------------------------------------------------





UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION





Washington,
D. C. 20549





-----------------------------------





FORM
10-Q





x QUARTERLY REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE





SECURITIES
EXCHANGE ACT OF 1934





FOR THE
QUARTERLY PERIOD ENDED SEPTEMBER 30, 2009





- OR
-





 ̈ TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE





SECURITIES
EXCHANGE ACT OF 1934





-----------------------------------





Commission
File No.  333-103749





MAINE
& MARITIMES CORPORATION





A Maine
Corporation





I.R.S.
Employer Identification No. 30-0155348





209 STATE
STREET, PRESQUE ISLE, MAINE 04769





(207)
760-2499





-----------------------------------





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x.    No  ̈.





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):




Large
      accelerated filer  ̈.
            Accelerated
      filer  ̈.Non-accelerated
      filer  ̈
            Smaller
      reporting company x.(Do not check
      if a smaller reporting company)




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes  ̈.    No x.





Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of November 12, 2009.





Common
Stock, $7.00 par value – 1,681,924 shares








1


MAINE & MARITIMES CORPORATION
AND SUBSIDIARIES


Statements of Consolidated Operations(Unaudited)


(In
thousands of dollars, except share and per share information)




Three
      Months Ended
                                                                September
      30,
                                                              
                                                              
                                                              Nine
      Months Ended
                                                                September
      30,2009
                                                              
                                                              
                                                              2008
                                                              
                                                              
                                                              2009
                                                              
                                                              
                                                              2008Operating
      RevenuesRegulated
      Revenues
                                                              
                                                              $
                                                              7,273
                                                              
                                                              
                                                              $
                                                              7,805
                                                              
                                                              
                                                              $
                                                              24,705
                                                              
                                                              
                                                              $
                                                              26,485Unregulated
      Utility Services Revenues
                                                              
                                                              
                                                              29
                                                              
                                                              
                                                              
                                                              4,463
                                                              
                                                              
                                                              
                                                              577
                                                              
                                                              
                                                              
                                                              7,837Total
      Operating Revenues
                                                              
                                                              
                                                              7,302
                                                              
                                                              
                                                              
                                                              12,268
                                                              
                                                              
                                                              
                                                              25,282
                                                              
                                                              
                                                              
                                                              34,322Operating
      ExpensesRegulated
      Operation and Maintenance
                                                              
                                                              
                                                              4,371
                                                              
                                                              
                                                              
                                                              2,949
                                                              
                                                              
                                                              
                                                              11,925
                                                              
                                                              
                                                              
                                                              9,591Unregulated
      Utility Services Direct Project Expenses
                                                              
                                                              
                                                              17
                                                              
                                                              
                                                              
                                                              4,530
                                                              
                                                              
                                                              
                                                              371
                                                              
                                                              
                                                              
                                                              7,740Other
      Unregulated Operation and Maintenance (1)
                                                              
                                                              
                                                              210
                                                              
                                                              
                                                              
                                                              204
                                                              
                                                              
                                                              
                                                              598
                                                              
                                                              
                                                              
                                                              687Depreciation
                                                              
                                                              
                                                              811
                                                              
                                                              
                                                              
                                                              766
                                                              
                                                              
                                                              
                                                              2,211
                                                              
                                                              
                                                              
                                                              2,277Amortization
      of Stranded Costs
                                                              
                                                              
                                                              2,700
                                                              
                                                              
                                                              
                                                              2,728
                                                              
                                                              
                                                              
                                                              8,101
                                                              
                                                              
                                                              
                                                              8,184Amortization
                                                              
                                                              
                                                              42
                                                              
                                                              
                                                              
                                                              54
                                                              
                                                              
                                                              
                                                              114
                                                              
                                                              
                                                              
                                                              161Taxes
      Other Than Income
                                                              
                                                              
                                                              441
                                                              
                                                              
                                                              
                                                              430
                                                              
                                                              
                                                              
                                                              1,364
                                                              
                                                              
                                                              
                                                              1,336(Benefit
      of) Provision for Income Taxes—Regulated
                                                              
                                                              
                                                              (467
                                                              )
                                                              
                                                              
                                                              (10
                                                              )
                                                              
                                                              
                                                              278
                                                              
                                                              
                                                              
                                                              1,547(Benefit
      of) Provision for Income Taxes—Unregulated
                                                              
                                                              
                                                              (91
                                                              )
                                                              
                                                              
                                                              354
                                                              
                                                              
                                                              
                                                              (198
                                                              )
                                                              
                                                              
                                                              177Total
      Operating Expenses
                                                              
                                                              
                                                              8,034
                                                              
                                                              
                                                              
                                                              12,005
                                                              
                                                              
                                                              
                                                              24,764
                                                              
                                                              
                                                              
                                                              31,700Operating
      (Loss) Income
                                                              
                                                              
                                                              (732
                                                              )
                                                              
                                                              
                                                              263
                                                              
                                                              
                                                              
                                                              518
                                                              
                                                              
                                                              
                                                              2,622Other
      Income (Deductions)Equity
      in Income of Associated Companies
                                                              
                                                              
                                                              37
                                                              
                                                              
                                                              
                                                              37
                                                              
                                                              
                                                              
                                                              98
                                                              
                                                              
                                                              
                                                              103Interest
      and Dividend Income
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              1
                                                              
                                                              
                                                              
                                                              8
                                                              
                                                              
                                                              
                                                              6Benefit
      of (Provision for) Income Taxes
                                                              
                                                              
                                                              4
                                                              
                                                              
                                                              
                                                              3
                                                              
                                                              
                                                              
                                                              7
                                                              
                                                              
                                                              
                                                              (7
                                                              )Other—Net
                                                              
                                                              
                                                              (11
                                                              )
                                                              
                                                              
                                                              (3
                                                              )
                                                              
                                                              
                                                              (68
                                                              )
                                                              
                                                              
                                                              (95
                                                              )Total
      Other Income
                                                              
                                                              
                                                              30
                                                              
                                                              
                                                              
                                                              38
                                                              
                                                              
                                                              
                                                              45
                                                              
                                                              
                                                              
                                                              7(Loss)
      Income Before Interest Charges
                                                              
                                                              
                                                              (702
                                                              )
                                                              
                                                              
                                                              301
                                                              
                                                              
                                                              
                                                              563
                                                              
                                                              
                                                              
                                                              2,629Interest
      ChargesLong-Term
      Debt and Notes Payable
                                                              
                                                              
                                                              449
                                                              
                                                              
                                                              
                                                              543
                                                              
                                                              
                                                              
                                                              1,355
                                                              
                                                              
                                                              
                                                              1,757Less
      Stranded Costs Carrying Charge
                                                              
                                                              
                                                              (274
                                                              )
                                                              
                                                              
                                                              (370
                                                              )
                                                              
                                                              
                                                              (910
                                                              )
                                                              
                                                              
                                                              (1,175
                                                              )Total
      Interest Charges
                                                              
                                                              
                                                              175
                                                              
                                                              
                                                              
                                                              173
                                                              
                                                              
                                                              
                                                              445
                                                              
                                                              
                                                              
                                                              582Net
      (Loss) Income from Continuing Operations
                                                              
                                                              
                                                              (877
                                                              )
                                                              
                                                              
                                                              128
                                                              
                                                              
                                                              
                                                              118
                                                              
                                                              
                                                              
                                                              2,047Discontinued
      OperationsLoss
      on Sale of Discontinued Operations
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              (1
                                                              )Income
      (Loss) from Operations
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              3
                                                              
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              (32
                                                              )Income
      Tax (Provision) Benefit
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              (2
                                                              )
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              13Income
      (Loss) from Discontinued Operations
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              1
                                                              
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              (20
                                                              )Net  (Loss)
      Income Available for Common Stockholders
                                                              
                                                              $
                                                              (877
                                                              )
                                                              
                                                              $
                                                              129
                                                              
                                                              
                                                              $
                                                              118
                                                              
                                                              
                                                              $
                                                              2,027Average
      Shares of Common Stock Outstanding - Basic
                                                              
                                                              
                                                              1,681,249
                                                              
                                                              
                                                              
                                                              1,678,249
                                                              
                                                              
                                                              
                                                              1,680,507
                                                              
                                                              
                                                              
                                                              1,678,069Average
      Shares of Common Stock Outstanding - Diluted
                                                              
                                                              
                                                              1,681,249
                                                              
                                                              
                                                              
                                                              1,678,982
                                                              
                                                              
                                                              
                                                              1,681,237
                                                              
                                                              
                                                              
                                                              1,678,405Basic
      (Loss) Earnings Per Share of Common Stock From Continuing
      Operations
                                                              
                                                              $
                                                              (0.52
                                                              )
                                                              
                                                              $
                                                              0.08
                                                              
                                                              
                                                              $
                                                              0.07
                                                              
                                                              
                                                              $
                                                              1.22Basic
      Loss Per Share of Common Stock From Discontinued
Operations
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              (0.01
                                                              )Basic
      (Loss) Earnings Per Share of Common Stock From Net (Loss)
      Income
                                                              
                                                              $
                                                              (0.52
                                                              )
                                                              
                                                              $
                                                              0.08
                                                              
                                                              
                                                              $
                                                              0.07
                                                              
                                                              
                                                              $
                                                              1.21Diluted
      (Loss) Earnings Per Share of Common Stock From Continuing
      Operations
                                                              
                                                              $
                                                              (0.52
                                                              )
                                                              
                                                              $
                                                              0.08
                                                              
                                                              
                                                              $
                                                              0.07
                                                              
                                                              
                                                              $
                                                              1.22Diluted
      Loss Per Share of Common Stock From Discontinued
Operations
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              (0.01
                                                              )Diluted
      (Loss) Earnings Per Share of Common Stock From Net (Loss)
      Income
                                                              
                                                              $
                                                              (0.52
                                                              )
                                                              
                                                              $
                                                              0.08
                                                              
                                                              
                                                              $
                                                              0.07
                                                              
                                                              
                                                              $
                                                              1.21(1)
      Other unregulated operation and maintenance expense and income tax
      benefits included in continuing operations is the activity of the holding
      company, including operating expenses of MAM USG, other corporate costs
      directly associated with unregulated operations, and other costs that
      cannot be charged to the regulated utility.





2





MAINE
& MARITIMES CORPORATION AND SUBSIDIARIES
 Statements of Consolidated Cash Flows(Unaudited)
 (In
thousands of dollars)


Nine
      Months Ended
                                        September
      30,2009
                                      
                                      
                                      2008Cash
      Flow From Operating ActivitiesNet
      Income
                                      
                                      $
                                      118
                                      
                                      
                                      $
                                      2,027Adjustments
      to Reconcile Net Income to Net Cash Provided by
Operations:Depreciation
                                      
                                      
                                      2,211
                                      
                                      
                                      
                                      2,277Amortization
      of Intangibles
                                      
                                      
                                      114
                                      
                                      
                                      
                                      161Amortization
      of Seabrook
                                      
                                      
                                      833
                                      
                                      
                                      
                                      833Amortization
      of Cancelled Transmission Plant
                                      
                                      
                                      -
                                      
                                      
                                      
                                      191Deferred
      Income Taxes—Net
                                      
                                      
                                      (2,085
                                      )
                                      
                                      
                                      (50
                                      )Deferred
      Investment Tax Credits
                                      
                                      
                                      (13
                                      )
                                      
                                      
                                      (15
                                      )Change
      in Deferred Regulatory and Debt Issuance Costs
                                      
                                      
                                      6,192
                                      
                                      
                                      
                                      4,277Change
      in Benefit Obligations
                                      
                                      
                                      (343
                                      )
                                      
                                      
                                      195Change
      in Deferred Directors' Compensation
                                      
                                      
                                      (9
                                      )
                                      
                                      
                                      88Change
      in Current Assets and Liabilities:Accounts
      Receivable and Unbilled Revenue from Utility
                                      
                                      
                                      4,170
                                      
                                      
                                      
                                      (1,081
                                      )Other
      Current Assets
                                      
                                      
                                      (149
                                      )
                                      
                                      
                                      (132
                                      )Accounts
      Payable
                                      
                                      
                                      (1,905
                                      )
                                      
                                      
                                      1,050Other
      Current Liabilities
                                      
                                      
                                      (566
                                      )
                                      
                                      
                                      290Other—Net
                                      
                                      
                                      98
                                      
                                      
                                      
                                      (862
                                      )Operating
      Cash Flows from Continuing Operations
                                      
                                      
                                      8,666
                                      
                                      
                                      
                                      9,249Operating
      Cash Flows from Discontinued Operations
                                      
                                      
                                      -
                                      
                                      
                                      
                                      27Net
      Cash Flow Provided By Operating Activities
                                      
                                      
                                      8,666
                                      
                                      
                                      
                                      9,276Cash
      Flow From Financing ActivitiesRepayments
      of Long-Term Debt
                                      
                                      
                                      (1,053
                                      )
                                      
                                      
                                      (4,410
                                      )Payments
      of Capital Lease Obligations
                                      
                                      
                                      (142
                                      )
                                      
                                      
                                      (171
                                      )Short-Term
      Debt Repayments, Net
                                      
                                      
                                      (2,000
                                      )
                                      
                                      
                                      (1,050
                                      )Net
      Cash Flow Used For Financing Activities
                                      
                                      
                                      (3,195
                                      )
                                      
                                      
                                      (5,631
                                      )Cash
      Flow From Investing ActivitiesChange
      in Restricted Investments
                                      
                                      
                                      (914
                                      )
                                      
                                      
                                      2,391Dividends
      Paid
                                      
                                      
                                      (252
                                      )
                                      
                                      
                                      -Cash
      Received from Sale of Discontinued Operations
                                      
                                      
                                      -
                                      
                                      
                                      
                                      573Investment
      in Fixed Assets
                                      
                                      
                                      (5,034
                                      )
                                      
