The Maryland Public Service Commission, in a Feb. 9 order, approved a settlement regarding Delmarva Power’s request to increase rates, noting that “the unanimous agreement of the parties will result in just and reasonable rates for Delmarva Power … and its customers and is consistent with the public interest.”
The parties noted in the order are Delmarva, commission staff, and the Office of People’s Counsel (OPC).
The commission also said, “The small rate increase contained in the settlement, a total of $13.4 million in distribution revenue, is significantly less than the company’s original request of” about $27m, which was later revised to about $19.3m.
While commission staff had recommended an increase of $11.1m, and OPC had recommended an increase of $7.2m, the commission said that it believes that the revenue increase of $13.4m is a reasonable compromise of all parties’ positions and results in just and reasonable rates.
The commission noted that it is willing to allow staff to convene a work group with representatives from Delmarva Power and OPC to facilitate the company’s evaluation of its Maryland reliability spend plan from 2017 through 2020. The company has agreed to report its findings to the work group 45 days prior to filing its next base rate case or by Oct. 31, whichever is earlier, and the work group will in turn examine the company’s system average interruption frequency index (SAIFI) and system average interruption duration index (SAIDI) performance target through 2020 within the cost containments established in another commission order.
The commission added that the parties have agreed that if staff determines “that a reliability planning consulting firm is necessary to assist staff in its evaluation, Delmarva will provide funding not to exceed $150,000 which costs the parties agree shall be recoverable in rates in the company’s next rate case filing.”
Further discussing the settlement agreement, the commission noted that the parties filed the settlement last December, and that it held an evidentiary hearing on the settlement on Jan. 5.
The settlement stipulates that the new rates will become effective as soon as reasonably practicable following issuance of the commission’s order approving the settlement. The commission added that the settlement stipulates that the parties have agreed to a “Two-Step” allocation of base rates among all customer classes. Additionally, the parties agreed to increase the customer charge for all service classifications by 1.6% and the resulting charge rounded to the nearest 10 cents.
The commission added that the settlement stipulates that solely for the purposes of calculating the Allowance for Funds Used During Construction and regulatory asset carrying costs, the cost of equity is to be 9.50%.
In support of the settlement, Delmarva submitted the testimony of Kevin McGowan, vice president, Regulatory Policy & Strategy of Pepco Holdings LLC, who concluded that “taking into account litigation risk, cost and timing, the $13.4 million overall revenue requirement represents a fair compromise of all parties’ positions and results in just and reasonable rates.”
He noted that the impact of the settlement on the average residential customer using 980 kWh per month will increase the total bill by $2.71, or 1.9%.
The commission added that staff filed testimony of David Hoppock, assistant director of the commission’s Electricity Division, among others. Discussing the Two-Step method, Hoppock noted that in Step One, 6.5% of the total revenue increase is allocated to the under-earning classes, General Service Secondary Large (LGS-S) and General Service Primary (GS-P), while in Step Two, the remaining revenue increase is allocated across all classes based on current distribution revenue.
Among other things, the commission said that the company is to file new tariffs that increase rates by no more than $13.4m.
The company, in a separate Feb. 9 filing, submitted to the commission tariffs updated to reflect rates effective Feb. 9, consistent with the settlement.