict. To your point about regressivity, one of the things that is required in the bill language for the Pine Tree Power Company is to establish lower rates for low income residential customers in the first five year plan. So we are trying to address that challenge that you're absolutely correct. It's the regressive funding structure, unlike taxation.

David Roberts

Also, one of the criticisms of these utilities is that they're sending all these cutoff notices, they're cutting off people from power, which is bad for all obvious reasons. But is Pine Tree going to pledge not to do that? And if it doesn't do that, where does that money to cover those people's rates come from? Because that would seem like an additional expense because whatever you might say about cutting people off, it does save the utilities money.

Nicole Grohoski

Right. Well, we do have what's called the Arrearage Management Program here in Maine and that does help folks get out of arrears and that is ratepayer funded program. So that is a somewhat fiscally progressive approach to that. You know the details of that program are probably more than you'd want to know. But the long and short is if you get back on track then some of your debt will be just forgiven. But it's not forgiven by the utilities, it's forgiven by your neighbors.

David Roberts

Right. Well, would Pine Tree pledge not to cut people off? Like, is that part of the campaign here or how would it treat cutoffs ?

Nicole Grohoski

You know, it's a good question that surprisingly I don't know if anyone has posed to me it is not in the legislation one way or the other. I'm of the belief that if rates go down and we could have rates that were income stratified to some extent, that the amount of disconnection notices that we saw earlier this year would go way down just economically. But I think it would be really a decision of the board. And then I'm also not sure if the Public Utilities Commission if there are any rules on the books because this utility, unlike a lot of consumer utilities in the country, is regulated by the Public Utilities Commission as if it were an investor owned utility.

So, there may be specific rules about that already.

David Roberts

Yeah, I would just think though, if you're trying to sell this, making this public rather than private, one of the things you could sell is like we think this is a public right to have electricity on some level.

Nicole Grohoski

The one other thing about it that just comes to mind is that a couple of years ago during COVID, people were especially concerned about the disconnection notices, not knowing if they were going to be receiving a next paycheck but we were told that the disconnection notices were necessary in order to provide certain assistance. So the utilities said, "Oh don't worry, we're not actually going to disconnect anyone but we have to do this to get them into this next program." So, I don't know if that would come into play here but I'm not convinced that the utilities wouldn't have ultimately shut the people off but that was a way that they spun it at least.

David Roberts

One more kind of semi-technical question that's a little bit of a side thing but is of interest, I think, to Volts listeners. One of the provisions in the IRA, the Inflation Reduction Act, is that it makes some of the tax credits direct pay, which means you don't have to pay taxes to get it back. You can get it back directly as a check and one of the categories of entities that would qualify for this is tax-exempt entities. So I wonder, has anyone done any thinking, and maybe this is too in the weeds but done any thinking about what advantage it might pose for Maine to have its utility be tax-exempt, whether it will benefit from the IRA through that.

Nicole Grohoski

It is something we're thinking about because we were excited to see that direct pay provision sort of leveling the playing field for publicly owned generation which is another topic I'm very interested in, but I think it remains to be seen. In the case of Pine Tree Power, it is not allowed to own generation and it may be permitted to own some storage as is necessary to maintain the grid functioning. So I'm not entirely sure that that direct IRA provision would help in this case but what I think it does is sort of change the paradigm a bit there that may then also shift to other things. If the federal government says let's have an ITC or PTC for transmission lines, the next step might be —

David Roberts

Praise be.

Nicole Grohoski

Well, let's make sure we set it up the same way we've just done with generation. Yes, I think it's a really important conversation even if it doesn't have a direct immediate effect on the Pine Tree Power Company.

David Roberts

Interesting. As I think anyone could predict just from what we've said so far, even knowing nothing else about it but what we've said so far, I'm sure people could predict that the private utilities in question are not excited about this happening and have mobilized to prevent it from happening. So tell us a little bit about the campaign against this. Is it as hysterical as one would predict?

Nicole Grohoski

Yeah, I mean hysterical is one word for it. Deeply troubling is another phrase that comes to mind. But these are utilities, like I mentioned, about the amount of profit that they make and that's just off of their Central Maine Power and Versant holdings. But Central Maine Power is just a small, small fraction of the entire Iberdrola conglomerate. So, yeah, we have seen them spending a lot of money against the campaign. They've put $27 million toward the campaign, both utilities, as of the end of June. So we expect to see more of course.

David Roberts

Not a small amount in a small state.

Nicole Grohoski

No. And honestly, talking to my neighbors, people are very upset by it. They're kind of irate that they're the people whose power goes out and doesn't come back on for a couple of days. They're the folks who had to spend $10,000 for a generator which isn't part of a clean energy solution last I checked. And there go the utilities putting $27 million toward just running ads.

David Roberts

Yeah, I mean, are they experiencing it as a flood of ads? I mean, $27 million must allow you to kind of dominate the airwaves.

Nicole Grohoski

Yes, the airwaves are definitely bought up, as far as we can tell. And they have just their two donors, which are the utility parent companies, which are Avangrid and Enmax.