                                      
                                      (5,746
                                      )Net
      Cash Flow Used For Investing Activities
                                      
                                      
                                      (6,200
                                      )
                                      
                                      
                                      (2,782
                                      )(Decrease)
      Increase in Cash and Cash Equivalents
                                      
                                      
                                      (729
                                      )
                                      
                                      
                                      863Cash
      and Cash Equivalents at Beginning of Period
                                      
                                      
                                      1,846
                                      
                                      
                                      
                                      910Cash
      and Cash Equivalents at End of Period
                                      
                                      $
                                      1,117
                                      
                                      
                                      $
                                      1,773Supplemental
      Disclosure of Cash Flow Information:Cash
      Paid During the Period for:Interest
                                      
                                      $
                                      1,383
                                      
                                      
                                      $
                                      1,776Income
      Taxes
                                      
                                      $
                                      3,416
                                      
                                      
                                      $
                                      2,626Non-Cash
      Activities:Dividends
      Payable
                                      
                                      $
                                      84
                                      
                                      
                                      $
                                      -Fair
      Market Value of Stock Issued to Directors and Officers
                                      
                                      $
                                      82
                                      
                                      
                                      $
                                      20




See Notes
to Consolidated Financial Statements





3


MAINE & MARITIMES CORPORATION AND
SUBSIDIARIES


Consolidated Balance Sheets(Unaudited)


(In
thousands of dollars)







September
      30,
                                          
                                          
                                          December
      31,2009
                                          
                                          
                                          2008ASSETSPlant:Electric
      Plant in Service
                                          
                                          $
                                          113,491
                                          
                                          
                                          $
                                          109,330Non-Utility
      Plant
                                          
                                          
                                          63
                                          
                                          
                                          
                                          66Less
      Accumulated Depreciation
                                          
                                          
                                          (47,283
                                          )
                                          
                                          
                                          (46,011
                                          )Net
      Plant in Service
                                          
                                          
                                          66,271
                                          
                                          
                                          
                                          63,385Construction
      Work-in-Progress
                                          
                                          
                                          2,927
                                          
                                          
                                          
                                          3,104Total
      Plant Assets
                                          
                                          
                                          69,198
                                          
                                          
                                          
                                          66,489Investments
      in Associated Companies
                                          
                                          
                                          1,082
                                          
                                          
                                          
                                          989Net
      Plant and Investments in Associated Companies
                                          
                                          
                                          70,280
                                          
                                          
                                          
                                          67,478Current
      Assets:Cash
      and Cash Equivalents
                                          
                                          
                                          1,117
                                          
                                          
                                          
                                          1,846Accounts
      Receivable (less allowance for uncollectible accounts of $163 in 2009 and
      $186 in 2008)
                                          
                                          
                                          5,480
                                          
                                          
                                          
                                          9,223Unbilled
      Revenue from Utility
                                          
                                          
                                          813
                                          
                                          
                                          
                                          1,240Inventory
                                          
                                          
                                          1,145
                                          
                                          
                                          
                                          943Unbilled
      Contract Revenue
                                          
                                          
                                          -
                                          
                                          
                                          
                                          14Prepaid
      Income Taxes
                                          
                                          
                                          728
                                          
                                          
                                          
                                          -Prepayments
                                          
                                          
                                          429
                                          
                                          
                                          
                                          469Total
      Current Assets
                                          
                                          
                                          9,712
                                          
                                          
                                          
                                          13,735Regulatory
      Assets:Uncollected
      Maine Yankee Decommissioning Costs
                                          
                                          
                                          2,667
                                          
                                          
                                          
                                          3,248Recoverable
      Seabrook Costs
                                          
                                          
                                          7,506
                                          
                                          
                                          
                                          8,339Regulatory
      Assets—Deferred Income Taxes
                                          
                                          
                                          5,291
                                          
                                          
                                          
                                          5,611Regulatory
      Assets—Pension and Post-Retirement Medical Benefits
                                          
                                          
                                          5,964
                                          
                                          
                                          
                                          5,985Deferred
      Fuel and Purchased Energy Costs
                                          
                                          
                                          20,688
                                          
                                          
                                          
                                          26,112Unamortized
      Premium on Early Retirement of Debt
                                          
                                          
                                          530
                                          
                                          
                                          
                                          685Deferred
      Regulatory Costs
                                          
                                          
                                          1,237
                                          
                                          
                                          
                                          1,570Total
      Regulatory Assets
                                          
                                          
                                          43,883
                                          
                                          
                                          
                                          51,550Other
      Assets:Unamortized
      Debt Issuance Costs
                                          
                                          
                                          122
                                          
                                          
                                          
                                          169Restricted
      Investments (at cost, which approximates market)
                                          
                                          
                                          923
                                          
                                          
                                          
                                          9Other
      Assets
                                          
                                          
                                          1,622
                                          
                                          
                                          
                                          1,577Total
      Other Assets
                                          
                                          
                                          2,667
                                          
                                          
                                          
                                          1,755Total
      Assets
                                          
                                          $
                                          126,542
                                          
                                          
                                          $
                                          134,518


See Notes
to Consolidated Financial Statements





4


MAINE & MARITIMES CORPORATION AND
SUBSIDIARIES


Capitalization and Liabilities(Unaudited)


(In
thousands of dollars)







September
      30,
                                    
                                    
                                    December
      31,2009
                                    
                                    
                                    2008Capitalization
      (see accompanying statement):Shareholders’
      Equity
                                    
                                    $
                                    45,631
                                    
                                    
                                    $
                                    45,048Long-Term
      Debt
                                    
                                    
                                    24,233
                                    
                                    
                                    
                                    25,425Total
      Capitalization
                                    
                                    
                                    69,864
                                    
                                    
                                    
                                    70,473Current
      Liabilities:Long-Term
      Debt Due Within One Year
                                    
                                    
                                    1,550
                                    
                                    
                                    
                                    1,412Notes
      Payable to Banks
                                    
                                    
                                    4,000
                                    
                                    
                                    
                                    6,000Accounts
      Payable
                                    
                                    
                                    3,603
                                    
                                    
                                    
                                    4,866Accounts
      Payable—Associated Companies
                                    
                                    
                                    29
                                    
                                    
                                    
                                    30Accrued
      Employee Benefits
                                    
                                    
                                    967
                                    
                                    
                                    
                                    1,608Customer
      Deposits
                                    
                                    
                                    276
                                    
                                    
                                    
                                    102Taxes
      Accrued
                                    
                                    
                                    360
                                    
                                    
                                    
                                    309Interest
      Accrued
                                    
                                    
                                    83
                                    
                                    
                                    
                                    111Dividends
      Payable
                                    
                                    
                                    84
                                    
                                    
                                    
                                    84Unearned
      Revenue
                                    
                                    
                                    51
                                    
                                    
                                    
                                    86Total
      Current Liabilities
                                    
                                    
                                    11,003
                                    
                                    
                                    
                                    14,608Deferred
      Credits and Other Liabilities:Accrued
      Removal Obligations
                                    
                                    
                                    5,904
                                    
                                    
                                    
                                    5,787Fair
      Value of Interest Rate Hedges
                                    
                                    
                                    3,756
                                    
                                    
                                    
                                    4,800Uncollected
      Maine Yankee Decommissioning Costs
                                    
                                    
                                    2,667
                                    
                                    
                                    
                                    3,248Other
      Regulatory Liabilities
                                    
                                    
                                    896
                                    
                                    
                                    
                                    663Deferred
      Income Taxes
                                    
                                    
                                    16,178
                                    
                                    
                                    
                                    18,161Accrued
      Postretirement Benefits and Pension Costs
                                    
                                    
                                    13,771
                                    
                                    
                                    
                                    14,135Investment
      Tax Credits
                                    
                                    
                                    26
                                    
                                    
                                    
                                    39Miscellaneous
                                    
                                    
                                    2,477
                                    
                                    
                                    
                                    2,604Total
      Deferred Credits and Other Liabilities
                                    
                                    
                                    45,675
                                    
                                    
                                    
                                    49,437Commitments,
      Contingencies, and Regulatory Matters (Note 8)Total
      Capitalization and Liabilities
                                    
                                    $
                                    126,542
                                    
                                    
                                    $
                                    134,518


See Notes
to Consolidated Financial Statements








5


MAINE
& MARITIMES CORPORATION AND SUBSIDIARIES


Statement
of Consolidated Shareholders’ Equity (Unaudited)


(in
thousands of dollars, except share and per share data)





Common
      SharesCommon
      Shares Issued and Outstanding
                  
                  
                  Par
      Value Issued ($7/Share)
                  
                  
                  Paid-In
      Capital
                  
                  
                  Retained
      Earnings
                  
                  
                  Accumulated
      Other Compre-hensive Income (Loss)
                  
                  
                  TotalBalance,
                    December
      31, 2008
                  
                  
                  1,678,924
                  
                  
                  $
                  11,752
                  
                  
                  $
                  1,740
                  
                  
                  $
                  34,426
                  
                  
                  $
                  (2,870
                  )
                  
                  $
                  45,048Common
      Stock  Issued
                  
                  
                  2,325
                  
                  
                  
                  16
                  
                  
                  
                  68
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  84Net
      Income
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  118
                  
                  
                  
                  
                  
                  
                  
                  118Other
      Comprehensive Income:Unrealized
      Loss on Investments Available for Sale, Net of Tax Provision of
      $5
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  7
                  
                  
                  
                  7Change
      in Fair Value of Interest Rate Hedges, Net of Tax Provision of
      $418
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  626
                  
                  
                  
                  626Total
      Other Comprehensive Income
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  633Total
      Comprehensive Income
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  751Dividend
      ($0.15 per share)
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (252
                  )
                  
                  
                  
                  
                  
                  
                  (252
                  )Balance,
                    September
      30, 2009
                  
                  
                  1,681,249
                  
                  
                  $
                  11,768
                  
                  
                  $
                  1,808
                  
                  
                  $
                  34,292
                  
                  
                  $
                  (2,237
                  )
                  
                  $
                  45,631


MAM had
five million shares of $7 per share common stock authorized, with 1,681,249 and
1,678,924 shares issued and outstanding as of September 30, 2009, and December
31, 2008, respectively.  At September 30, 2009, and December 31, 2008,
MAM had 500,000 shares of $0.01 per share preferred stock authorized, with none
issued or outstanding.

















See Notes
to Consolidated Financial Statements.


6





NOTES
TO CONSOLIDATED


FINANCIAL
STATEMENTS





1.    ACCOUNTING
POLICIES





Consolidation
and Basis of Presentation




The
accompanying consolidated financial statements include the accounts of Maine
& Maritimes Corporation (“MAM” or the “Company”) and the following
wholly-owned subsidiaries and affiliates:





1.
            Maine
      Public Service Company (“MPS”) and its wholly-owned inactive Canadian
      subsidiary Maine & New Brunswick Electrical Power Company, Ltd
      (“Me&NB”); and





2.
            MAM
      Utility Services Group (“MAM USG”), a wholly-owned United States
      subsidiary.





Discontinued
operations reported for 2008 consists of the activity of The Maricor Group
(“TMG”) and its wholly-owned United States subsidiary The Maricor Group New
England, Inc. (“TMGNE”) and TMG’s wholly-owned Canadian subsidiary The Maricor
Group, Canada Ltd (“TMGC”) and TMGC’s wholly-owned Canadian subsidiary Mecel
Properties Ltd. (“Mecel”).  Each of these discontinued entities has
been dissolved.





MAM was a
50% owner of Maricor Properties Ltd, a Canadian company formerly wholly-owned by
MAM, and its wholly-owned Canadian subsidiary Cornwallis Court Developments Ltd.
(“Cornwallis”).  MAM divested its 50% ownership of Maricor Properties
on March 31, 2008, through a share redemption agreement with Ashford
Investments, Inc. (“Ashford”).





MAM is
listed on the NYSE Amex under the symbol “MAM.”




All
inter-company transactions between MAM and its subsidiaries have been eliminated
in consolidation.  In the opinion of Management, the interim financial
statements contain all adjustments necessary (consisting of normal recurring
accruals) to present fairly the financial information contained
herein.  Operating results for the interim period presented are not
necessarily indicative of the results to be expected for a full year, in part
due to the regulated utility rates being higher in the winter than summer
periods. Also, there is an effect of a sales volume adjustment in December under
regulatory order that will recognize stranded cost sales volume variances from
the entire year.




Management evaluated
subsequent events through November 12, 2009, the date the financial statements
were issued.





Accounting
Policies





The
Company’s accounting policies are those disclosed in its 2008 Annual Report on
Form 10-K, which is hereby incorporated by this reference.





New
Accounting Pronouncements





Financial
Accounting Standards Board (“FASB”) Accounting Standards
Codification





In June
2009 the FASB issued Statement No. 168 “The FASB Accounting Standards
Codification (“ASC”) and the Hierarchy of Generally Accepted Accounting
Principles,” now known as FASB ASC 105-10.  The FASB Accounting
Standards Codification (“Codification”) is the source of authoritative U.S.
generally accepted accounting principles (“GAAP”) recognized by the FASB to be
applied by nongovernmental entities.  This statement is effective for
financial statements issued for interim and annual periods ending after
September 15, 2009.





The
Codification superseded all existing non-SEC accounting and reporting
standards.  All other non-grandfathered, non-SEC accounting literature
not included in the Codification will become non-authoritative. The FASB has
issued several FASB Accounting Standards Updates, primarily to update existing
guidance for the FASB codification.  This statement and the FASB
Accounting Standards Updates issued through the date of this report have not
materially impacted the Company’s financial statements.





2.    INCOME
TAXES





A summary
of Federal and State income taxes charged (credited) to income is presented
below.  For accounting and ratemaking purposes, income tax provisions
(benefits) included in “Operating Expenses” reflect taxes applicable to revenues
and expenses allowable for ratemaking purposes on MPS regulated activities and
unregulated activities for MAM, MAM USG and TMG.  The tax effect of
items not included in rate base or normal operating activities is allocated as
“Other Income (Deductions).”






