Maryland PSC authorizes $15m rate increase for Delmarva Power

Maryland state regulators have authorized Delmarva Power to file revised tariff sheets to increase annual base rates by $14.9m, effective Sept. 15, or as soon as reasonably practicable following regulatory approval.

The July 30 proposed order of the public utility law judge became a final order of the state Public Service Commission (PSC) on Aug. 30, according to a Sept. 3 letter to all parties of record from the PSC. The proposed order was not appealed by any party, nor has the PSC modified or reversed it, or initiated further proceedings into the matter, according to the letter.

In the proposed order, Terry Romine, chief public utility law judge with the PSC, also granted a joint motion for approval of agreement of the unanimous stipulation and settlement filed on July 17 by Delmarva Power, the Maryland Office of People’s Counsel and the PSC’s technical staff (the parties).

The settlement agreement is intended to settle all issues identified by the parties as well as any other matter pertaining to the establishment of the company’s revenue requirement and rates in the proceeding, Romine said.

“The parties agreed the resolution of the issues identified in the matter, taken as a whole, results in just and reasonable rates and is in the public interest,” Romine said.

The parties agreed to a revenue requirement of $14.9m and to a cost of equity of 9.81% for the limited purposes of calculating the allowance for funds used during construction (AFUDC) and regulatory asset carrying charges, Romine said, adding that this is the same cost of equity approved in the company’s prior base rate case.

Furthermore, the parties agreed that the company is authorized to implement a grid resiliency charge with respect to the priority feeder improvements only, subject to certain conditions, which mirror the conditions for Potomac Electric Power Company’s (Pepco) implementation of its grid resiliency charge in a previous PSC order.

They also agreed that Delmarva Power is to amortize over five years the costs of about $1.2m related to the June 29, 2012, derecho and the costs of about $4.8m related to Hurricane Sandy, which hit the East Coast in October 2012, with the unamortized balance included in rate base.

Delmarva Power had sought an approximate $22.6m increase. PSC staff recommended an increase of about $12.5m, and the OPC recommended about $3.7m, Romine said.

Based on those positions, and taking into account litigation risk, costs and timing, Frederick Boyle, senior vice president and CFO of Pepco Holdings (NYSE:POM) – of which Delmarva Power and Pepco are subsidiaries – said that the $14.9m overall revenue requirement represents a fair compromise of all parties’ positions, results in just and reasonable rates and is generally consistent with the recent PSC decision in the Pepco rate case.

Based on the $14.9m overall revenue requirement, for the average residential customer using 1,000 kWh per month, the monthly bill impact is $5.09, or 3.6%, according to Boyle.

Among other things, Romine said that the agreed upon rates will not result in a rate shock to any of the classes and are just and reasonable.

“I recognize that any rate increase may affect the financial well-being of many of the company’s customers because the Eastern Shore still has not fully recovered from the 2007/2008 economic crisis and many of the residential customers are living on fixed incomes that are not adjusting with the increasing costs of day-to-day living,” Romine said. “In review of the evidence presented, however, I find that the company has sufficiently evidenced that adjustment to its revenue requirement is necessary to allow it to maintain safe and reliable service to its customers.”

During Pepco Holdings’ 2Q13 earnings webcast on Aug. 7, Pepco Chairman, President and CEO Joseph Rigby said of the Delmarva Power case, “We view this outcome as more constructive and we do not anticipate any changes to Delmarva Power’s planned capital expenditures in Maryland.”

Pepco Holdings, he said, is challenging in court the PSC’s July 12 decision to grant Pepco an electric distribution rate increase of about $28m, which is less than half of what the company had requested.

About Corina Rivera-Linares 3113 Articles
Corina Rivera-Linares, chief editor for TransmissionHub, has covered the U.S. power industry for the past 15 years. Before joining TransmissionHub, Corina covered renewable energy and environmental issues, as well as transmission, generation, regulation, legislation and ISO/RTO matters at SNL Financial. She has also covered such topics as health, politics, and education for weekly newspapers and national magazines. She can be reached at clinares@endeavorb2b.com.