Rising Operational Costs Have Not Spared EMEC

Moderate Delivery Rate Increase Needed

Eastern Maine Electric’s Delivery rates will change later this year, as the result of general economic inflation. The moderate increase would impact only the delivery of electricity. Standard Offer supply pricing will remain the same.

Electricity costs in Maine are split into two major cost categories: supply and delivery. This split is reflected on every Eastern Maine Electric bill, where line-item charges are broken down into Delivery and Supply sections. 

Revenue from Delivery charges remains with the Cooperative, and the revenue is used to operate EMEC. The funds collected for Standard Offer are passed through to the electricity supplier to cover the cost of the electricity supply.

These two different categories of utility costs are affected by different developments in the market. Electricity Supply charges are heavily impacted by rising fuel costs, which is why most of the state has seen wild fluctuations in supply prices in the past few years.  Those increases have not impacted Eastern Maine Electric’s members so far, because the Co-op had locked in a five-year contract in 2020, before fuel costs began their climb. Eastern Maine Electric’s supply price is not scheduled to change until November of 2025.

Delivery costs, on the other hand, are less impacted by fuel costs and more affected by the overall inflation rate. In recent years, inflation’s impact has been especially steep, as it relates to the cost of construction materials for the local electric grid.

Materials costs have risen substantially in the past five years.  This is reflected in the changing costs for two commonly used items on Eastern Maine Electric’s system: a 40-foot utility pole and a 10 kV pole-top transformer.

In January 2019, the average cost to the Co-op of a 40-foot pole was $358. In January 2024, that average cost had risen to $534, a 49% increase.

The average cost to the Co-op of a 10 kV transformer was $770 in January 2019. In January 2024, the cost was $1,330, an increase of 72%.

These examples are on the purchase of materials, but inflation has impacted all aspects of Co-op operations. That includes tree cutting and maintenance in the power line rights of way. EMEC plans to spend about $550,000 on right of way in 2024.

New and Ongoing Infrastructure Projects

While inflation appears to have lessened in recent months, its impact on the Co-op’s operation has been and remains significant. The increase in costs may have an impact on the Co-op’s ongoing and upcoming infrastructure projects. 

The Co-op’s 40-mile, 69 kV transmission line will require continued, significant investment in the years to come. The line runs from Calais to Topsfield and serves four of EMEC’s substations, as well as the Woodland Pulp mill. The section of the line from Calais to Princeton was originally constructed in 1964, and the Princeton-to-Topsfield section was constructed in the early 1970’s. 

In 2016, the Co-op began a long-term project to evaluate and start making upgrades to sections of the transmission line. More recently, in 2022, work was done, including rebuilding approximately a mile of line in Baring.

The age of the line makes the continued upgrading and rebuilding necessary. The Co-op anticipates upgrading and rebuilding some portions of the line in a year or so. Existing wooden poles and wire will be replaced with ductile iron poles and new wire. The Co-op is applying for grant funds, which, if awarded, would help cover a considerable amount of the cost of the upcoming project. It would thereby mitigate some of the cost impact on Co-op members.

Within the next three or four years, Eastern Maine Electric will also have to make significant investments in its Ludlow and Patten substations. The two substations receive power over a 44 kV transmission line owned by neighboring electric utility, Versant. That company plans to upgrade its transmission line to 69 kV in the near future.
Their upgrade would require EMEC to purchase new substation transformers for both affected stations. Modifications to the Patten substation will also be needed.

Just as costs have risen for pole-top transformers, they have also risen for the much-larger substation transformers. The Ludlow substation transformer was purchased in 2006 for approximately $85,000. The replacement transformer will cost more than $400,000.

Storm Cost Not a Factor

Eastern Maine Electric’s February newsletter featured an article about the December 18, 2023, windstorm. Costs from that storm are not a factor in the decision about a rate change, even though the damage from the storm racked up record-breaking costs.

EMEC has applied to the Federal Emergency Management Agency (FEMA) for disaster relief, under the Major Disaster declared on January 30, 2024. Electric cooperatives qualify for such disaster relief as private, non-profit utilities. The Co-op expects to recover a significant portion of the December 18 storm costs.

In summary, a rate increase would cover increased operational costs and upgrades to EMEC’s electric system. The Co-op will continue to talk about this issue, and an announcement about any proposed increases would come sometime later this year