7







(In
      thousands of dollars)
                                  
                                  For
      the Quarters Ending September 30,
                                  
                                  
                                  For
      the Nine Months Ending September 30,2009
                                  
                                  
                                  2008
                                  
                                  
                                  2009
                                  
                                  
                                  2008Current
      income taxesFederal
                                  
                                  $
                                  169
                                  
                                  
                                  $
                                  856
                                  
                                  
                                  $
                                  1,856
                                  
                                  
                                  $
                                  1,901State
                                  
                                  
                                  86
                                  
                                  
                                  
                                  325
                                  
                                  
                                  
                                  636
                                  
                                  
                                  
                                  682Foreign
                                  
                                  
                                  -
                                  
                                  
                                  
                                  5
                                  
                                  
                                  
                                  (1
                                  )
                                  
                                  
                                  19Total
      current income taxes
                                  
                                  
                                  255
                                  
                                  
                                  
                                  1,186
                                  
                                  
                                  
                                  2,491
                                  
                                  
                                  
                                  2,602Deferred
      income taxesFederal
                                  
                                  
                                  (690
                                  )
                                  
                                  
                                  (696
                                  )
                                  
                                  
                                  (2,044
                                  )
                                  
                                  
                                  (739
                                  )State
                                  
                                  
                                  (122
                                  )
                                  
                                  
                                  (142
                                  )
                                  
                                  
                                  (361
                                  )
                                  
                                  
                                  (130
                                  )Total
      deferred income taxes
                                  
                                  
                                  (812
                                  )
                                  
                                  
                                  (838
                                  )
                                  
                                  
                                  (2,405
                                  )
                                  
                                  
                                  (869
                                  )Investment
      credits, net
                                  
                                  
                                  (5
                                  )
                                  
                                  
                                  (5
                                  )
                                  
                                  
                                  (13
                                  )
                                  
                                  
                                  (15
                                  )Total
      income taxes
                                  
                                  $
                                  (562
                                  )
                                  
                                  $
                                  343
                                  
                                  
                                  $
                                  73
                                  
                                  
                                  $
                                  1,718Allocated
      to:Operating
      income-  Regulated
                                  
                                  $
                                  (467
                                  )
                                  
                                  $
                                  (10
                                  )
                                  
                                  $
                                  278
                                  
                                  
                                  $
                                  1,547-  Unregulated
                                  
                                  
                                  (91
                                  )
                                  
                                  
                                  354
                                  
                                  
                                  
                                  (198
                                  )
                                  
                                  
                                  177Subtotal
                                  
                                  
                                  (558
                                  )
                                  
                                  
                                  344
                                  
                                  
                                  
                                  80
                                  
                                  
                                  
                                  1,724Discontinued
      Operations
                                  
                                  
                                  -
                                  
                                  
                                  
                                  2
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (13
                                  )Total
      Operating
                                  
                                  
                                  (558
                                  )
                                  
                                  
                                  346
                                  
                                  
                                  
                                  80
                                  
                                  
                                  
                                  1,711Other
      income
                                  
                                  
                                  (4
                                  )
                                  
                                  
                                  (3
                                  )
                                  
                                  
                                  (7
                                  )
                                  
                                  
                                  7Total
                                  
                                  $
                                  (562
                                  )
                                  
                                  $
                                  343
                                  
                                  
                                  $
                                  73
                                  
                                  
                                  $
                                  1,718


For the
nine months ended September 30, 2009, and 2008, the effective income tax rates
were 38.4% and 45.9%, respectively.  The principal reasons for the
effective tax rate differing from the US federal income tax rate are the
earnings from investments, investment tax credit amortization, and adjustments
to prior year estimates.





The
Company has not accrued U.S. income taxes on the undistributed earnings of
Me&NB, as the withholding taxes due on the distribution of any remaining
amount would be principally offset by foreign tax credits.  No
dividends were received from Me&NB in the first three quarters of 2009 or
2008.





An income
tax position must be more-likely-than-not for the position to be recognized in
the financial statements.  The Company does not expect that the
amounts of unrecognized tax benefits will change significantly in the next
twelve months, and no adjustments to reported tax benefits were
required.  It is the Company’s policy to accrue interest and
penalties, if applicable, related to uncertain tax positions.  As of
September 30, 2009 and 2008, the Company has accrued no interest or penalties
related to uncertain tax positions.





The
statutes of limitations for audits by Federal, Maine, Massachusetts and Canadian
tax authorities have expired for all tax years ending December 31, 2005, or
earlier.





Management
of the Company has evaluated the positive and negative evidence bearing upon the
realizability of the Company’s deferred tax assets, which consist principally of
pension and post-retirement benefits, net operating loss carryforwards, earnings
on investments, and accumulated OCI on MPS’s interest rate
hedges.  For the nine months ended September 30, 2009, and the year
ended December 31, 2008, Management evaluated the deferred tax assets and
determined a valuation allowance was needed on the earnings on
investments.  Certain distributions from MPS’s investments have been
treated for tax purposes as dividend income, resulting in a deferred tax asset
of $393,000 at September 30, 2009, and $384,000 at December 31,
2008.  As this will become a capital loss for tax purposes, the
Company cannot be assured capital gains will exist to allow for the use of this
loss, and a valuation allowance has been provided.


8





The
following summarizes accumulated deferred income tax (assets) and liabilities
established on temporary differences under SFAS 109 as of September 30, 2009,
and December 31, 2008:





(In
      thousands of dollars)September 30,
                        2009
                      
                      
                      December
      31,
                        2008Seabrook
                      
                      $
                      4,051
                      
                      
                      $
                      4,511Property
                      
                      
                      10,929
                      
                      
                      
                      10,385Flexible
      pricing revenue
                      
                      
                      (91
                      )
                      
                      
                      164Deferred
      fuel
                      
                      
                      8,253
                      
                      
                      
                      10,417Pension
      and post-retirement benefits
                      
                      
                      (5,488
                      )
                      
                      
                      (5,458
                      )Other
      Comprehensive Income
                      
                      
                      (1,465
                      )
                      
                      
                      (1,888
                      )Deferred
      Directors' Compensation
                      
                      
                      (553
                      )
                      
                      
                      (557
                      )Other
                      
                      
                      542
                      
                      
                      
                      587Net
      Accumulated Deferred Income Tax Liability
                      
                      $
                      16,178
                      
                      
                      $
                      18,161


3.    SEGMENT
INFORMATION





The
Company is organized based on products and services.  Management
monitors the operations of the Company in the following operating
segments:




·
            Regulated
      electric utility: MPS and its inactive wholly-owned Canadian subsidiary,
      Me&NB;





·
            Unregulated
      utility services: MAM USG;





·
            Unregulated
      engineering services: TMG and its subsidiaries and product and service
      lines have been dissolved, but were classified as discontinued operations
      in prior years;





·
            Other:
      Corporate costs directly associated with the unregulated subsidiaries,
      other costs not allocated to the regulated utility and inter-company
      eliminations.





The
accounting policies of the segments are the same as those described in Note 1,
“Accounting Policies.”  MAM provides certain administrative support
services to MPS and MAM USG, and provided similar services to TMG and its
subsidiaries.  The costs of services provided to MPS and MAM USG are
billed to MPS and MAM USG based on a combination of direct charges and
allocations.  The cost of corporate services provided to the other
unregulated entities remained at the holding company, and were not allocated or
charged to the various subsidiaries.





MPS also
provides services to MAM and other affiliates, including administrative
services, such as information technology, human resources and accounting, and
operational services.  The administrative services are billed to MAM
at cost through inter-company transactions.  Operational services for
which MPS has an established rate for charging third parties are charged at
those established rates.








9







(In thousands of
      dollars)Quarter
      Ended September 30, 2009Regulated
                    Electric
                    Utility
                  
                  
                  Unregulated
      Utility Services
                  
                  
                  Other
                  
                  
                  TotalRevenues
      from External CustomersRegulated
      Operating Revenues
                  
                  $
                  7,293
                  
                  
                  $
                  -
                  
                  
                  $
                  (20
                  )
                  
                  $
                  7,273Unregulated
      Utility Operating Revenues
                  
                  
                  -
                  
                  
                  
                  29
                  
                  
                  
                  -
                  
                  
                  
                  29Total
      Operating Revenues
                  
                  
                  7,293
                  
                  
                  
                  29
                  
                  
                  
                  (20
                  )
                  
                  
                  7,302Operating
      ExpensesRegulated
      Operation & Maintenance
                  
                  
                  4,371
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  4,371Unregulated
      Operation & Maintenance
                  
                  
                  -
                  
                  
                  
                  143
                  
                  
                  
                  84
                  
                  
                  
                  227Depreciation
                  
                  
                  807
                  
                  
                  
                  3
                  
                  
                  
                  1
                  
                  
                  
                  811Amortization
      of Stranded Costs
                  
                  
                  2,700
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,700Amortization
                  
                  
                  42
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  42Taxes
      Other than Income
                  
                  
                  441
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  441Income
      Taxes
                  
                  
                  (467
                  )
                  
                  
                  (48
                  )
                  
                  
                  (43
                  )
                  
                  
                  (558
                  )Total
      Operating Expenses
                  
                  
                  7,894
                  
                  
                  
                  98
                  
                  
                  
                  42
                  
                  
                  
                  8,034Operating
      Loss
                  
                  
                  (601
                  )
                  
                  
                  (69
                  )
                  
                  
                  (62
                  )
                  
                  
                  (732
                  )Other
      Income (Deductions)Equity
      in Income of Associated Companies
                  
                  
                  37
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  37Other
      Deductions
                  
                  
                  (5
                  )
                  
                  
                  -
                  
                  
                  
                  (2
                  )
                  
                  
                  (7
                  )Total
      Other Income (Deductions)
                  
                  
                  32
                  
                  
                  
                  -
                  
                  
                  
                  (2
                  )
                  
                  
                  30Loss
      Before Interest Charges
                  
                  
                  (569
                  )
                  
                  
                  (69
                  )
                  
                  
                  (64
                  )
                  
                  
                  (702
                  )Interest
      Charges
                  
                  
                  165
                  
                  
                  
                  4
                  
                  
                  
                  6
                  
                  
                  
                  175Net
      Loss
                  
                  $
                  (734
                  )
                  
                  $
                  (73
                  )
                  
                  $
                  (70
                  )
                  
                  $
                  (877
                  )
  10




(In
      thousands of dollars)Quarter
      Ended September 30, 2008Regulated
                                        
                                        
                                        UnregulatedElectric
                                          Utility
                                        
                                        
                                        Utility
      Services
                                        
                                        
                                        Engineering
      Services
                                        
                                        
                                        Other
                                        
                                        
                                        TotalRevenues
      from External CustomersRegulated
      Operating Revenues
                                        
                                        $
                                        7,840
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        (35
                                        )
                                        
                                        $
                                        7,805Unregulated
      Utility Operating Revenues
                                        
                                        
                                        -
                                        
                                        
                                        
                                        4,463
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        4,463Total
      Operating Revenues
                                        
                                        
                                        7,840
                                        
                                        
                                        
                                        4,463
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (35
                                        )
                                        
                                        
                                        12,268Operating
      ExpensesRegulated
      Operation & Maintenance
                                        
                                        
                                        2,949
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        2,949Unregulated
      Operation & Maintenance
                                        
                                        
                                        -
                                        
                                        
                                        
                                        4,684
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        50
                                        
                                        
                                        
                                        4,734Depreciation
                                        
                                        
                                        762
                                        
                                        
                                        
                                        3
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1
                                        
                                        
                                        
                                        766Amortization
      of Stranded Costs
                                        
                                        
                                        2,728
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        2,728Amortization
                                        
                                        
                                        54
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        54Taxes
      Other than Income
                                        
                                        
                                        430
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        430Income
      Taxes
                                        
                                        
                                        (10
                                        )
                                        
                                        
                                        (89
                                        )
                                        
                                        
                                        -
                                        
                                        
                                        
                                        443
                                        
                                        
                                        
                                        344Total
      Operating Expenses
                                        
                                        
                                        6,913
                                        
                                        
                                        
                                        4,598
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        494
                                        
                                        
                                        
                                        12,005Operating
      Income (Loss)
                                        
                                        
                                        927
                                        
                                        
                                        
                                        (135
                                        )
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (529
                                        )
                                        
                                        
                                        263Other
      Income (Deductions)Equity
      in Income of Associated Companies
                                        
                                        
                                        37
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        37Interest
      and Dividend Income
                                        
                                        
                                        1
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1Other
      Income (Deductions)
                                        
                                        
                                        1
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (1
                                        )
                                        
                                        
                                        -Total
      Other Income (Deductions)
                                        
                                        
                                        39
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (1
                                        )
                                        
                                        
                                        38Income
      (Loss) Before Interest Charges
                                        
                                        
                                        966
                                        
                                        
                                        
                                        (135
                                        )
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (530
                                        )
                                        
                                        
                                        301Interest
      Charges
                                        
                                        
                                        154
                                        
                                        
                                        
                                        3
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        16
                                        
                                        
                                        
                                        173Income
      (Loss) from Continuing Operations
                                        
                                        
                                        812
                                        
                                        
                                        
                                        (138
                                        )
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (546
                                        )
                                        
                                        
                                        128Income
      from Discontinued Operations:Income
      From Operations
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        3
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        3Provision
      for Income Taxes
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (2
                                        )
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (2
                                        )Income
      from Discontinued Operations
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1Net
      Income (Loss)
                                        
                                        $
                                        812
                                        
                                        
                                        $
                                        (138
                                        )
                                        
                                        $
                                        1
                                        
                                        
                                        $
                                        (546
                                        )
                                        
                                        $
                                        129
 
  11


(In
      thousands of dollars)Nine
      Months Ended September 30, 2009Regulated
                                          Electric
                                          Utility
                                        
