The Maine Public Utilities Commission voted Wednesday to launch a new investigation into whether Central Maine Power Co. has been overcharging its customers.
PUC Chairman Mark Vannoy said the vote came in response to a complaint filed by over a dozen CMP customers on May 29. The complaint, led by former state Rep. Herbert Adams, D-Portland, accuses CMP of charging rates that exceed the state limit for the utility’s return on equity. It also alleges that CMP has been deliberately gouging customers to recoup losses from a massive storm in October 2017 that resulted in about 470,000 CMP customers losing power across the state.
CMP filed a response to the complaint June 8, denying the allegations and requesting that the complaint be dismissed.
On Wednesday, the PUC dismissed the portion of the complaint related to the October storm, but it approved the request for a general rate investigation. It gave CMP an Oct. 15 deadline to file the rate case.
Vannoy said it is appropriate to revisit CMP’s rates this year, and that the utility’s most recent rate case was in 2014. He noted that the outcome of a rate case is unpredictable and will not necessarily result in lower bills for customers.
Still, Vannoy said CMP’s reported average return on equity of 9.43 percent over the past four years is considerably lower than the PUC’s estimate of 10.53 percent for the company over the same period.
The 2014 rate case set rates based on a maximum allowable return on equity for CMP of 9.45 percent, he said. Return on equity is a measure of how much profit a company makes for each dollar of shareholder equity.
“Obviously it’s impossible to determine the causes for the percentages or the results, which are significant, and you can’t determine those results outside the context of a full rate examination,” Vannoy said.
CONSUMERS HAVE ‘POWERFUL TOOL’
In 2016, the most recent year for which figures are available, CMP reported a total net income of $135 million.
The utility issued a response to the PUC vote via email Wednesday.
“CMP awaits the commission’s written order,” it said. “Our last regulatory rate review was filed in 2013 with new distribution base prices set in September 2014. CMP has been operating under those prices for nearly four years, and as the commission noted, our returns have fluctuated substantially during that period. In accordance with the commission order, CMP will file a Chapter 120 rate filing in October 2018.”
Adams, who filed the complaint against CMP, served on the state’s Energy, Utilities and Technology Committee for a total of eight years during his tenure as a legislator. He said Maine is unusual in that it allows any group of 10 or more customers of a utility to jointly petition the PUC to investigate that utility.
“It’s a little-known but truly powerful tool,” Adams said. “Certainly CMP and (its Spanish parent company) Iberdrola are goliaths, but Maine consumers can be a mighty David, too.”
Adams said he could have easily gotten 1,000 CMP customers to sign the complaint if he had been given more time. He is encouraged by the PUC decision to investigate CMP’s rates, but disappointed that the commission will not specifically re-examine the company’s rate increase after the October windstorm.
“I would hope that financial justice for the October storm is not totally ruled out,” Adams said, noting that some customers have decided to pursue the matter in civil court.
RECOUPING COSTS OF OCTOBER STORM
In January, CMP said the short but powerful windstorm that knocked out power to an unprecedented number of Mainers cost the company about $69 million.
Of that $69 million, about $32 million was attributed to damaged utility poles, transformers and other equipment. The company said it’s likely a good portion of that damage will be rolled into future rate increase requests over several years or decades.
The other $27 million reflects what CMP spent on labor and equipment to get power restored, after subtracting what the company would have paid its own workers anyway. In all, there were 1,400 utility workers who assisted with restoration, or about seven times the normal number of line workers on call.
The $27 million will be split about evenly between CMP and its customers based on a 2014 agreement between CMP, the Office of Public Advocate and other parties. CMP said it would apply up to $14 million from its reserves to pay for its share, which would leave $13 million for customers.
That $13 million equates to about $1.30 per monthly bill for each customer if the amount is recovered over one year, or $0.65 per customer for two years.
CMP spokeswoman Gail Rice said the recent corporate tax rate reduction offset the cost of the storm damage, and thus customers did not actually see a rate increase. Still, the storm’s cost prevented customers from seeing a significant rate reduction from the tax cut.
CMP already is being investigated by the PUC over questions about its metering and billing systems that arose over the winter, when customers complained about unreasonably high power bills, some of which were triple or quadruple the norm.
In April, CMP reported that 97,000 individual accounts saw bills increase 50 percent or more in December, January and February. CMP has acknowledged that new billing software introduced last October created issues for some customers, but the company attributed the spike in power bills to an 18 percent increase in the standard-offer electricity cost, along with higher electricity consumption during an extreme cold snap in December and January.
CMP serves more than 600,000 customers in southern and central Maine. Its parent company Avangrid is a subsidiary of Iberdrola, a multinational utility company headquartered in Spain.
Correction: This story was updated at 9:15 a.m. Thursday July 19, 2018, to correct the name of CMP’s parent company. At 11 a.m., it was updated to clarify the impact of the wind storm’s effect on rates.
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