Central Maine Power sued Maine regulators Friday to stop the implementation of a new state law that would block the utility from collecting a $4.6 million boost in investment return.

The law, LD 2038, requires transmission line owners in Maine — CMP, Versant and the utility-owned Maine Electric Power Co. — to join a regional group that operates the lines and manages the flow of electricity.

CMP, MEPCO and Versant are already voluntary members of that group, called ISO New England — which means they are eligible for a federal profit incentive that goes to companies that choose to participate in such collectives. By requiring the utilities to participate, lawmakers hoped to eliminate that federal incentive.

Maine regulators and consumer advocates asked the Federal Energy Regulatory Commission to block utilities from collecting that incentive on Sept. 1. CMP, meanwhile, wants to get the state law thrown out.

The lawsuit comes amid an ongoing fight between CMP and regulators over the utility’s proposed rate hike — and again puts the CMP’s allowed investment profit center stage.

MEPCO joined CMP’s lawsuit against the Maine Public Utilities Commission, public advocate and Department of Energy Resources; Versant did not.

Here’s what to know about the incentive, the state law and the arguments on either side.

A 2005 federal law spells it out: For voluntarily joining ISO New England and allowing it to operate CMP’s transmission lines, federal regulators allow CMP to earn an extra 0.5% return on equity — the profit it can make on its built infrastructure.

That 0.5% is an “adder,” as FERC puts it. Utilities all around the country benefit from it.

For CMP, that adder is worth about $4.6 million this year, the Office of the Public Advocate said in March testimony on the bill. Combined, Versant and MEPCO earned $1.35 million.

In 2024, Maine ratepayers paid about $700,000 extra on their bills for this 0.5% “adder,” according to a Sept. 1 complaint from the OPA and Maine regulators. Ratepayer costs are split between New England states.

Congress intended for the incentive to compensate utilities for “surrendering operational control of their facilities” and for maintaining the lines, CMP and MEPCO said in the lawsuit. Without the adder, the company may not be able to afford to keep up its infrastructure and attract outside investment, the lawsuit says.

The adder also helps “handle growing demand for electricity from changing weather patterns due to climate change, the construction of data centers, and the rapid electrification of cars, heating and cooling, home appliances, and other consumer products,” the companies wrote.

CMP, by its own account, is hurting financially. After Maine regulators denied a $7 per month rate increase this month, the company said that it would need to defer upgrades to grid infrastructure, pause hiring and “consider workforce reductions.” CMP’s financial outlook was downgraded this summer by S&P Global Ratings to “negative” because of lag in its rate case and a $100 million cash flow deficit.

A spokesperson for CMP declined to comment.

Maine’s LD 2038, passed mostly along party lines this spring, followed the lead of Maryland and Connecticut, which approved similar legislation this year and brought their case to federal regulators shortly thereafter.

California and Ohio have similar laws or rules, too — FERC recently denied the adder for utilities in those states. Federal appeals courts backed up FERC’s decisions last year.

The law was always meant to be the first of two steps, Public Advocate Heather Sanborn said in January testimony in favor of the bill.

Like the other states, officials in Maine planned to petition federal regulators to remove the adder for Maine utilities as soon as the law was implemented. Maine did so Sept. 1, and three other New England states joined the complaint three weeks later.

“It is long past time to eliminate this ROE adder, which adds millions of dollars to customer bills,” former Public Utilities Commission Chair Philip Bartlett said in a September news release. “Maine has joined other states in the region in requiring transmission owner participation in ISO-New England, providing a clear pathway to reducing this inflated return on equity.”

Maine’s law, like the others, was born out of a concern for affordability and high electricity rates. By most measures, Maine’s rates rank in the top five most expensive in the country, and the effort, when combined with Connecticut’s new law, was estimated to save Maine customers $2 million per year — $5 million if all New England states enacted the same law.

“Given the urgency of electricity affordability issues, this is a simple and easy solution that will have immediate impact,” Sanborn told legislators.

Sanborn declined to comment, citing the ongoing litigation. A spokesperson for the PUC did not respond to a request for comment.

CMP argued in its lawsuit that Maine attempted to supersede federal law, in violation of the Constitution, by interrupting transmission rates that had already been approved by FERC.

CMP also said the new law violated its contractual right to withdraw from ISO New England — a scenario the public advocate called “highly unlikely” in its bill testimony. It also argued that the law essentially made it so it no longer owned its transmission property.

The utility also blasted the new Maine law in a response to the Sept. 1 complaint. CMP said the Maine lawmakers enacted an “unlawful state statute in a naked attempt to interfere with FERC’s authority” over transmission rates.

A federal judge will review the case in the coming weeks, and FERC will continue to consider the complaint from the public advocate and PUC.

CMP’s state-level rate case will continue in the meantime, too. Maine regulators recently rejected a $7 per month increase — but the larger rate hike, worth about $18 per month to the average household, will remain under consideration until the spring.