                                        
                                        Unregulated
      Utility Services
                                        
                                        
                                        Other
                                        
                                        
                                        TotalRevenues
      from External CustomersRegulated
      Operating Revenues
                                        
                                        $
                                        24,773
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        (68
                                        )
                                        
                                        $
                                        24,705Unregulated
      Utility Operating Revenues
                                        
                                        
                                        -
                                        
                                        
                                        
                                        577
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        577Total
      Operating Revenues
                                        
                                        
                                        24,773
                                        
                                        
                                        
                                        577
                                        
                                        
                                        
                                        (68
                                        )
                                        
                                        
                                        25,282Operating
      ExpensesRegulated
      Operation & Maintenance
                                        
                                        
                                        11,925
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        11,925Unregulated
      Operation & Maintenance
                                        
                                        
                                        -
                                        
                                        
                                        
                                        789
                                        
                                        
                                        
                                        180
                                        
                                        
                                        
                                        969Depreciation
                                        
                                        
                                        2,201
                                        
                                        
                                        
                                        9
                                        
                                        
                                        
                                        1.00
                                        
                                        
                                        
                                        2,211Amortization
      of Stranded Costs
                                        
                                        
                                        8,101
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        8,101Amortization
                                        
                                        
                                        114
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        114Taxes
      Other than Income
                                        
                                        
                                        1,364
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,364Income
      Taxes
                                        
                                        
                                        278
                                        
                                        
                                        
                                        (91
                                        )
                                        
                                        
                                        (107
                                        )
                                        
                                        
                                        80Total
      Operating Expenses
                                        
                                        
                                        23,983
                                        
                                        
                                        
                                        707
                                        
                                        
                                        
                                        74
                                        
                                        
                                        
                                        24,764Operating
      Income (Loss)
                                        
                                        
                                        790
                                        
                                        
                                        
                                        (130
                                        )
                                        
                                        
                                        (142
                                        )
                                        
                                        
                                        518Other
      Income (Deductions)Equity
      in Income of Associated Companies
                                        
                                        
                                        98
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        98Interest
      and Dividend Income
                                        
                                        
                                        8
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        8Other
      Deductions
                                        
                                        
                                        (59
                                        )
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (2
                                        )
                                        
                                        
                                        (61
                                        )Total
      Other Income (Deductions)
                                        
                                        
                                        47
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (2
                                        )
                                        
                                        
                                        45Income
      (Loss) Before Interest Charges
                                        
                                        
                                        837
                                        
                                        
                                        
                                        (130
                                        )
                                        
                                        
                                        (144
                                        )
                                        
                                        
                                        563Interest
      Charges
                                        
                                        
                                        411
                                        
                                        
                                        
                                        7
                                        
                                        
                                        
                                        27
                                        
                                        
                                        
                                        445Net
      Income (Loss)
                                        
                                        $
                                        426
                                        
                                        
                                        $
                                        (137
                                        )
                                        
                                        $
                                        (171
                                        )
                                        
                                        $
                                        118Total
      Assets
                                        
                                        $
                                        125,347
                                        
                                        
                                        $
                                        835
                                        
                                        
                                        $
                                        360
                                        
                                        
                                        $
                                        126,542
 
  12


(In
      thousands of dollars)Nine
      Months Ended September 30, 2008Regulated
                                          
                                          
                                          UnregulatedElectric
                                            Utility
                                          
                                          
                                          Utility
      Services
                                          
                                          
                                          Engineering
      Services
                                          
                                          
                                          Other
                                          
                                          
                                          TotalRevenues
      from External CustomersRegulated
      Operating Revenues
                                          
                                          $
                                          26,546
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          (61
                                          )
                                          
                                          $
                                          26,485Unregulated
      Utility Operating Revenues
                                          
                                          
                                          -
                                          
                                          
                                          
                                          7,837
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          7,837Total
      Operating Revenues
                                          
                                          
                                          26,546
                                          
                                          
                                          
                                          7,837
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (61
                                          )
                                          
                                          
                                          34,322Operating
      ExpensesRegulated
      Operation & Maintenance
                                          
                                          
                                          9,591
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          9,591Unregulated
      Operation & Maintenance
                                          
                                          
                                          -
                                          
                                          
                                          
                                          8,208
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          219
                                          
                                          
                                          
                                          8,427Depreciation
                                          
                                          
                                          2,269
                                          
                                          
                                          
                                          7
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          1
                                          
                                          
                                          
                                          2,277Amortization
      of Stranded Costs
                                          
                                          
                                          8,184
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          8,184Amortization
                                          
                                          
                                          161
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          161Taxes
      Other than Income
                                          
                                          
                                          1,334
                                          
                                          
                                          
                                          2
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          1,336Income
      Taxes
                                          
                                          
                                          1,547
                                          
                                          
                                          
                                          (150
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          327
                                          
                                          
                                          
                                          1,724Total
      Operating Expenses
                                          
                                          
                                          23,086
                                          
                                          
                                          
                                          8,067
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          547
                                          
                                          
                                          
                                          31,700Operating
      Income (Loss)
                                          
                                          
                                          3,460
                                          
                                          
                                          
                                          (230
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (608
                                          )
                                          
                                          
                                          2,622Other
      Income (Deductions)Equity
      in Income (Loss) of Associated Companies
                                          
                                          
                                          112
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (9
                                          )
                                          
                                          
                                          103Interest
      and Dividend Income
                                          
                                          
                                          23
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (17
                                          )
                                          
                                          
                                          6Other
      (Deductions) Income
                                          
                                          
                                          (104
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          2
                                          
                                          
                                          
                                          (102
                                          )Total
      Other Income (Deductions)
                                          
                                          
                                          31
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (24
                                          )
                                          
                                          
                                          7Income
      (Loss) Before Interest Charges
                                          
                                          
                                          3,491
                                          
                                          
                                          
                                          (230
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (632
                                          )
                                          
                                          
                                          2,629Interest
      Charges
                                          
                                          
                                          479
                                          
                                          
                                          
                                          3
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          100
                                          
                                          
                                          
                                          582Income
      (Loss) from Continuing Operations
                                          
                                          
                                          3,012
                                          
                                          
                                          
                                          (233
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (732
                                          )
                                          
                                          
                                          2,047Loss
      from Discontinued Operations:Loss
      on Sale of Discontinued Operations
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (1
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (1
                                          )Loss
      From Operations
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (32
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (32
                                          )Benefit
      of Income Taxes
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          13
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          13Loss
      from Discontinued Operations
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (20
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (20
                                          )Net
      Income (Loss)
                                          
                                          $
                                          3,012
                                          
                                          
                                          $
                                          (233
                                          )
                                          
                                          $
                                          (20
                                          )
                                          
                                          $
                                          (732
                                          )
                                          
                                          $
                                          2,027Total
      Assets
                                          
                                          $
                                          126,144
                                          
                                          
                                          $
                                          4,608
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          (184
                                          )
                                          
                                          $
                                          130,568


4.    INVESTMENTS
IN ASSOCIATED COMPANIES





Maine
Yankee and MEPCO





MPS owns
5% of the common stock of Maine Yankee Atomic Power Company (“Maine Yankee”), a
jointly-owned nuclear electric power company, and 7.49% of the common stock of
MEPCO, a jointly-owned electric transmission company.  Although MPS’s
ownership percentage of these entities is relatively low, it does have influence
over the operating and financial decisions of these companies through board
representation, and therefore MPS records its investment in MEPCO and Maine
Yankee using the equity method.  This is consistent with industry
practice for similar jointly-owned units.




No
dividends were paid by Maine Yankee in the first nine months of 2009 or
2008.  MPS received dividends of $2,000 from MEPCO in each of the
first three quarters of 2009 and 2008.





In 1983,
Maine Yankee contracted with the U.S. Department of Energy for disposal of its
spent nuclear fuel.  Maine Yankee elected to make a single payment of
this obligation prior to the first delivery of spent fuel to the Department of
Energy.  These deliveries were scheduled to begin January 1, 1998, but
have not yet taken place.  Interest on the obligation accrues at the
13-week Treasury Bill rate compounded quarterly from April 7, 1983 through the
date the payment is made.





Maine
Yankee formed its Spent Fuel Disposal Trust to provide for payment of this
obligation.  In 1999, Maine legislation allowed Maine Yankee to use a
portion of these funds for construction of its Independent Spent Fuel Storage
Installation.  The fund has also incurred an unrealized loss of $21.8
million through December 31, 2008, due to market conditions, included on Maine
Yankee’s balance sheet as a regulatory asset.






13





Scheduled
trust fund deposits, which are included in “Uncollected Maine Yankee
Decommissioning Costs” on the Consolidated Balance Sheets, plus estimated
earnings, are expected to be sufficient to meet the total estimated liability of
$221.1 million at October 31, 2013.  However, actual returns, Treasury
Bill rates, and adjustments to the DOE assessment may materially impact this
obligation and the funds available to meet it, and additional contributions from
Maine Yankee owners may be required.





As MPS’s
investment in Maine Yankee is recorded using the equity method and the losses on
the spent fuel trust are deferred on the Maine Yankee balance sheet, those
losses are recorded within “Investments in Associated Companies” on the
Consolidated Balance Sheets, and have not impacted the Consolidated Income
Statement.  Should these losses become realized by Maine Yankee, 5% of
the loss would be recognized on MAM’s Consolidated Income
Statement.





Substantially
all earnings of Maine Yankee and MEPCO are distributed to investor
companies.





5.    DILUTED
EARNINGS PER SHARE




The
dilutive earnings per share impact of outstanding stock options
was:





Quarters
      Ended September 30,
                  
                  
                  Nine
      Months Ended September 30,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Net
      (Loss) Income (in thousands)
                  
                  $
                  (877
                  )
                  
                  $
                  129
                  
                  
                  $
                  118
                  
                  
                  $
                  2,027Shares
      Used in Computation of EarningsWeighted-Average
      Common Shares Outstanding in Computation of Basic Earnings per
      Share
                  
                  
                  1,681,249
                  
                  
                  
                  1,678,249
                  
                  
                  
                  1,680,507
                  
                  
                  
                  1,678,069Dilutive
      Effect of Common Stock Options
                  
                  
                  -
                  
                  
                  
                  733
                  
                  
                  
                  730
                  
                  
                  
                  336Shares
      Used in Computation of Earnings per Common Share Assuming
      Dilution
                  
                  
                  1,681,249
                  
                  
                  
                  1,678,982
                  
                  
                  
                  1,681,237
                  
                  
                  
                  1,678,405Net
      (Loss) Income per Share (Basic)
                  
                  $
                  (0.52
                  )
                  
                  $
                  0.08
                  
                  
                  $
                  0.07
                  
                  
                  $
                  1.21Net
      (Loss) Income per Share (Diluted)
                  
                  $
                  (0.52
                  )
                  
                  $
                  0.08
                  
                  
                  $
                  0.07
                  
                  
                  $
                  1.21


Due to
the loss incurred in the third quarter of 2009, the stock options outstanding
were anti-dilutive.  There were 3,932 potentially dilutive stock
options outstanding at September 30, 2009.





6.  DEFERRED
DIRECTORS’ COMPENSATION





The
compensation program for the MAM Board of Directors includes an option for the
director to defer some or all of his or her fees, rather than taking those fees
in cash each quarter.  The first deferral option grants the director a
number of phantom shares of stock, with the number granted equivalent to the
fees earned for the quarter, divided by the closing share price on the last day
of that quarter.  The cumulative deferred phantom shares are marked to
the closing share price on the last day of each quarter, and the adjustment is
recorded as expense.  If applicable, any dividends paid are also
converted to an equivalent number of phantom shares, and are added to the
cumulative deferred total.





During
the third quarter of 2009, the equivalent of 708 shares was deferred, bringing
the total deferred through September 30, 2009, to the equivalent of 37,243
shares.  The share price on that date was $35.95, resulting in a $1.3
million liability recorded on the Consolidated Balance Sheet under
“Miscellaneous Liabilities.”  A $1 increase in MAM’s stock price will
increase the liability and expense by approximately $37,000.  A $1
decrease in MAM’s stock price will decrease the liability by approximately
$37,000.  This unfunded liability is payable upon termination of
services of the director.  The plan allows for a lump sum distribution
or a monthly payment over ten years.  All directors currently
participating in this deferral plan have elected the ten-year payment
option.





The
second deferral option allows directors to postpone payment of their fees in
cash, and earn interest on the deferred amounts at a rate adjusted quarterly to
the five-year Treasury Note rate, which was 2.375% at September 30,
2009.  The unfunded obligation under this deferral program is $27,000,
and is also recorded under “Miscellaneous Liabilities” on the Consolidated
Balance Sheets.”





7.    BENEFIT
PROGRAMS





The
Company provides certain pension, post-retirement and welfare benefit programs
to its employees.  Benefit programs are an integral part of the
Company’s commitment to hiring and retaining employees, providing market-based
compensation that rewards individual and corporate performance.  The
Company offers welfare benefit plans to all employees, consisting of health
care, life insurance, long-term disability, and accidental disability
insurance.  The Company also offers a retirement savings program to
most employees in the form of a 401(k) plan.  This plan allows
voluntary contributions by the employee and may contain a contribution by the
Company.






14





U.
S. Defined Benefit Pension Plan





The
Company has a non-contributory defined benefit pension plan covering MPS and
certain former MAM employees.  No employees of other unregulated
businesses are eligible for this benefit plan.  Benefits under the
plan are based on employees’ years of service and compensation prior to
retirement.





On
December 31, 2006, future salary and service accruals for current participants
in the plan ceased, and any new employees hired on or after January 1, 2006, are
not eligible for the pension plan.  The Company agreed to additional
employer contributions to the Retirement Savings Plan to compensate employees in
part or in full, depending on their number of years of service, for this lost
benefit.  This additional contribution ranges from 5% to 25% of each
eligible employee’s gross base pay, and is immediately fully
vested.  This contribution was $560,000 and $541,000 in the first nine
months of 2009 and 2008, respectively.





