A senior executive at Central Maine Power Co. told state regulators that the company won’t ask to have ratepayers cover the costs of providing electricity to thousands of new customers who weren’t billed for their service.
The Portland Press Herald/Maine Sunday Telegram reported Sunday that about 3,400 new electricity customers weren’t billed for months because of delays the company had in setting up new accounts. The company captured those customers’ electricity use on their meters, but it decided to start billing only for the most recent 30-day period after the accounts were finally set up.
The company initially indicated that it might seek to have the lost revenue covered by other customers under a formula that the Maine Public Utilities Commission and CMP use in annual rate-setting decisions. But in testimony to the commission Monday, an executive said the company will not go that route.
During a technical conference before the commission Monday, Eric Stinneford, a CMP vice president, said the company will, essentially, eat the lost revenue and not count it against a revenue projection agreed to by the company and the commission.
“Does that mean CMP is not going to collect the lost revenue in any form?” Stinneford was asked by Eric Bryant, the senior counsel for the Maine Public Advocate’s Office.
“That is correct,” Stinneford replied.
The company could pass the losses onto its shareholders through lower earnings. A company spokeswoman declined to address that option directly, but confirmed that ratepayers will not bear the cost.
CMP has said it hasn’t bothered to tally how much electricity was used by the new customers who weren’t being billed because the company was following a practice of not billing customers who were using electricity before an account was set up. Stinneford told regulators Monday that the practice goes back “an extended period,” although he did not provide details.
Company officials have said there were delays in setting up the accounts due to short-staffing caused by retirements. One CMP executive told the commission Monday that the company’s employee numbers have dropped, with some workers transferred to a “shared services” company. As of June, CMP employed 808 people, about 64 fewer than it did four years ago.
The shared services company was set up by Avangrid, CMP’s parent company, as a way to cut costs and avoid duplicate positions at CMP and the company’s other U.S. electric utilities. Avangrid, a publicly traded company based in Connecticut, is owned by Iberdrola, which is based in Spain.
Through the first nine months of its fiscal year, Avangrid reported revenues north of $4.8 billion and net income of $482 million.
The lost revenue from the billing issue hasn’t been calculated, but it could be significant. In one case, CMP connected a construction contractor that drew more than 43,000 kilowatt hours of electricity while working on a construction project in Portland from April through September. But because an account was not set up for months, the contractor’s first bill was only for the power it used in September: 385 kilowatt-hours at a cost of $954.76. Based on typical rates, the contractor should have been billed at least $6,400 for the electricity used during the period when no bills were sent out.
Company officials had initially indicated that it planned to address the costs of the unbilled electricity through its ongoing rate process. The company is seeking a 10 percent return on equity for its shareholders.
Under that process, known as revenue decoupling, the company and the commission agree each year on a revenue target and if revenues fall below the figure, rates are adjusted upward to allow the company to recapture that money. If revenues come in above the target, rates are cut to return some of the surplus to ratepayers.
CMP spokeswoman Catherine Hartnett said Monday that the company is returning $11 million to customers through lower rates from July 2016 through the end of the current rate period of next June under the revenue decoupling procedure.
PUC officials on Monday pointed out that the commissioners have the final say on whether CMP could seek to recover the lost revenue from unbilled electricity through revenue decoupling. A commission spokesman said the company wouldn’t be allowed to use the method if the delays in setting up accounts were considered the result of “imprudent” management.
Hartnett said that because those receiving the electricity were not considered customers until their accounts were set up, the company will not calculate those accounts in its projections for the PUC.
“We have looked at the issue and considered what the potential impact on other customers could be and decided that the RDM (revenue decoupling) is not the right mechanism,” she said. Hartnett would not address directly whether that cost will end up being transferred to shareholders via lower earnings.
Edward D. Murphy can be contacted at 791-6465 or at:
emurphy@pressherald.com
Send questions/comments to the editors.
