Potomac Edison’s Proposed Distribution Rate Hike of 42% Not Justified, OPC Testimony Says
BALTIMORE – Potomac Edison’s proposed $50.4 million increase in the distribution rates it charges Maryland customers would burden customers with more costs than required to meet their service needs, the Office of People’s Counsel said in testimony recently filed with the Public Service Commission. The utility’s proposal would increase distribution rates substantially—by 42 percent from current rates—with the average customer’s distribution charges increasing by about $10 a month.
“After studying Potomac Edison’s proposal, we have determined the utility is asking for a far greater rate increase than is necessary to serve customers well,” said People’s Counsel David S. Lapp.
OPC’s testimony follows Potomac Edison’s March 22, 2023, application for a rate increase. The application triggers a proceeding before the Commission to evaluate the proposal and then decide whether to approve, deny, or modify the utility’s proposed rate increase. As the statutory representative of residential customers, OPC evaluates the proposal and submits testimony on aspects that impact customers. OPC filed the expert testimony of seven witnesses, who will testify at an evidentiary hearing in July before the Commission.
OPC’s testimony pointed out problems with Potomac Edison’s proposal, including:
- The utility proposed a 40 percent increase in its residential “customer charge,” from the current $5.70 per month to $8 per month. OPC’s testimony states the charge should be set at no more than $6 per customer per month, protecting low-income customers in particular.
- The utility proposed to earn a 7.54 percent rate of return—which acts like an interest rate that customers pay on the amount of money the utility has invested in its distribution infrastructure and has a significant impact on customer rates. OPC’s testimony explained that the proposed rate is higher than similarly situated utilities and that the appropriate rate of return should be 6.27 percent.
- The utility proposed to fund certain reliability projects through a customer surcharge, as opposed to funding all such projects through rates as is standard ratemaking policy. OPC explained the surcharge funding is unnecessary, would lessen the utility’s incentive to properly manage costs, and would reduce utility shareholder risk at the expense of customers.
OPC also submitted testimony related to the cost impacts of the bribery scandal of Potomac Edison’s owner, Ohio-based FirstEnergy Corp. In the summer of 2021, FirstEnergy entered into a deferred federal criminal prosecution agreement that requires it to pay $230 million related to the scandal. More background is here. OPC recently asked the Commission to continue an investigation the Commission had opened but prematurely closed.
OPC’s testimony argued that costs incurred in the aftermath of the scandal associated with audit, ethics, and compliance actions should not be recovered from Maryland customers. OPC also recommended an independent review to ensure the utility is appropriately issuing refunds to its Potomac Edison customers.
Perhaps most significantly, OPC’s testimony explained that Potomac Edison has continued to maintain that certain accounting data and related information of FirstEnergy and its affiliates is privileged and outside of its control—and thus unavailable for review by the Commission or OPC. Without access to that information, no one can tell what costs are being billed to Potomac Edison by its parent and affiliated companies, and thus no one knows if Maryland customers are being asked to pay for costs unrelated to their utility service, OPC explained.
“The Commission should prevent Potomac Edison from hiding information about costs billed to Maryland customers by its parent company or its affiliates,” Lapp said. “Without access to the cost data, the Commission cannot know whether costs charged to Maryland customers are appropriate and reasonable.”
Public comments on Potomac Edison’s rate increase proposal can be provided at an evening hearing on Monday, July 10, 2023, beginning at 6:30 p.m. with options for attendance in Cumberland and Frederick, or in written form through the Commission's website by 5 p.m. on Friday, July 14, 2023. The Commission has scheduled evidentiary hearings on PE’s application before a Public Utility Law Judge. Evidentiary hearings are scheduled for July 18, 2023 through July 21, 2023. The Commission is expected to issue a ruling by September 6, 2023, with any new rate set to go into effect on or about October 19, 2023.
The Maryland Office of People’s Counsel is an independent state agency that represents Maryland’s residential consumers of electric, natural gas, telecommunications, private water and certain transportation matters before the Public Service Commission, federal regulatory agencies and the courts.
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