During
recent years, the Company’s policy has been to fund pension costs
accrued.  In the current year, the Company is funding an amount
greater than the current year accrual due to the underfunded status of the
Plan.  The Company contributed $341,000 for the 2008 plan year in the
first quarter of 2009, and does not anticipate any additional contributions for
the 2008 plan year.  The Company contributed $400,000 through
September 30, 2009, $200,000 in October 2009 for the 2009 plan year, and expects
to contribute another $200,000 in January 2010, all for the 2009 plan
year.





The
following table sets forth the plans’ net periodic benefit cost:





(In
      thousands of dollars)
                      
                      Pension
      BenefitsQuarters
      Ended September 30,
                      
                      
                      Nine
      Months Ended September 30,2009
                      
                      
                      2008
                      
                      
                      2009
                      
                      
                      2008Interest
      cost
                      
                      $
                      271
                      
                      
                      $
                      268
                      
                      
                      $
                      813
                      
                      
                      $
                      805Expected
      return on plan assets
                      
                      
                      (292
                      )
                      
                      
                      (305
                      )
                      
                      
                      (876
                      )
                      
                      
                      (914
                      )Recognized
      net actuarial loss
                      
                      
                      36
                      
                      
                      
                      19
                      
                      
                      
                      108
                      
                      
                      
                      56Net
      periodic benefit cost
                      
                      $
                      15
                      
                      
                      $
                      (18
                      )
                      
                      $
                      45
                      
                      
                      $
                      (53
                      )


Health
Care Benefits





The
Company provides certain health care benefits to eligible
employees.  Eligible employees share in the cost of their medical
benefits, in addition to plan deductibles and coinsurance
payments.  The plan also covers retiree medical coverage for employees
of Maine Public Service Company, the regulated utility.  Employees
hired on or after October 1, 2005, are not eligible for post-retirement medical
coverage.





The
following table sets forth the plans’ net periodic benefit cost:





(In
      thousands of dollars)
                      
                      Health
      Care BenefitsQuarters
      Ended September 30,
                      
                      
                      Nine
      Months Ended September 30,2009
                      
                      
                      2008
                      
                      
                      2009
                      
                      
                      2008Service
      cost
                      
                      $
                      49
                      
                      
                      $
                      50
                      
                      
                      $
                      147
                      
                      
                      $
                      150Interest
      cost
                      
                      
                      139
                      
                      
                      
                      142
                      
                      
                      
                      417
                      
                      
                      
                      425Expected
      return on plan assets
                      
                      
                      (38
                      )
                      
                      
                      (57
                      )
                      
                      
                      (114
                      )
                      
                      
                      (170
                      )Amortization
      of transition obligation
                      
                      
                      18
                      
                      
                      
                      18
                      
                      
                      
                      54
                      
                      
                      
                      54Amortization
      of prior service cost
                      
                      
                      (15
                      )
                      
                      
                      (15
                      )
                      
                      
                      (45
                      )
                      
                      
                      (45
                      )Recognized
      net actuarial loss
                      
                      
                      50
                      
                      
                      
                      47
                      
                      
                      
                      150
                      
                      
                      
                      142Net
      periodic benefit cost
                      
                      $
                      203
                      
                      
                      $
                      185
                      
                      
                      $
                      609
                      
                      
                      $
                      556





8.    COMMITMENTS,
CONTINGENCIES AND REGULATORY MATTERS





Request
for Approval of Maine Public Service Company’s Stranded Cost Revenue Requirement
and Rates for the Rate Effective Period Beginning January 1, 2010




On
September 24, 2009, MPS filed its stranded cost revenue requirement and rates
for the two-year rate effective period beginning January 1, 2010 with the Maine
Public Utilities Commission.  Subsequently, the Hearing Examiner
issued a Procedural Order in MPUC Docket No. 2009-323 providing interested
parties the opportunity to intervene not later than November 13, 2009. An
initial case conference has been scheduled for November 19, 2009.  The
Company’s filing includes updated stranded cost schedules as well as a sales
forecast for the rate effective period.  MPS is not proposing any
change to stranded cost rates.   The Company cannot predict the
final outcome of the case at this time.






15




Federal
Energy Regulatory Commission 2009 Open Access Transmission Tariff Formula Rate
Filing




On June
15, 2009, pursuant to Section 205 of the Federal Power Act, 16 U.S.C. Section
824d, and Title 18 CFR Sections 35.11 and 35.13 of the regulations of
the FERC, MPS submitted for filing its proposed revisions to its FERC Open
Access Transmission Tariff (“OATT”) in Docket No. ER 05 to modify its
transmission rate formula.  The proposed changes, if approved, will
not have a material impact on the revenue requirement.




On June
15, 2009, MPS filed its updated rates under the 2009 OATT formula for both
wholesale and retail customers.  The revenue decreases were
approximately $81,000 or 14% for wholesale customers, effective June 1, 2009,
and $623,000 or 20% for retail customers, effective July 1,
2009.  Under the OATT formula, the cost of transmission service and
the return on transmission assets is reduced by the wheeling revenue charged
during the year to determine the revenue requirement.  Due to higher
wheeling revenue from generators exporting electricity off the MPS system, MPS
had a higher wheeling revenue credit in the formula for 2008 than prior year,
resulting in the lower rates.




The
proceeding and potential settlement negotiations for both changes to the formula
and the 2009 rates are under way; the final change in rates could differ from
the initial filing.  MPS cannot determine the ultimate outcome at this
time.




Federal
Energy Regulatory Commission 2008 Open Access Transmission Tariff Formula Rate
Filing





On June
16, 2008, MPS filed its updated rates under the 2008 Open Access Transmission
Tariff formula pursuant to Docket ER00-1053 for both wholesale and retail
customers.  The revenue decreases were approximately $220,000 or 27%
for wholesale customers, effective June 1, 2008, and $631,000 or 17% for retail
customers, effective July 1, 2008.  The decrease was primarily
associated with wheeling revenue collected from generators exporting electricity
off the MPS system during 2007.  The interested parties in this Docket
reached and filed a settlement with FERC on May 6, 2009.  FERC
approved the settlement agreement, without adjustment of rates, on August 17,
2009.





Reduction
of Stated Capital of Maine & New Brunswick Electrical Power Company,
Ltd.




In the
Order Approving Stipulation under MPUC Docket No. 2002-676, “Maine Public Service Company Request
for Approval of Reorganization of the Company into a Holding Company Structure,”MPS received permission from the MPUC to wind up and dissolve Me&NB
at such future time as MPS deemed appropriate.  In September 2008, MPS
filed notice with the MPUC and partially liquidated its investment in
Me&NB.  This partial liquidation reduced MPS’s equity investment
in Me&NB from $1 million to $150,000, with $850,000 cash returned from
Me&NB to MPS.  MPS wired those funds to its First Mortgage Bond
Trustee in April 2009, to be held in trust until bondable property additions
since the receipt of the funds exceed the balance in the trust
account.




On
October 6, 2009, the First Mortgage Bond Trustee released the funds to the
Company.





Wheelabrator-Sherman





MPS was
ordered into a Power Purchase Agreement with Wheelabrator-Sherman in 1986, which
required the purchase of the entire output (up to 126,582 MWH per year) of a
17.6 MW biomass plant through December 31, 2006.  Total stranded costs
included as regulatory assets under the caption “Deferred Fuel and Purchased
Energy Costs” in the Consolidated Balance Sheet related to this contract are
$20.7 million and $26.1 million at September 30, 2009, and December 31, 2008,
respectively.





Poly
Chlorinated Bi-Phenol Transformers





In
response to a Maine environmental regulation to phase out Poly Chlorinated
Bi-phenol (“PCB”) transformers, MPS has a program to eliminate transformers on
its system that do not meet the State environmental guidelines.  The
Company is in the process of inspecting almost 13,000 distribution transformers
over a ten-year period. MPS is currently in its ninth year of this ten-year
program.  Approximately 35% of the transformers inspected require “in
service” PCB oil sampling.   In addition, transformers that pass the
inspection criteria will be refitted with new lightning arrestors and animal
guards, where necessary.  The current total estimated cost of the project
is $3.2 million; as of September 30, 2009, $2.7 million of this total has been
spent.   The remaining cost of the project has been accrued on the
Consolidated Balance Sheet as “Accrued Removal Obligations.”





Financial
Information System Hosting Agreement





In 2007,
the Company renegotiated its financial information system hosting agreement with
OneNeck IT Services to host and provide technical and functional support for the
integrated Oracle Financial Information System.  The base hosting fees
were reduced to $537,500 per year for 2007 through 2013.






16





Off-Balance
Sheet Arrangements





The
Company has several operating leases for office and field equipment, vehicles
and office space, accounted for in accordance with SFAS 13, Accounting for
Leases.  The following summarizes payments for leases for a
period in excess of one year:


Nine
      Months Ended
                        September
      30,(In
      thousands of dollars)
                      
                      2009
                      
                      
                      2008Equipment
                      
                      $
                      28
                      
                      
                      $
                      14Building
                      
                      
                      -
                      
                      
                      
                      97Rights
      of Way
                      
                      
                      29
                      
                      
                      
                      27Total
                      
                      $
                      57
                      
                      
                      $
                      138
 
  The
future minimum lease payments have not changed materially from the amounts
reported as of December 31, 2008.  Please refer to MAM’s 2008 Form
10-K for these future lease payments.








9.    CAPITAL
LEASES





MPS
financed certain of its 2006 and 2007 vehicle and computer equipment purchases
through capital leases, totaling $820,000.  The remaining liability as
of September 30, 2009, for these capital lease arrangements is approximately
$318,000, and is recorded within “Miscellaneous Liabilities” on the Consolidated
Balance Sheet.  Future minimum lease payments have not changed from
the amounts reported as of December 31, 2008.  Please refer to MAM’s
2008 Form 10-K for these future lease payments.





From the
inception of the leases through December 31, 2008, the Company recorded
depreciation expense and accumulated depreciation on leased assets in accordance
with generally accepted accounting principles.  FERC General
Instruction No. 20 requires this reduction in the value of computers, office
equipment and vehicles under capital lease be reported as rent expense within
Operation and Maintenance expense.  The 2009 Consolidated Income
Statement reflects this reclassification of $245,000, recorded in the first
quarter.





10.    FAIR
VALUE DISCLOSURES





Currently,
the Company uses interest rate swaps to manage its interest rate
risk.  The valuation of these instruments is determined using widely
accepted valuation techniques, including discounted cash flow analysis on the
expected cash flows of each derivative.  This analysis reflects the
contractual terms of the derivatives, including the period to maturity, and uses
observable market-based inputs.  This valuation relies on Level 2
inputs as described in ASC 820.  Level 2 inputs are inputs other than
quoted prices that are observable for the asset or liability, either directly or
indirectly, including quoted prices for similar assets and liabilities in active
markets, as well as other observable inputs for the asset or liability, such as
interest rates, foreign exchange rates, and yield curves that are observable at
commonly quoted intervals.




At
September 30, 2009, MPS had two long-term debt issues outstanding with variable
interest rates.  Pursuant to its rate order in MPUC Docket 2003-85,
MPS agreed to fix its interest rates and the MPUC allowed recovery of the fixed
interest costs in rates.  On September 9, 2003, MPS executed swap
agreements for the variable-rate issues then outstanding, locking in the rates
over the remaining terms of the issues.  For the two series of
tax-exempt bonds issued by the MPUFB, the effective fixed interest rates for the
1996 Series due 2021 and the 2000 Series due 2025 are 4.42% and 4.53%,
respectively.  Gains or losses in the fair market value of the
interest rate swaps do not impact the Company’s net income or revenues, unless
MPS’s shareholders’ common equity falls below the minimum allowable 48% of
common equity rate, the floor established by the MPUC Order in Docket
No. 2002-676 authorizing the formation of the holding company,
MAM.




As of
September 30, 2009, the fair value of the interest rate hedges was a liability
of $3.8 million, compared to a liability of $4.8 million at December 31, 2008,
an unrealized gain in fair value of $1.0 million.  This unrealized
gain, less the deferred income tax provision of $418,000 from December 31, 2008
to September 30, 2009, has been reported as “Other Comprehensive Income” on the
Consolidated Statement of Shareholders’ Equity.  The difference
between the fixed rates and the underlying variable rates on the issues was
charged to interest expense, along with the interest expense incurred on the
corresponding debt issues.


17





The
following table presents the notional amounts and estimated fair values of the
Company’s interest rate derivative contracts outstanding at September 30,
2009 and December 31, 2008.  The Company utilizes dealer
quotations to value its interest rate derivative contracts designated as
hedges.





September
      30, 2009
                December
      31, 2008Consolidated
      Balance Sheet Location
                Notional
      Amount
                Estimated
      Fair Value
                Notional
      Amount
                Estimated
      Fair ValueInterest
      rate derivatives designated as cash flow hedgesInterest
      rate swaps on 1996 Series Notes
                Other
      Liabilities
                13,600
                2,100
                13,600
                2,678Interest
      rate swaps on 2000 Series Notes
                Other
      Liabilities
                9,000
                1,656
                9,000
                2,121





The
year-to-date weighted-average rates paid and received for interest rate swaps
outstanding at September 30, 2009, were as follows:


Weighted-AverageInterest
      Received (Variable Rate on Debt)
                    
                    
                    Interest
      Paid (Fixed Rate on Swaps)Interest
      rate swaps:Interest
      rate swaps on 1996 Series Notes
                    
                    
                    0.67
                    %
                    
                    
                    4.42
                    %Interest
      rate swaps on 2000 Series Notes
                    
                    
                    0.73
                    %
                    
                    
                    4.53
                    %


11.    DISCONTINUED
OPERATIONS




MAM
divested substantially all of its unregulated engineering operations during
2007.  TMG is presented as discontinued operations in these financials
statements through its dissolution in the fourth quarter of 2008.  The
net loss for TMG is a result of the operations of Mecel Properties, and is
composed of the following:


(In
      thousands of dollars)
                  
                  Quarter
      Ended
                  
                  
                  Nine
      Months EndedSeptember
      30, 2008Income
      (Loss) From Operations:Loss
      on Sale of Discontinued Operations
                  
                  $
                  -
                  
                  
                  $
                  (1
                  )Operating
      Revenue
                  
                  
                  -
                  
                  
                  
                  26Expenses
                  
                  
                  3
                  
                  
                  
                  (58
                  )Income
      (Loss) from Operations
                  
                  
                  3
                  
                  
                  
                  (33
                  )(Provision
      for) Benefit of Income Taxes
                  
                  
                  (2
                  )
                  
                  
                  13Net
      Income (Loss) — Unregulated Engineering Services
                  
                  $
                  1
                  
                  
                  $
                  (20
                  )


TMG had
no assets or liabilities remaining at September 30, 2009, or December 31,
2008.