David Roberts

Are they funding 100% of this?

Nicole Grohoski

100%, yes. And these utilities, lest they tell you how amazing and green and climate-friendly they are, they are gas utilities, Avangrid and Enmax anyhow. And then on the flip side, we are a smaller organization. We don't have Mainers' pockets to pickpocket on a regular basis.

David Roberts

I'm guessing you guys haven't hit $27 million yet. How much money have you have?

Nicole Grohoski

You're closer to around a million, I think. And that's over 1000 donors, most of whom are just regular donors giving what they can because they understand these differences. And also I think the big difference is the utilities are putting out a lot of fear, doubt, scare tactic type ads. And on the flip side, what we're offering people is something different and something positive, something that we can all lean into and make sure that it succeeds because it would actually be ours. So I think that's resonating with folks.

David Roberts

What are the scare tactics specifically? Are they saying this will be expensive or what?

Nicole Grohoski

Yeah, expensive. I mean, you quoted some of their numbers and it's laughable. They're like, "Oh, we're going to get $13.5 billion." Well, they're worth $5.4 billion. That's what they pay taxes on. That's what they filed their official paperwork saying. So I think especially as we learn more and more about how decrepit certain portions of this grid are, they'd be lucky to get a little bit over that. So that's one of them. "Is there a plan? We don't have a plan, but do they have a plan?" is another one. You know what, a lot of it is just to my sensibility is a little insulting to Maine people.

You don't know what you're doing, that kind of thing. Meanwhile, we're going to keep the line workers who are doing the work and we're giving them a retention bonus because we value their expertise, because they're the ones that actually know how the grids work, not the CEOs and the CFOs.

David Roberts

Yeah, it is historically pretty easy though just to I mean, when you're fighting against change, you barely even need arguments. You know what I mean? You can just say "Booga booga booga change" and you're halfway there, it seems like.

Nicole Grohoski

Well, I think that's why we're in such a unique position in Maine because while that can be kind of an initial gut reaction, I think people here are curious. We've certainly seen plenty of campaigns where one side was outspent a lot by the other and it didn't make a difference. We have led in other policy areas. Ranked choice voting could be one recent example. Clean elections one of the only states that splits our electoral college votes. So I think Maine people, I think we're interested in things that are different if they make sense to us.

David Roberts

Where is the public on this? Do we know do we have enough polling or survey data or what have you to know kind of what the level of support is or where the public is on this? Do we have a barometer? Do we have a measure here?

Nicole Grohoski

Yeah, I think the most recent public polling was probably a couple of months ago. But what it showed was there were people that were solidly in each camp but a lot of undecided voters and it really put us in a dead heat in terms of the people that were decided. And what I think is interesting is folks are not being swayed by Central Maine Power and Versant ads mainly because we don't trust them. They have not been good faith actors.

David Roberts

Are they creating fake groups like "Mainers for puppy dogs and grandma"?

Nicole Grohoski

Yes, Maine Affordable Energy is one of them. Yeah, so they sound pretty good, but all you have to do is google that and you find out pretty quickly, because of our disclosure rules, that's 100% utility funded.

David Roberts

To the extent that the public supports this, are they viewing it as primarily a green thing, a thing about clean energy? Or is it primarily " Screw these out of state —," you know what I mean? Like a Maine pride kind of thing. Is it a reliability? Do you know what it is about this that the public has taken from it? What it is the public is supporting when the public supports it?

Nicole Grohoski

That's a great question and it does vary depending on the person and their interest and maybe even where they live in the state because the utility rates are the worst where I live compared to all the other districts in the state. So it depends. I think if you're a person who tried to interconnect and you got told you have to wait two years and $10,000, then it might be about greening the grid. But I think for a lot of folks underlying whatever their specific reason might be, it is that question of trust. I think about this all the time we have aggressive clean electricity goals, but 50% of our carbon emissions in this state are coming from vehicles and we are the most heating oil dependent state in the country.

So we've got to get people onto the electricity grid in order to have any hope of cleaning it up. But it's really hard for me to knock on someone's door and say, "I really hope you'll consider changing your whole house over to heat pumps, even though we have below zero temperatures sometimes. Or I know that the power went out for a week last year, but would you consider an EV?" So I think that in order to make this transition work, we have to have utilities that people trust and that are providing just basic service. People should not have to think as hard as they're thinking about if their electricity is going to be there for them.

David Roberts

Yes, that's such an important point. And so generalizable too, like if electrification is the thing, then people have got to trust the institutions in charge of electrification and they do not have much public trust these days. So that's an interesting argument in favor, I think, of making utilities more accountable, more public. What about the other big argument against one of the big scare things is you have to buy all these assets, which is like a big bill, a big one-time bill. The other scare story is that utilities are going to immediately sue, that this is going to get mired in the courts, and that it's going to take 4, 5, 6, 7 years to even get it all settled, and until then it will be chaos and no one will know what's going on and blah, blah, blah.

