Exelon’s (NYSE:EXC) Atlantic City Electric said recently that the New Jersey Board of Public Utilities (BPU) has approved a settlement between the company and interested parties, allowing the company to increase its annual revenues by $43m to recover investments that the company has made in its system to provide safe and reliable service for customers.
Based on the settlement, overall energy delivery rates would increase by 4.03% beginning on Oct. 1, the company said on Sept. 22. The total monthly bill for a typical residential electric customer using about 716 kWh of electricity would increase by $5.52, the company said.
The settlement allows Atlantic City Electric to continue to replace equipment and upgrade infrastructure, the company said, adding that in 2016, customers experienced 33% fewer outages and the average time customers were without power declined 35% compared to 2011.
Atlantic City Electric said that it also built new distribution substations in Cape May and Gloucester counties, as well as replaced hundreds of utility poles across the region. The company noted that it completed nearly 30 separate substation enhancement projects that included new transformers and other equipment, and completed reliability improvements on 41 distribution lines to improve service for local customers.
As noted in the BPU’s decision, Atlantic City Electric in March filed a petition for approval of an increase in its current base rates for electric service of about $70.2m, excluding sales and use tax (SUT) ($74.8m including SUT), to be effective for electric service provided on or after April 30. The company also requested a return on equity (ROE) of 10.10%, the BPU said.
According to the petition, the primary reason for the requested increase is that the company’s current base rates do not provide sufficient operating revenues to reflect increased investment in the company’s rate base, meet operating expenses, taxes, and fixed charges, and maintain its financial viability; and provide a fair opportunity to earn a reasonable rate of return on the fair value of the company’s property.
The BPU also said that after discovery and comprehensive settlement discussion, on Sept. 8, the company, BPU staff, Wal-Mart Stores East, LP and Sam’s East, Inc., (Wal-Mart), and the Division of Rate Counsel (collectively referred to as the signatory parties) reached a stipulation of settlement, which included such key elements as:
- The company is to have an overall rate of return of 7.60%, which is based on a capital structure consisting of 50.47% equity with a cost rate of 9.60%, and 49.53% long-term debt with a cost rate of 5.56%
- The signatory parties recommend that the company should be authorized to create a regulatory asset that includes such costs to achieve synergy savings incurred in the merger between Exelon and Pepco Holdings, Inc., as the costs to achieve in the amount of about $3.3m incurred in the period beginning March 23, 2016 through July 31, 2016
- The signatory parties agree that the company should be permitted to create a regulatory asset in the amount of about $5.6m to reflect costs related to three major storm events, including a June 2016 storm, which will be recovered in base rates via a three-year amortization with no rate base treatment of the unamortized balance
The BPU said that an administrative law judge (ALJ) on Sept. 12 issued an initial decision accepting the terms of the settlement; the BPU in its decision adopted that initial decision and stipulation in their entirety.
Atlantic City Electric said in its statement that it is committed to helping customers offset the impact of the increase by continuing to provide tips and information about how to save energy and money, as well as by connecting customers with state and federal energy efficiency resources. The company further noted that it offers payment options – including budget billing, which makes short-term fluctuation in monthly bills easier to handle by dividing annual energy costs evenly throughout the year – to help customers manage their monthly electricity bills.