12.  SUBSEQUENT
EVENT – LABOR AGREEMENT




Approximately
36% of the MPS labor force are members of the Local 1837 Unit 11 of the
International Brotherhood of Electrical Workers (“IBEW”) and are covered under a
collective bargaining agreement.  On October 1, 2009, the IBEW 1837
Unit 11 Union approved a four-year collective bargaining agreement for the term
of October 1, 2009, through September 30, 2013.  The key provisions of
this contract include wage increases of 3.25% for each year, transition of union
employees from the current MPS health insurance plan to the New England
Electrical Workers Benefit Fund, increases to the employee and retiree
contributions for health insurance and an increase in the 401(k) match from 4%
to 6% effective January 1, 2010, for bargaining unit employees hired on or after
January 1, 2006.


18


PART
1. FINANCIAL INFORMATION





Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations





Forward-Looking
Statements





This
filing contains certain "forward-looking statements" as defined in the Private
Securities Litigation Reform Act of 1995, related to the expected future
performance of our plans and objectives, such as forecasts and projections of
expected future performance or statements of Management’s plans and
objectives.  These forward-looking statements may be contained in
filings with the SEC and in press releases and oral statements.  We
use words such as “anticipate,” “estimate,” “predict,” “expect,” “project,”
“intend,” “plan,” “believe,” and other words and terms of similar meaning in
connection with any discussion of future operating or financial
performance.  These statements are based on the current expectations,
estimates or projections of Management and are not guarantees of future
performance.  Some or all of these forward-looking statements may not
turn out to be what the Company expected.  Actual results will differ,
and some of the differences may be material.





Factors
that could cause actual results to differ materially from our projections
include, among other matters, legislation and regulation, construction of new
transmission facilities, financing risk for new transmission facilities, risk
from joint development agreement, contract risks at MAM USG, attraction and
retention of qualified employees, economy of the region and general economic
conditions, competitive conditions, holding company structure, interest rate and
debt covenant risk, pension plan investments, information technology,
environmental risks, aging infrastructure and reliability, weather, vandalism,
terrorism and other illegal acts, alternative generation options, and
professional liability.  Therefore, no assurances can be given that
the outcomes stated in such forward-looking statements and estimates will be
achieved.





Accounting
Policies





Critical
accounting policies are disclosed in the Company’s 2008 Annual Report on Form
10-K.





Results of
Operations and Executive Overview




Net (Loss) Income and (Loss) Earnings Per
Share


Quarters
      Ended September 30,
                        
                        
                        Nine
      Months Ended September 30,(In
      thousands except per share amounts)
                        
                        2009
                        
                        
                        2008
                        
                        
                        2009
                        
                        
                        2008(Loss)
      Income from Continuing OperationsRegulated
      Electric Utility
                        
                        $
                        (734
                        )
                        
                        $
                        812
                        
                        
                        $
                        426
                        
                        
                        $
                        3,012Unregulated
      Utility Services
                        
                        
                        (73
                        )
                        
                        
                        (138
                        )
                        
                        
                        (137
                        )
                        
                        
                        (233
                        )Other*
                        
                        
                        (70
                        )
                        
                        
                        (546
                        )
                        
                        
                        (171
                        )
                        
                        
                        (732
                        )(Loss)
      Income from Continuing Operations
                        
                        
                        (877
                        )
                        
                        
                        128
                        
                        
                        
                        118
                        
                        
                        
                        2,047Income
      (Loss) from Discontinued OperationsUnregulated
      Engineering Services
                        
                        
                        -
                        
                        
                        
                        1
                        
                        
                        
                        -
                        
                        
                        
                        (20
                        )Net
      (Loss) Income
                        
                        $
                        (877
                        )
                        
                        $
                        129
                        
                        
                        $
                        118
                        
                        
                        $
                        2,027Basic
      (Loss) Earnings Per Share
                        
                        $
                        (0.52
                        )
                        
                        $
                        0.08
                        
                        
                        $
                        0.07
                        
                        
                        $
                        1.21


*The
“Other” line includes activities of the holding company (including corporate
costs directly associated with the unregulated subsidiaries and costs not
allocated to the regulated utility or unregulated utility services) and
inter-company eliminations.





Net
income above is allocated based upon the segments as presented in Note 3,
“Segment Information,” of the Consolidated Financial Statements.  The
results by segment are explained more fully in the following
sections.





The
consolidated net income of the Company for the third quarter of 2009 was down
$1.0 million compared to the third quarter of 2008 and down $1.9 million for the
nine months ended September 30, 2009 over the previous year.  There
are three major factors that led to these results:





1.
            Revenues
      for MPS were down substantially, falling by $532,000 or 6.8% over the same
      quarter last year.  Year to date, MPS revenues decreased $1.8
      million or 6.7%.  While revenues for all commercial customer
      classes are down year to date, the most significant decrease was from the
      large commercial customer class where the wood and lumber industry
      continues to struggle within our service territory.  Revenue
      from our large commercial customers was down by approximately 32.3% for
      the first three quarters of the year or $1.0 million.  These
      trends started in the middle of 2008 and Management cannot say for certain
      if, or when, these trends may reverse.  Revenues increased for
      residential customers, up 1.8%, which represents an increase of 2,413 MWH
      in volume, and $12,000 in revenues.






19





2.
            MAM
      USG, the unregulated contracting subsidiary, had no material projects
      during the first three quarters of 2009, greatly reducing its revenues
      from 2008.  Revenue fell by $4.4 million for the third quarter
      of 2009 and by $7.3 million for the first nine months of the year compared
      to the three quarters of 2008 when there were two large projects in
      process.  The resulting impact to net income was a decrease in
      the loss of $138,000 for the third quarter of 2008 to a loss of $73,000
      for the third quarter of 2009.  The year-to-date losses for 2008
      were $233,000 through the third quarter of 2008, compared to $137,000
      through the third quarter of 2009.  However, much of this
      reduction in loss is because MPS was charged an additional $133,000 of
      common costs on a year to date basis, costs covered by MAM USG revenue in
      2008.





3.
            During
      2008, MPS deferred the costs of our MPC transmission line project in the
      amounts of approximately $247,000 for the third quarter and $517,000 for
      the first nine months.  MPS stopped deferring those costs in
      early 2009 and is now expensing them.  The total deferred costs
      of the MPC project as of September 30, 2009, are approximately $872,000
      and are currently recorded on the balance sheet as “Miscellaneous
      Assets.”  MPS will seek to recover these costs through rates
      either from our customers when the MPC project is completed or through
      abandoned plant treatment.  As a result of MAM USG not covering
      substantial amounts of labor, benefits and common corporate costs through
      its projects, and because we are no longer capitalizing the expenses of
      transmission line development, MPS regulated operating and maintenance
      expenses increased sharply by $1.4 million in the third quarter of 2009
      over 2008 and by $2.3 million for the nine months ended 2009 over
      2008.





The
Company is addressing these issues through the following
initiatives:





·
            Some
      portion of the downturn in MPS revenue will be collected as additional
      stranded costs.  Based upon the Commission’s Order in the
      previous stranded cost filing, Docket No. 2006-506, for the rate effective
      period ending December 31, 2009, and our recent stranded cost filing in
      Docket No. 2009-323, the Company anticipates a “true-up” in revenues
      occurring in December 2009, which will recognize previously uncollected
      revenue among the stranded cost rate components during the
      year.  Management estimates that this revenue adjustment for
      year to date revenue shortfalls will be approximately $1.0
      million.  This stranded cost revenue shortfall will be
      capitalized as a regulatory asset within “Deferred Regulatory Costs” on
      the Balance Sheet, and will be collected over time from
      ratepayers.





·
            MAM
      USG has secured a limited notice to proceed on designing the collector
      system for another New England wind farm, and it has submitted bids on
      other wind projects with developer time horizons within the next one to
      three years.  MAM USG is also pursuing other commercial and
      industrial projects, as well as looking at additional products and
      services it may be able to provide.





·
            The
      MPC team continues to pursue the interconnection of MPS to the ISO-NE
      regional grid and other alternatives.  During 2009, MPS has
      continued meetings with various stakeholders to discuss the MPC project
      scope and requirements, and identify means to reduce the impact of the MPC
      project on northern Maine
ratepayers.





·
            Management
      is cognizant of our need to control increasing costs and is considering
      certain measures to help offset these negative
  trends.





·
            Management
      is also considering the need for MPS to seek rate relief for our
      increasing costs, which are currently not fully covered in our
      rates.  .





Regulated
Operations





Regulated
operations include MPS and Me&NB, the Company’s regulated subsidiary and its
inactive unregulated Canadian subsidiary:





Quarters
      Ended
                  
                  
                  Nine
      Months EndedSeptember
      30,
                  
                  
                  September
      30,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Net
      (Loss) Income — Regulated Electric Utility (In thousands)
                  
                  $
                  (734
                  )
                  
                  $
                  812
                  
                  
                  $
                  426
                  
                  
                  $
                  3,012(Loss)
      Earnings Per Share from Regulated Electric Utilities
                  
                  $
                  (0.44
                  )
                  
                  $
                  0.48
                  
                  
                  $
                  0.25
                  
                  
                  $
                  1.80


20


Regulated Operating Revenues





Consolidated
revenues (in thousands of dollars) and Megawatt Hours (“MWH”) for the quarters
and nine months ended September 30, 2009, and 2008, are as follows:





Quarters
      Ended September 30,
                                                                    
                                                                    
                                                                    Nine
      Months Ended September 30,2009
                                                                    
                                                                    
                                                                    2008
                                                                    
                                                                    
                                                                    2009
                                                                    
                                                                    
                                                                    2008Dollars
                                                                    
                                                                    
                                                                    MWH
                                                                    
                                                                    
                                                                    Dollars
                                                                    
                                                                    
                                                                    MWH
                                                                    
                                                                    
                                                                    Dollars
                                                                    
                                                                    
                                                                    MWH
                                                                    
                                                                    
                                                                    Dollars
                                                                    
                                                                    
                                                                    MWHResidential
                                                                    
                                                                    $
                                                                    3,501
                                                                    
                                                                    
                                                                    
                                                                    41,838
                                                                    
                                                                    
                                                                    $
                                                                    3,481
                                                                    
                                                                    
                                                                    
                                                                    40,963
                                                                    
                                                                    
                                                                    $
                                                                    11,399
                                                                    
                                                                    
                                                                    
                                                                    136,010
                                                                    
                                                                    
                                                                    $
                                                                    11,387
                                                                    
                                                                    
                                                                    
                                                                    133,597Large
      Commercial
                                                                    
                                                                    
                                                                    664
                                                                    
                                                                    
                                                                    
                                                                    29,857
                                                                    
                                                                    
                                                                    
                                                                    915
                                                                    
                                                                    
                                                                    
                                                                    37,319
                                                                    
                                                                    
                                                                    
                                                                    2,174
                                                                    
                                                                    
                                                                    
                                                                    92,016
                                                                    
                                                                    
                                                                    
                                                                    3,211
                                                                    
                                                                    
                                                                    
                                                                    112,722Medium
      Commercial
                                                                    
                                                                    
                                                                    1,042
                                                                    
                                                                    
                                                                    
                                                                    25,627
                                                                    
                                                                    
                                                                    
                                                                    1,101
                                                                    
                                                                    
                                                                    
                                                                    27,274
                                                                    
                                                                    
                                                                    
                                                                    3,748
                                                                    
                                                                    
                                                                    
                                                                    73,796
                                                                    
                                                                    
                                                                    
                                                                    4,017
                                                                    
                                                                    
                                                                    
                                                                    77,965Small
      Commercial
                                                                    
                                                                    
                                                                    1,292
                                                                    
                                                                    
                                                                    
                                                                    20,069
                                                                    
                                                                    
                                                                    
                                                                    1,373
                                                                    
                                                                    
                                                                    
                                                                    21,277
                                                                    
                                                                    
                                                                    
                                                                    5,099
                                                                    
                                                                    
                                                                    
                                                                    66,535
                                                                    
                                                                    
                                                                    
                                                                    5,255
                                                                    
                                                                    
                                                                    
                                                                    68,615Other
      Retail
                                                                    
                                                                    
                                                                    228
                                                                    
                                                                    
                                                                    
                                                                    855
                                                                    
                                                                    
                                                                    
                                                                    227
                                                                    
                                                                    
                                                                    
                                                                    842
                                                                    
                                                                    
                                                                    
                                                                    683
                                                                    
                                                                    
                                                                    
                                                                    2,561
                                                                    
                                                                    
                                                                    
                                                                    690
                                                                    
                                                                    
                                                                    
                                                                    2,541Total
      Regulated Retail
                                                                    
                                                                    
                                                                    6,727
                                                                    
                                                                    
                                                                    
                                                                    118,246
                                                                    
                                                                    
                                                                    
                                                                    7,097
                                                                    
                                                                    
                                                                    
                                                                    127,675
                                                                    
                                                                    
                                                                    
                                                                    23,103
                                                                    
                                                                    
                                                                    
                                                                    370,918
                                                                    
                                                                    
                                                                    
                                                                    24,560
                                                                    
                                                                    
                                                                    
                                                                    395,440Other
      Regulated Operating Revenue
                                                                    
                                                                    
                                                                    566
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    743
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    1,670
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    1,986Total
      Regulated Revenue
                                                                    
                                                                    $
                                                                    7,293
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    $
                                                                    7,840
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    $
                                                                    24,773
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    
                                                                    $
                                                                    26,546


Residential
customer sales volume increased 875 MWH or 2.1% from the third quarter of 2008
to the third quarter of 2009, resulting in $20,000 more revenue.