So realistically, what's your view of, say, voters approve this in November? What is your view of sort of how that plays out and when and how the inevitable legal wrangling gets resolved?

Nicole Grohoski

Basically, the Pine Tree Power Board will offer a certain amount for the utility infrastructure. I don't expect that the utilities will accept that on first pass you're buying a used car, you don't just take the first price. Right. So we would expect some negotiation, but if that doesn't work, then it will go to the courts. And there is a refereed process that's spelled out in the legislation in the Superior Court that then can be appealed to the Supreme Court in the state of Maine. But there are timelines set up. So it cannot go on for years and years and years, because at some point, if you lose or win a case, that's it.

You have one appeal. I think it's funny that this argument is coming from the utilities because if there are any lawsuits and if it got dragged out, as they say, even though we've protected against that to the best of our ability, that's coming from them. That is a choice that they are making.

David Roberts

"Don't make us do this."

Nicole Grohoski

Yeah, so it's kind of ironic but additionally, one of the things that comes up is how do we know the utilities will continue to invest in the meantime? And it's like the best parallel I could say to that is if I'm going to sell my house, I don't just stop fixing things before I sell it. I keep it up in really good shape. And in fact, utilities would have an incentive to invest more because usually they don't just sell it for exactly what it's worth. There's usually a multiplier. We expect it to be like 1.5 times.

So we actually have increased the oversight capacity of the Public Utilities Commission to ensure that there isn't any of that sort of last-minute gold plating going on, because that is actually what we'd expect, not the further disrepair scenario.

David Roberts

Oh, so you think if this goes through, they'll plow a bunch of money into high dollar upgrades just to boost their price that you have to pay for them?

Nicole Grohoski

That's what I would do if I were them. Fortunately, we're going to keep an eye on that on behalf of Maine people. But if you are able to invest a million dollars here and in two to three years time make $1.5 million because that's the multiplier that the courts assign, that's pretty good.

David Roberts

Yeah. So what's your timeline in your head then? What do you envision? At what point is there just the one public utility operating and all this is behind us? Were you willing to predict?

Nicole Grohoski

Yeah, we're looking at fall 2027, so four years from now, and that includes having the elections for the board members next year. So that's the first major hurdle, which I think is exciting, especially because living in one of the more rural parts of Maine, we don't always feel here that our interests are represented at the Public Utilities Commission, which is folks from southern Maine. And I think this geographic component is really compelling to, you know, so that's our first step. And then basically we have to get a lot of information. I mean, the board would have to get a lot of information from the utilities in order to know what purchase price they should put forward, what's the business plan, what does the revenue bonding look like, and make sure they can secure that financing through a large municipal bond market.

So that takes time and we want to make sure we do it right. On the other hand, doing nothing is also a risk that I think sets people in my generation and folks younger than me behind economically and environmentally for decades. So a couple of years to do it right is definitely worth it.

David Roberts

Okay, final question then. I can see lots of Maine-specific reasons why one might argue that this is a good deal; these utilities are particularly bad, Maine has a particular set of problems, it has a particular sort of public culture, a culture of participation and a culture of civic engagement, et cetera, et cetera. Lots of Maine-specific reasons why you could make the case for this. I wonder, to what extent do y'all have your eyes on other states and trying to make this the beginning of something bigger? Like, do you believe that taking private utilities public is a good idea across the board?

Is that something you'd like to see become a national trend or are you just purely focused on Maine? How do you think about the influence this may or may not have on other states?

Nicole Grohoski

I think that all the issues we've had in Maine are what led us to looking around for solutions, but it is a structural imbalance that we have with the regulated monopolies when they're for profit. So, I do think it is something that is exportable to other states. We people in our coalition have been working with and talking to people elsewhere in the country who are looking to make a similar transition also elsewhere in the world. It's kind of interesting. The Scottish power is also owned by Avengrid, which owns Central Maine Power, and they are looking to become a public, truly public utility over there.

So, in doing this work, we've found a lot of interest for that business model change. And I think as we become another case study, we are standing on the shoulders of other case studies that have happened in this country. And as we become another one for folks, I think that we'll see some opportunities arise. And I would like to see that because I want every American to be able to afford their electricity and to be able to have clean energy and not a lot of hurdles to getting there, because we are literally all in this together as a country and as a world with our climate crisis.

David Roberts

That seems like a wonderful note to wrap up on. Nicole Grohoski, thanks so much for coming on and walking through this with us. It's super fascinating and I think it will be an example to the rest of the country one way or the other. However it plays out.

Nicole Grohoski

We're hoping that we're a positive "yes" example. We're working every day toward that. And I want to thank you, David, for having me on and talking about this topic, which is, I think, endlessly important and fascinating.

David Roberts

Agreed, agreed. OK. Thanks, Nicole. Thank you for listening to the Volts podcast. It is ad-free, powered entirely by listeners like you. If you value conversations like this, please consider becoming a paid Volts subscriber at volts. WTF. Yes, that's volts.WTF so that I can continue doing this work. Thank you so much and I'll see you next time.

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