Staff for the Maine Public Utilities Commission recommended Monday that regulators deny Central Maine Power Co.’s ask for almost $70 million in raised rates this fall.
CMP requested the increase — which would add about $7 per month to the average household bill — in April to soften the “significant financial distress” it is experiencing.
The move is intended to let Maine’s largest electric utility recoup some of its costs while its larger and longer-term rate case continues to be deliberated.
The three-member utility board will meet Oct. 6 for a final decision on the so-called “temporary rates.” Without the hike, CMP may need to defer millions in new projects and maintenance, which the utility said could be particularly impactful as Maine heads into fall and winter.
Staff for the commission said in their 19-page recommendation that CMP’s worsening financial situation wasn’t enough to justify raising rates now.
Estimates for CMP’s revenue needs varied by tens of millions of dollars between different parties in the case, and the proposal was disputed by eight groups, ranging from the Maine Office of the Public Advocate to the Department of Energy Resources to advocacy groups.
The PUC can only approve undisputed temporary rates, per state law. Plus, regulators said, concerns remain about the complexity of the case, affordability and consumer confusion.
Heather Sanborn, the public advocate, applauded the recommendation.
“With Maine household budgets already strained to the breaking point, any rate increase for CMP must be thoroughly scrutinized before it goes into effect,” she said Monday in an emailed statement. “We look forward to continuing that thorough review in the rate case process that remains on-going at the PUC.”
Staff hinted the commission might consider approving a small part of the hike next week. CMP said that may not be enough.
“Prolonged revenue uncertainty puts pressure on the infrastructure investments, workforce, financing capacity, and grant-funded modernization efforts that customers and communities depend upon,” CMP spokesperson Dustin Wlodkowski said Monday in an emailed statement. “Unfortunately, the consequences of prolonged uncertainty are no longer theoretical.”
WHY ‘TEMPORARY’ RATES?
CMP wanted to enact about a third of its full $189 million request this fall using the “temporary rates” at issue here.
Essentially, it’d be the first in a two-step rate increase proposal — with the rest to come this spring.
Regulators recommended this approach last year when they denied the utility’s 5-year plan, which would have raised the average household’s bill by about $35.
Commissioner Patrick Scully said last November that “we’re open to having (CMP) seek temporary rates in the interim.” Chair Phil Bartlett said “there may well be temporary rates that get put in place for next fall.” And Commissioner Carolyn Gilbert noted that if that denial last year created “hardship for the company, they could file for temporary rates as permitted by our rules.”
CMP is indeed experiencing financial difficulties. The utility’s financial outlook was downgraded this summer by S&P Global Ratings to “negative” because of lag in this rate case and a $100 million cash flow deficit.
“CMP has already been forced to defer planned capital work, including projects intended to strengthen reliability, improve resilience, and modernize the system, and will continue to do so,” Wlodkowski said. “CMP will now also be forced to evaluate workforce levels and hiring plans that support current operations and future needs.”
For instance, maintenance on 19 transformers servicing thousands of customers from York to Rangeley will be delayed if temporary rates are not enacted, according to the utility. A $6.6 million project to improve grid infrastructure in western Cumberland County would also be put off.
Technically, these mid-case rates are refundable to customers if regulators end up approving a lower amount for permanent rates. That’s what makes them “temporary” — though they’re rarely actually refunded.
THE BIGGER PICTURE
The average household’s bill dropped by $11 per month in July, to about $157, due to lapsing storm costs.
These temporary rates would raise bills by about $7 a month, and the full hike, expected to be decided over the next couple months, could add another $11. CMP originally asked for the rates to be enacted by July 1, but regulators delayed consideration until this fall.
Rightsizing the utility’s return on equity — the revenue the company can make back on the infrastructure it builds — made up about two-thirds of CMP’s temporary rate proposal. Utilities can’t mark up the service of providing electricity, and return on equity is the only way they can make profit.
Return on equity has become a central battleground in the case, with consumer advocates arguing Maine regulators should set strict boundaries on utility profits, especially while Mainers struggle with the weight of rising costs for heating, housing and more.
Seth Berry, the executive director of intervening group Our Power, said the organization was pleased with the decision, especially given its implications for CMP’s profit.
“With energy costs at record highs, Maine people are shouting from the rooftops: We can’t take yet another rate hike to boost the profits of distant investors,” Berry said in an email.
CMP, meanwhile, has argued it needs more return on equity to continue building new infrastructure and delivering power to its 670,000 customers.
“Deferring necessary infrastructure investments simply pushes costs into the future, often at a higher price, while increasing the risk that reliability improvements, grid modernization efforts, and other customer benefits are delayed as critical infrastructure continues to age,” Wlodkowski said.
That ongoing dispute over revenue needs and return on equity is a big reason staff at the PUC recommended denying temporary rates.
“In short… because there are many parties with many differing positions, the Commission cannot conclude that there is ‘an amount which is undisputed,’ as required by statute,” staff wrote.
But, they hinted that regulators could approve about $21 million if their concern for CMP’s financial outlook outweighs worries about affordability, customer whiplash and the complexity of the case. That’s the amount the Office of the Public Advocate initially said was undisputed — before it had the chance to review other testimony on utility profit.
The ruling early next month is likely to be the final major decision during the tenure of Bartlett, the chair.
After seven years leading the board, Bartlett announced earlier this month that he’d be stepping down Oct. 9 to move into the private sector.