Large
commercial customers continued to decline, down 7,462 MWH or 20% in volume, and
$251,000 in revenue dollars.  Consistent with the trend in the past
several quarters, the wood- and lumber-related industries are continuing to
struggle, scaling back or closing operations.





Small and
medium service customer volumes are down approximately 6% each for the quarter
compared to prior year, a total of 2,855 MWH and $140,000.





Other
retail revenue for 2009 is consistent with the third quarter and year to date
2008.





Other
regulated operating revenue decreased $177,000.  Wheeling revenue
decreased $96,000 in the third quarter of 2009 compared to the third quarter of
2008.  The 2009 transmission rates went into effect June 1, 2009, for
wholesale customers, and July 1, 2009, for retail customers.  As
described more fully in the Part II, Item 1, “Legal Proceedings,” these rates
decreased 14% for wholesale customers and 20% for retail
customers.  Transmission rates are based on the Company’s revenue
requirement (transmission expenses plus the allowed rate of return on assets)
less wheeling revenue earned.  As the 2008 wheeling revenue earned
exceeded the revenue requirement, the revenue requirement in the 2009 OATT was
reduced to return this over-collection to the transmission customers, resulting
in this decrease in revenue.  Unbilled revenue also decreased $40,000,
with the remaining $41,000 decrease in other revenue, mostly due to a decrease
in contract work.





Similar
to the quarter, residential customer sales volume is up 2,413 MWH or 1.8% for
the year to date, or about $12,000.





Large
commercial customer sales volume is down 20,706 MWH or 18.4% through the first
nine months of 2009, compared to 2008, or $1.0 million.





Much of
the large commercial customer rate is stranded costs.  Under the
stranded cost filing in MPUC Docket No. 2006-506, MPS is required to reconcile
its expected and actual sales volume and record revenue and a regulatory asset
to ensure the full revenue requirement is met during the rate effective period
of 2007 through 2009.  This adjustment, in accordance with the Order
in this Docket, is recorded annually in December.  Assuming current
sales volume trends continue through the end of the year, MPS will recognize
$1.0 million of additional revenue in December for this
reconciliation.





Medium
and small commercial customers are down 5.3% and 3.0% in volume, respectively, a
total of 6,249 MWH and $425,000.





Other
regulated operating revenue is down $316,000 from the first three quarters of
2008 to the first three quarters of 2009.  Lower wheeling revenue
accounts for $217,000 of the decrease, and less contact work decreased revenue
$62,000.  Various other miscellaneous revenues decreased $37,000, the
remaining difference.





For more
information on the status of the most recent rate filings, see Part II, Item 1,
“Legal Proceedings.”





21





MPS
revenue is seasonal, with higher rates in place during the winter
months.  The following table presents regulated revenues for the
twelve months ended September 30, 2009 and 2008:





Twelve
      Months Ended September 30,2009
                    
                    
                    2008Total
      Regulated Revenues
                    
                    
                    35,278
                    
                    
                    
                    37,115


Revenue
is down approximately $1.8 million or 4.9% from the twelve months periods ended
September 30, 2008 to 2009.  This decrease is consistent with the 6.7%
decrease in the year-to-date revenues, and is also primarily due to the
reduction in large commercial customer volume.





Regulated
Utility Expenses





For the
quarters and nine months ended September 30, 2009, and 2008, regulated operation
and maintenance expenses are as follows:





Quarters
      Ended September 30,
                  
                  
                  Nine
      Months Ended September 30,(In
      thousands of dollars)
                  
                  2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Regulated
      Operation and MaintenanceLabor
                  
                  $
                  1,429
                  
                  
                  $
                  1,191
                  
                  
                  $
                  3,953
                  
                  
                  $
                  3,562Benefits
                  
                  
                  518
                  
                  
                  
                  322
                  
                  
                  
                  1,362
                  
                  
                  
                  919Outside
      Services
                  
                  
                  641
                  
                  
                  
                  378
                  
                  
                  
                  1,334
                  
                  
                  
                  885Holding
      Company Management Costs
                  
                  
                  556
                  
                  
                  
                  53
                  
                  
                  
                  1,244
                  
                  
                  
                  1,024Insurance
                  
                  
                  160
                  
                  
                  
                  147
                  
                  
                  
                  433
                  
                  
                  
                  405Regulatory
      Expenses
                  
                  
                  283
                  
                  
                  
                  216
                  
                  
                  
                  867
                  
                  
                  
                  829Transportation
                  
                  
                  137
                  
                  
                  
                  121
                  
                  
                  
                  513
                  
                  
                  
                  572Maintenance
                  
                  
                  127
                  
                  
                  
                  121
                  
                  
                  
                  436
                  
                  
                  
                  430Rent
                  
                  
                  64
                  
                  
                  
                  12
                  
                  
                  
                  554
                  
                  
                  
                  52Other
                  
                  
                  456
                  
                  
                  
                  388
                  
                  
                  
                  1,229
                  
                  
                  
                  913Total
      Regulated Operation and Maintenance
                  
                  $
                  4,371
                  
                  
                  $
                  2,949
                  
                  
                  $
                  11,925
                  
                  
                  $
                  9,591


Deferral
of costs for MPC and increased common cost allocations to MAM USG, due to its
two large projects, resulted in lower expenses at MPS in 2008.  The
cessation of deferring MPC costs and the lack of major projects at MAM USG in
2009 has had the opposite effect, significantly increasing the common and direct
charges to MPS.  Specifically, costs increased in the following
categories:





§
            Labor
      and benefits are up $434,000 for the third quarter of 2009, compared to
      the third quarter of 2008.  Labor charged to MAM USG and
      deferred on the MPC project in 2008 are the primary reasons for the
      increase, while normal salary increases and higher pension expense, due to
      lower asset values at December 31, 2008, also increased
    costs.





§
            Outside
      services expense increased $263,000, due to more vegetation management
      work in response to recommendations from a study performed during
      2008.





§
            Holding
      company management costs are up $503,000, due to a combination of an
      increased cost pool, as well as a shift in the allocation
      percentages.  The Company’s cost allocation method is based on
      certain operating expenses.  As MAM USG expenses have decreased
      with fewer projects in 2009, the percentage allocated to MPS has increased
      from 77.6% in the first nine months of 2008, to 95.5% for the first nine
      months of 2009.





§
            Regulatory
      expenses increased $67,000, due to higher
  assessments.





§
            Rent
      increased $52,000 due to the treatment of capital leases under the 2008
      OATT and FERC guidance.





The
remaining increase is due to other smaller differences.





Expenses
are also up $2.3 million or 24% for the first nine months of 2009, compared to
the first nine months of 2008.  The reasons for the increases are
similar to the increases for the quarter, including:





§
            Lower
      charges to MAM USG and MPC, and higher pension costs resulted in $834,000
      of additional labor and benefits
expense.






22





§
            Outside
      services expense is up $449,000, due to outsourced vegetation management
      work.





§
            Holding
      company management costs are up $220,000 year to date, with the shift in
      allocation percentages and the higher cost pool.  In addition,
      MAM has been working with its financial advisor to assess its strategic
      alternatives.  This increased common costs approximately
      $115,000 through the first nine months of
2009.





§
            Capital
      leases also increased rent expense $502,000 for the first three
      quarters.





§
            Slower
      collections and a customer bankruptcy increased bad debt expense $126,000
      from the prior year.





Other
smaller increases combined led to the remaining increase in
expense.





Stranded
cost expenses of the regulated utility are as follows:





Quarters
      Ended September 30,
                  
                  
                  Nine
      Months Ended September 30,(In
      thousands of dollars)
                  
                  2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Stranded
      CostsMaine
      Yankee
                  
                  $
                  70
                  
                  
                  $
                  588
                  
                  
                  $
                  209
                  
                  
                  $
                  1,763Seabrook
                  
                  
                  384
                  
                  
                  
                  384
                  
                  
                  
                  1,153
                  
                  
                  
                  1,153Deferred
      Fuel
                  
                  
                  2,115
                  
                  
                  
                  1,560
                  
                  
                  
                  6,345
                  
                  
                  
                  4,679Cost
      Incentive Refund
                  
                  
                  62
                  
                  
                  
                  62
                  
                  
                  
                  187
                  
                  
                  
                  187Cancelled
      Transmission Plant
                  
                  
                  -
                  
                  
                  
                  64
                  
                  
                  
                  -
                  
                  
                  
                  192Special
      Discounts
                  
                  
                  69
                  
                  
                  
                  70
                  
                  
                  
                  207
                  
                  
                  
                  210Total
      Stranded Costs
                  
                  $
                  2,700
                  
                  
                  $
                  2,728
                  
                  
                  $
                  8,101
                  
                  
                  $
                  8,184


The
amortization expense above is in accordance with MPUC Docket No.
2006-506.  Amortization expense for the fourth quarter of 2009 is
expected to be similar to the first three quarters.  The reduction in
amortization expense for Maine Yankee is a result of Maine Yankee’s decreasing
costs.  Amortization expense is “levelized” through the deferred fuel
amortization, resulting in the year-over-year increase presented
above.





On
September 24, 2009, MPS filed its stranded cost revenue requirement and rates
for the two-year rate effective period beginning January 1, 2010 with the Maine
Public Utilities Commission under MPUC Docket No. 2009-323.  MPS is
not proposing any changes to rates; however, with the decrease MPS has
experienced in volume since the previous stranded cost filing, MPUC Docket No.
2006-506, the revenue requirement decreased from $11.9 million for the 2007
through 2009 rate effective period to $11.1 million in 2010, and $10.7 million
in 2011, with a corresponding reduction in stranded cost amortization
expense.  The final outcome of this filing cannot be predicted, and
the revenue impact could be materially higher or lower.  Refer to Part
II., Item 1, “Legal Proceedings” for more information.





Unregulated
Utility Services





Unregulated
Utility Services is comprised of the operations of MAM USG.


Quarters
      Ended September 30,
                                  
                                  
                                  Nine
      Months Ended September 30,2009
                                  
                                  
                                  2008
                                  
                                  
                                  2009
                                  
                                  
                                  2008Revenue
                                  
                                  $
                                  29
                                  
                                  
                                  $
                                  4,463
                                  
                                  
                                  $
                                  577
                                  
                                  
                                  $
                                  7,837Direct
      Expenses
                                  
                                  
                                  17
                                  
                                  
                                  
                                  4,530
                                  
                                  
                                  
                                  371
                                  
                                  
                                  
                                  7,740Gross
      Profit
                                  
                                  
                                  12
                                  
                                  
                                  
                                  (67
                                  )
                                  
                                  
                                  206
                                  
                                  
                                  
                                  97Other
      Expenses
                                  
                                  
                                  (100
                                  )
                                  
                                  
                                  (99
                                  )
                                  
                                  
                                  (337
                                  )
                                  
                                  
                                  (210
                                  )Common
      Corporate Costs and Facilities Charges
                                  
                                  
                                  (33
                                  )
                                  
                                  
                                  (61
                                  )
                                  
                                  
                                  (97
                                  )
                                  
                                  
                                  (270
                                  )Income
      Tax Benefit
                                  
                                  
                                  48
                                  
                                  
                                  
                                  89
                                  
                                  
                                  
                                  91
                                  
                                  
                                  
                                  150Net
      Loss — Unregulated Utility Services
                                  
                                  $
                                  (73
                                  )
                                  
                                  $
                                  (138
                                  )
                                  
                                  $
                                  (137
                                  )
                                  
                                  $
                                  (233
                                  )Loss
      Per Share from Unregulated Utility Services
                                  
                                  $
                                  (0.04
                                  )
                                  
                                  $
                                  (0.08
                                  )
                                  
                                  $
                                  (0.08
                                  )
                                  
                                  $
                                  (0.14
                                  )




MAM USG
reduced its loss from $138,000 in the third quarter of 2008 to $73,000 in the
third quarter of 2009.  In 2008, MAM USG was performing work on two
significant wind farm projects, as well as other smaller
projects.  There have been no major projects in
2009.  However, MAM USG has secured a limited notice to proceed on
designing the collector system for another New England wind farm, and it has
submitted bids on other wind projects with developer time horizons within the
next one to three years.  MAM USG is also pursuing other commercial
and industrial projects, as well as looking at additional products and services
it may be able to provide.






23





Other
Continuing Operations


Quarters
      Ended
                  
                  
                  Nine
      Months EndedSeptember
      30,
                  
                  
                  September
      30,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Net
      Loss — Other Continuing Operations (in thousands)
                  
                  $
                  (70
                  )
                  
                  $
                  (546
                  )
                  
                  $
                  (171
                  )
                  
                  $
                  (732
                  )Loss
      Per Share from Other Continuing Operations
                  
                  $
                  (0.04
                  )
                  
                  $
                  (0.33
                  )
                  
                  $
                  (0.10
                  )
                  
                  $
                  (0.44
                  )


Other
continuing operations are the common costs of MAM that cannot be allocated to
MPS or MAM USG and intercompany eliminations.  This segment lost
$70,000 in the third quarter of 2009, compared to $546,000 in the third quarter
of 2008, with a similar reduction in the loss for the nine months ended
September 30, 2009 and 2008.   The majority of the 2008 loss was
attributable to a reduction in the estimated income tax benefit as a result of
the filing of the 2007 income tax return.





