Janet Mills brought legal & analytical talent to bear in considering the Pine Tree Power bill, before she vetoed it.
With a third version of the Pine Tree Power Company already in the works, Governor Mills proposes using other approaches consistent with the Maine Constitution.
On July 13, Maine’s Governor Mills vetoed LD1708, a bill sponsored by Representative Seth Berry of Bowdoinham to establish a publicly owned electric utility.
The Maine Bill Search reports that the Governor returned the bill “together with objections to the same pursuant to Article IV, Part Third, Section 2 of the Constitution of the State of Maine, after reconsideration, the House proceeded to vote on the question: “Shall this Bill become a law notwithstanding the objections of the Governor?”
The option to proceed despite the Governor’s veto was narrowly defeated in the House by a vote of 68 to 65.
Contrary to what is reported in the Maine Bill Search, In the Governor’s letter, she asserts her authority to veto the bill pursuant to Article IV, Part Third, Section 2 of the Maine Constitution. which is not the same as basing her objections to the bill on Article IV, Part Third, Section 2
In explaining her decision the Governor describes the bill forming a state-owned power company as “ one of the most consequential ever to be considered by the Maine Legislature”. Reasons supporting this statement are detailed in the Governor’s letter as well as the report submitted by consultants in consideration of LD 1646 An Act To Restore Local Ownership and Control of Maine’s Power Delivery Systems, the previous bill, also sponsored by Representative Berry, and defeated in 2020
As a skilled politician, Governor Mill’s words mirror those of the bill’s proponents when she says that it may be time for “ the people of the State of Maine to retake control over the assets on which they depend for the lifeblood of our communities, that is, our electric transmission and distribution services”. There has never been a state-owned electric utility in Maine and so there is no state-owned power company to take back, but in the entirety of what Mills said are hints of a different meaning in the mind of the Governor.
The Governor's response brings to bear her legal background and impressive analytical skills in presenting what the bill does and in articulating how poorly the bill is conceived.
The footnote on page two captures Governor Mill's analytical approach:
A not insignificant ambiguity lies in the bill's very definition of the new entity, variously referred to as "body corporate and politic", "consumer-owned transmission and distribution utility," a "public municipal corporation," a "quasi-municipal corporation," and in the referendum language as "a nonprofit, privately operated utility .... " The characterization of this entity ultimately determines whether it is eligible to issue tax-exempt bonds, a major underpinning of the proposal's purpose of lowering rates, achieving climate goals and improving connectivity and reliability. However, subjecting the entity to property taxes makes it much more difficult to qualify as a "constituted authority of the state." Comm'r v. Shamberg's Estate, 144 F.2d 998 (2d Cir. 1944). If, on the other hand, it is intended to be a private entity eligible for tax-exempt private activity bonds, it would be subject to the "Rostenkowski Rule," which prohibits the purchase of utility assets with tax-exempt bonds.
Throughout the analysis by both Governor Mills and the consulting firm that assessed last year’s attempt to institute a state-owned power utility, the unifying theme is that whatever affects one part of a whole, affects all parts and that what benefits one faction can adversely affect another faction. At one point Governor Mills quotes the American journalist H.L. Mencken who said, “Every complex problem has a solution which is simple, direct, plausible — and wrong.”
