Last April, Maine’s largest wind energy developer, First Wind, trumpeted a multimillion-dollar deal that would pay for the company’s ambitious plans to erect more wind turbines throughout Maine and the Northeast.

But in just the last week, the Maine Public Utilities Commission (PUC) dealt a potentially fatal blow to the deal.

Faced with what opponents have called the first serious challenge to the state’s landmark electricity deregulation law, which went into effect in 2000, PUC staff on Jan. 13 recommended that the agency give the thumbs down to the deal.

“We deny approval of the ‘proposed transactions’ as we find that the risk of harm to ratepayers exceeds the benefits,” the draft decision reads, “even if conditions intended to mitigate the risk of harm to ratepayers were imposed.”

The recommendation, which will be considered and voted on by the three agency commissioners Jan. 31, caps a nine-month struggle over a deal that’s described in legal filings as being worth, “at the high end,” $880 million. The capital infusion to First Wind alone would amount to $333 million.

First Wind, Emera Inc. (the Nova Scotia-based parent company of Bangor Hydro and Maine Public Service) and Ontario-based Algonquin Power and Utilities Corp. propose to jointly build and operate wind energy projects in the Maine and elsewhere in the Northeast. After a failed bid to go public in 2010, which left First Wind cash-hungry, the deal is a way for the Boston-based company to continue building wind towers across Maine and the region, as well as a way for Emera and Algonquin to reach new energy consumers in the U.S.

At last count, there were 312 legal filings in the case, a brigade of lawyers from the Maine’s top law firms and state agencies, briefs, motions and documents that referenced Hemingway, Shakespeare and Lady Gaga and a subpoena served on an Emera official by a retired Canadian Mountie.

The case centered on two legal issues: Was the proposal in the interest of ratepayers. And would the deal violate the state’s “Electric Restructuring Act.” That act, which took effect on March 1, 2000, prohibits utilities from owning both transmission and generation, which forced the state’s utilities to sell off their dams and power plants. After what came to be called “restructuring,” utilities were responsible only for delivering power, while other companies produced it – all in the hopes that would lead to more competition and lower electricity rates.

Parties to the deal asserted in filings that it would benefit ratepayers by providing “a substantial benefit in achieving the State’s aggressive wind energy targets,” lowering the price of electricity in the regional market and strengthening the finances of both Bangor Hydro and Maine Public Service. And they said that the Restructuring Act would not be violated because Bangor Hydro and Maine Public Utility, the two regulated Maine utilities in the deal, would not actually “own” or “have any measure of control” over generation assets or hold a “financial interest” in them.

But Eric Bryant, an attorney for the Maine Public Advocate’s office, which represents the interest of utility customers, said last week that his office opposed the deal because it could result in “higher utility prices,” thus violating the law that required a deal to do no harm to the interests of ratepayers.

Bryant said the plan would violate the Restructuring Act, too. Its complex corporate structure, he said, would amount to just what the law forbids — a utility controlling a power generator.

“It’s a virtual vertical utility,” said Bryant. “If we’re going to actually honor the Restructuring Act, you can’t allow this restructuring to happen.”

Anthony Buxton, the lead attorney for industrial energy users such as Verso, Huhtamaki and Madison Paper, who are opposed to the deal, said, “Maine is being asked to change its energy policy, dramatically. The interpretation of this part of the statute is incredibly important in keeping a competitive market for electricity prices in Maine.

“The question is whether the Restructuring Act will be kept whole,” he said, “or whether someone will drive a big hole in it.”

The PUC staff draft decision rejected the opponents’ arguments that the Restructuring Act would be violated, because it would be a utility affiliate that owned generation, not the utility itself.

The staff concluded, “The utilities will not have any equity interest or voting securities that will allow them to exercise any direct or indirect management control over the development or operation of generation assets within the meaning of the statute.”

Nevertheless, staff wrote that the proposed affiliation of Bangor Hydro and Maine Public Service with companies that will “develop, own and operate generation assets” raises “substantial concerns regarding the possible exercise of preferential treatment by a utility to its competitive affiliates.” That, in turn, could produce higher transmission rates and higher electricity prices.

First Wind spokesman John Lamontagne said Thursday that, “We firmly believe that the joint venture with Northeast Wind will bring significant benefits to Maine ratepayers and will lead to as much as $3 billion in investment in the Maine economy and its communities.  That will create hundreds of related jobs and generate more competitively priced clean, renewable energy for Maine homes and businesses.”

Emera spokeswoman Sasha Irving declined to comment.