Interest
Expense





Interest
expense decreased $94,000 from $543,000 in the third quarter of 2008 to $449,000
in the third quarter of 2009, due to a combination of the repayment of debt and
lower interest rates.  The offsetting stranded cost carrying charges
also decreased $96,000, due to the amortization of the regulatory assets,
primarily deferred fuel, resulting in a net $2,000 increase in interest expense
for the period.





Through
nine months, 2009 interest expense is $1.4 million or $402,000 lower than the
$1.8 million incurred in 2008.  MPS and MAM have repaid approximately
$3.2 million of debt in the first nine months of 2009, and the lower interest
rates also reduced the year-to-date interest.  Like the quarter,
stranded cost carrying charges are down $265,000 through nine months of 2009,
compared to 2008, because of the decreasing regulatory asset
balances.





Income
Tax Expense / Benefit




Income
taxes reduced the quarterly net loss by $558,000 in 2009, compared to income tax
expense of $344,000 in 2008.  Through the first three quarters of
2009, the Company incurred $80,000 of income tax expense, compared to $1.7
million in 2008.  These changes are primarily a result of the lower
income in 2009.





Taxes
Other Than Income





Taxes
other than income consist of property, payroll and other miscellaneous
taxes.  Increases in payroll taxes, due to normal pay increases, were
the main driver of the $11,000 or 2.5% increase in taxes other than income for
the quarter, and $28,000 or 2.1% increase year to date.





Off-Balance
Sheet Arrangements and Financial Information System Hosting
Agreement





Please
refer to Note 8 of the financial statements.





Liquidity
and Capital Resources





As we
have throughout the stranded cost free cash flow period, MAM has continued in
2009 to generate strong operating cash flows.  As noted in Part II,
Item 1, “Legal Proceedings,” MPS has filed its stranded cost revenue requirement
and rates for the two-year rate effective period beginning January 1, 2010,
under MPUC Docket No. 2009-323.  In this filing, the recovery of
deferred fuel was extended, and the revenue requirement lowered in order to
maintain current rates.  Assuming recovery is allowed as requested,
the timing of the stranded cost free cash flows would be:





2010
                  
                  
                  2011
                  
                  
                  2012
                  
                  
                  2013
                  
                  
                  2014
                  
                  
                  2015
                  
                  
                  2016$
                  5,976
                  
                  
                  $
                  7,113
                  
                  
                  $
                  6,020
                  
                  
                  $
                  863
                  
                  
                  $
                  1,035
                  
                  
                  $
                  958
                  
                  
                  $
                  586


We cannot
predict the outcome at this time; actual cash flows could be materially
different, depending on the outcome of this proceeding.





The
Company’s cash and cash equivalents as of September 30, 2009, were $1.1 million,
down $729,000 from December 31, 2008.  The “Statements of Consolidated
Cash Flows” of the Company’s Consolidated Financial Statements, as presented in
Part I, Item 1 of this Form 10-Q, reflect the Company’s sources and uses of
capital.






24





Cash flow
provided by operating activities for the first nine months of 2009 was $8.7
million, compared to $9.3 million in the first nine months of
2008.  The amortization of deferred regulatory and debt issuance costs
of $1.9 million, and the $5.3 million reduction in accounts receivable,
primarily due to lower receivables at MAM USG, were the factors causing the
largest increases in operating cash flows in 2009 over 2008.  The
factors causing the largest decreases in operating cash flows over that period
were the decrease in net income of $1.9 million, deferred income taxes becoming
current taxes as the stranded costs are amortized ($2.0 million reduction
year-over-year) and lower accounts payable, corresponding to the lower
receivables at MAM USG ($3.0 million reduction from 2008 to 2009).





Consistent
with the normal seasonal operations of MPS, the Company increased its short-term
borrowings from $2.8 million at June 30, 2009, to $4.0 million at September 30,
2009.  Similar to prior years, this is expected to reverse as cash
flows improve with higher rates in the fourth quarter.  Cash flow used
for financing included the repayment of short- and long-term debt totaling $3.1
million in the first three quarters of 2009, as well as payments of $142,000 on
the capital lease obligations.  Cash flow used for financing
activities for the first nine months of 2008 totaled $5.5 million from
reductions in debt and an additional $171,000 for payments on capital
leases.





Cash flow
used for investing activities for the first nine months of 2009 was $6.2
million, consisting of $5.0 million for investments in fixed assets, $252,000
for payments of dividends, and $914,000, which was transferred to our first
mortgage bond trustee and recorded as restricted cash on our balance
sheet.  This restricted cash is for a partial liquidation of our
inactive subsidiary, Me&NB, as we look to employ our capital in our
continuing businesses.  We received this restricted cash back from our
trustee on October 6, 2009.  For the first nine months of 2008, cash
flow used for investing activity totaled $2.8 million.  The $5.7
million investment in fixed assets was offset by $2.4 million of incoming cash
from the transfer of restricted cash from our FAME Note trustees set aside for
repayment of debt which was retired in 2008.  An additional offset in
2008 was $573,000 of proceeds from the sale of some discontinued real-estate
assets.




Regulatory
Proceedings





For
regulatory proceedings, see Part II, Item 1, “Legal Proceedings,” which is
incorporated in this section by this reference.





Item
4T. Controls and Procedures





The
principal executive officer and principal financial officer evaluated the
effectiveness of the Company's disclosure controls and procedures as of the end
of the period covered by this report.  "Disclosure controls and
procedures" are controls and other procedures of a company that are designed to
ensure that information required to be disclosed by the company in the reports
that it files or submits under the Securities Exchange Act of 1934, within the
time periods specified in the SEC rules and forms, is recorded, processed,
summarized and reported, and is accumulated and communicated to the Company's
Management, including its principal executive officer and principal financial
officer, as appropriate to allow timely decisions regarding required
disclosure.  Based on their evaluation, the Company’s principal
executive officer and principal financial officer concluded that the Company's
disclosure controls and procedures are effective.





We
maintain a system of internal control over financial reporting designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with accounting principles generally accepted in the United States of America.
There was no change in our internal control over financial reporting that
occurred during the most recent fiscal quarter that materially affected, or is
reasonably likely to materially affect, our internal control over
financial reporting.





25


PART
II. OTHER INFORMATION





Item
1. Legal Proceedings





Request
for Approval of Maine Public Service Company’s Stranded Cost Revenue Requirement
and Rates for the Rate Effective Period Beginning January 1, 2010




On
September 24, 2009, MPS filed its stranded cost revenue requirement and rates
for the two-year rate effective period beginning January 1, 2010 with the Maine
Public Utilities Commission.  Subsequently, the Hearing Examiner
issued a Procedural Order in MPUC Docket No. 2009-323 providing interested
parties the opportunity to intervene not later than November 13, 2009. An
initial case conference has been scheduled for November 19, 2009.  The
Company’s filing includes updated stranded cost schedules as well as a sales
forecast for the rate effective period.  MPS is not proposing any
change to stranded cost rates.   The Company cannot predict the
final outcome of the case at this time.




Federal
Energy Regulatory Commission 2009 Open Access Transmission Tariff Formula Rate
Filing




On June
15, 2009, pursuant to Section 205 of the Federal Power Act, 16 U.S.C. Section
824d, and Title 18 CFR Sections 35.11 and 35.13 of the regulations of
the FERC, MPS submitted for filing its proposed revisions to its FERC Open
Access Transmission Tariff (“OATT”) in Docket No. ER 05 to modify its
transmission rate formula.  The proposed changes, if approved, will
not have a material impact on the revenue requirement.




On June
15, 2009, MPS filed its updated rates under the 2009 OATT formula for both
wholesale and retail customers.  The revenue decreases were
approximately $81,000 or 14% for wholesale customers, effective June 1, 2009,
and $623,000 or 20% for retail customers, effective July 1,
2009.  Under the OATT formula, the cost of transmission service and
the return on transmission assets is reduced by the wheeling revenue charged
during the year to determine the revenue requirement.  Due to higher
wheeling revenue from generators exporting electricity off the MPS system, MPS
had a higher wheeling revenue credit in the formula for 2008 than prior year,
resulting in the lower rates.




The
proceeding and potential settlement negotiations for both changes to the formula
and the 2009 rates are under way; the final change in rates could differ from
the initial filing.  MPS cannot determine the ultimate outcome at this
time.




Federal
Energy Regulatory Commission 2008 Open Access Transmission Tariff Formula Rate
Filing





On June
16, 2008, MPS filed its updated rates under the 2008 Open Access Transmission
Tariff formula pursuant to Docket ER00-1053 for both wholesale and retail
customers.  The revenue decreases were approximately $220,000 or 27%
for wholesale customers, effective June 1, 2008, and $631,000 or 17% for retail
customers, effective July 1, 2008.  The decrease was primarily
associated with wheeling revenue collected from generators exporting electricity
off the MPS system during 2007.  The interested parties in this Docket
reached and filed a settlement with FERC on May 6, 2009.  FERC
approved the settlement agreement, without adjustment of rates, on August 17,
2009.





Reduction
of Stated Capital of Maine & New Brunswick Electrical Power Company,
Ltd.




In the
Order Approving Stipulation under MPUC Docket No. 2002-676, “Maine Public Service Company Request
for Approval of Reorganization of the Company into a Holding Company Structure,”MPS received permission from the MPUC to wind up and dissolve Me&NB
at such future time as MPS deemed appropriate.  In September 2008, MPS
filed notice with the MPUC and partially liquidated its investment in
Me&NB.  This partial liquidation reduced MPS’s equity investment
in Me&NB from $1 million to $150,000, with $850,000 cash returned from
Me&NB to MPS.  MPS wired those funds to its First Mortgage Bond
Trustee in April 2009, to be held in trust until bondable property additions
since the receipt of the funds exceed the balance in the trust
account.




On
October 6, 2009, the First Mortgage Bond Trustee released the funds to the
Company.





Item
1A.  Risk Factors




The Risk
Factors identified in Item 1A. of MAM’s 2008 Form 10-K and MAM’s 2009 Forms 10-Q
are incorporated herein by reference.  The following risk factors
include new risk factors identified during the quarter, as well as risk factors
that have changed materially since year end.





Legislation
and Regulation





MPS is a
regulated utility, operating its distribution activity under the jurisdiction of
the Maine Public Utilities Commission and transmission activity under the
jurisdiction of the Federal Energy Regulatory Commission.  The MPUC
and FERC regulate the rates MPS is allowed to charge its
customers.  This includes determination of our allowed rate of return
and rate structure, construction and operation of facilities, approval of
depreciation and amortization rates and recovery of certain incremental costs,
such as storm damage.  The timing of rate changes and the results of
regulatory proceedings could materially impact our results.




26






MPS
adjusts its transmission rates annually; the most recent change was on July 1,
2009.  The final settlement of 2009 transmission rates is not yet
complete, and may result in an adjustment during 2009 or
2010.  Distribution and stranded cost rates did not change during 2008
or 2009.  In September 2009, MPS submitted a rate filing under MPUC
Docket No. 2009-323 for its stranded cost rates to be effective January 1, 2010,
which included maintaining the current rates.  The ultimate impact is
unknown at this time, and could be an increase or decrease in
rates.





MPS is
also subject to local regulations, which may impact the location of our
transmission and distribution facilities, and our ability to make repairs and
upgrades to our facilities.





Other
changes in legislation and regulation could impact MAM’s earnings and operations
positively or negatively.  Such changes could include changes in tax
rates or changes in environmental or workplace laws.





Financing
Risks




MAM and
its subsidiaries have financial and other covenants on their financing
arrangements.  In the event of a default, the lenders could require
immediate repayment of the debt.  A default could also trigger
increases in interest rates, difficulty obtaining other sources of financing and
cross-default provisions with the debt agreements.  The Company was in
compliance with all debt covenants as of September 30, 2009.




MAM, MAM
USG and MPS have interest rate risk due to variable interest rates on financing
arrangements.  The Company has mitigated a portion of this risk by
fixing interest rates on three MPS variable rate debt issues with an interest
rate swap transaction on September 9, 2003.




The
one-year term of MAM USG’s $500,000 working capital line of credit expired on
June 30, 2009.  MAM and MAM USG jointly entered into a $4.0 million
two-year credit facility with Bank of America to replace this
line.  The $4.0 million facility is structured to allow MAM and/or MAM
USG to use the credit capacity as either a line of credit or letters of
credit.  MAM USG may use the letter of credit option as a way to
secure performance bonding required for some projects.  Both the line
of credit and letters of credit will be considered by lenders in assessing the
total credit available to MAM USG.  Particularly in today’s economy,
MAM USG may be unable to contract for certain projects due to its limited credit
capacity.





This
credit facility has certain covenants, including maintaining a MAM consolidated
interest coverage ratio of 2.5:1 on a 12-month rolling
average.  Failure to comply with this covenant or a default on MPS
debt is an event of default under the terms of this facility.





Item
2. Unregistered Sales of Equity Securities and Use of Proceeds





None.





Item
3. Defaults upon Senior Securities





None.





Item
4. Submission of Matters to a Vote of Security Holders





None.





Item
5. Other Information





None.





27


Item
6. Exhibits





The
following exhibits are attached:




·Exhibit 31.1 Rule
13a-14(a)/15d-14(a) Certification




·Exhibit 31.2 Rule
13a-14(a)/15d-14(a) Certification
  ·  Exhibit 32  Certification of Financial Reports
Pursuant to 18 USC Section 1350














28


SIGNATURE





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.





MAINE
& MARITIMES CORPORATION


(Registrant)





Date:  November
12, 2009





/s/ Randi
J. Arthurs


-----------------------


Randi J.
Arthurs


Vice
President Accounting, Controller


and
Assistant Treasurer






















29