For a while, in 2019, the state power company garnered support based on a popular misconception that the bill created local control over electric utilities. This misconception was codified in the naming of the bill as “ An Act To Restore Local Ownership and Control of Maine’s Power Delivery Systems”, That bill “Died Upon Conclusion of the 129th Legislature, Nov 16, 2020”, as reported by Maine Bill Search. A reading of the previous bill reveals that total control is designated to a governor-appointed ten-person board with no consumer-owner recourse to be found. The consulting firm agreed. The lack of local control is first on the firm's list of what LD164 does not do:
Finally, the Project Team finds that LD 1646 does not do: provide direct control of the electric T&D operations to the ratepayers of the IOUs (the governance of the MPDA Board is based on appointment by the Governor of Maine, rather than selection by the ratepayers). Additionally, the MPDA Board represents a wide range of stakeholders and would not represent solely the interests of ratepayers; MDPA Report on LD 1646
The proponents of the current bill formulating a Pine Tree Power Company must have paid attention because the way that the controlling board of the power company is decided is redesigned in the latest version LD1708, but as Mills points out, this presents a new set of problems:
The new authority would be governed by an 11-member board. Seven members with voting rights would be popularly-elected and need not have relevant experience or credentials. Four seats on the board are designated for members with expertise on energy and utility matters, though these members have no voting privileges. The new authority would be required to contract with an operator, through a competitive bid process, to run the just-acquired assets. The bill requires that preference be given to bidders with demonstrated "familiarity with the systems to be administered." That requirement would leave Central Maine Power and Versant - the same entities whose assets were just condemned - in the most obvious position to win the contracts to operate Governor Mill's letter to the Legislature
A petition circulated in protest of the speed with which the state-owned power company was being pursued.
The petition text read:
I am a concerned citizen, residing in the (fill in the blank) ZIP code:
The proposed government takeover of Maine's electric grid is risky business, and a handful of politicians in Augusta shouldn't be able to rush it through. They don't know how much it will cost and they want us—their constituents—to write them a blank check. I believe this would be a disaster for Maine, and we need to slow down until we get some answers.
Governor Mills also objects to the haste in which this bill was conceived and rushed through the Maine Senate and House.
The Governor writes:
This bill's rush to enactment is particularly disturbing given where this matter was left at the end of the 129th session, This bill's rush to enactment is particularly disturbing given where this matter was left at the end of the 129th session, when an analysis by London Economics (LEI) had recommended several substantial areas requiring further study.
Governor Mills objects to areas of study recommended by the consulting firm reviewing the previous bill proposing a state-owned power company, not undertaken despite the Energy and Utilities commission’s vote to create a task force. The task force was never created and instead, the issues raised were deferred to be dealt with by the proposed company’s elected board in a new bill for the same cause.
Mills raises many important points and also proposes alternative approaches to fairness in utility pricing. Both Governor Mills and the consulting group for the first bill invested a great deal of effort into analyzing the problems. A proposed third bill is already underway.
The analytical work by the Governor and the consultants deserve fair consideration by lawmakers and the public.
The task force to study the areas identified in the review of last year’s version should be formed as was decided at that time.
There is much I could say about this bill, but much of it is already well articulated by the sources mentioned above. What is unlikely to be mentioned, for political reasons that have a far-reaching effect, is that a publicly owned electric utility is arguably a violation of the Maine Constitution, Article IV, Part Third, Sections 13 and 14.
Section 14 forbids the Legislature from chartering corporations by special acts of legislation, except for municipal purposes or if the object of the corporation cannot be done another way, which clearly it can because the object of the corporation is already being achieved in the private sector.
Government players are unlikely to bring up the constitutionality of the Pine Tree Power Company, an issue impacting many other government institutions. However, if a private power company is threatened by eminent domain, or another unwanted attempt to usurp its property, the private company might raise the constitutional issue in the courts, It is best not to put privately-owned companies in that position. Even if one believes that Maine should revert to the structure of government defined in the Maine Constitution, a transition back to a more constitutionally consistent form of government must proceed with a careful methodology.
Alternate approaches raised by Mills do not involve chartering a corporation and are constitutionally consistent with Article IV Part Third, Section 13 of the Maine Constitution.
Article IV Part Third, Section 13
Section 13. Special legislation. The Legislature shall, from time to time, provide, as far as practicable, by general laws, for all matters usually appertaining to special or private legislation.
Pursuant to Section 13, the state can address all of the above in general laws, Section 14 says that the state cannot do so by creating its own corporation by a special act of legislation, and if it does create a corporation by special acts of legislation, general laws will apply. Government is fairer when it is separate from the private sector, not when it takes over private sector functions. Pursuant to Section 13, the laws that government enacts must apply commonly to all, and cannot create special exceptions for itself, as in the section below:
A state should not be a player in a field where it also writes the rules.
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