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Emera Maine Asks PUC for $6.6M Distribution Rate Increase

March 29, 2016 By Cheryl Kaften

Emera Maine – an investor-owned electric transmission and distribution utility serving 159,000 customers in the northern, central and eastern parts of the Pine Tree State – has asked the Maine Public Utilities (PUC) for an increase in distribution rates of $6.6 million (Case No. 2015-00360), to become effective in 2017.

 

The requested increase would be about 8.3 percent – or $2.40 extra on the invoice of a typical residential customer using 500 kilowatt hours (kWh) of electricity per month.

Specifically, the utility is proposing to boost distribution revenues by about $6.6 million over 2014 test year revenues, as adjusted, to approximately $86.6 million using a pre-tax weighted average cost of capital of 11.20 percent, a return on equity of 10.25 percent, and a common equity capital ratio of 49 percent.

The principal drivers behind Emera Maine’s application are capital investments and reduced energy sales, according to CEO Alan Richardson, who filed his testimony before the PUC on March 21.

 

Each year,” Richardson said, “Emera Maine must reinvest in its distribution assets as they reach the end of their useful lives. In the absence of sales growth, by definition, this reinvestment puts upward pressure on distribution rates.”

Indeed, he noted, “The reason for the proposed 2017 increase is that the lives of certain of our assets could not be extended further without unacceptable risk to safe and reliable service. These assets had to be replaced. Emera Maine raised the capital and made these necessary investments (or is in the process of doing so), and seeks recovery of and on these investments in this application.”

Further, he said, distribution rates have not kept up with inflation “for the past ten years” – explaining, “Said another way, the real price (inflation adjusted) of distribution service today is lower than it was in 2007 (approximately 6 percent lower), and with the proposed 2017 increase would be approximately the same as 2007.”

Finally, Richardson also attributed the need for more money to lower sales volume. “The other significant driver of the required rate increase is a decrease in Emera Maine’s volume of sales,” he said, “… in large part [due] to negative economic factors and continued energy efficiency measures adopted by customers. The reduced sales volume increases the revenue requirement shortfall by approximately $1.3 million.”

The Office of the Public Advocate has reserved the option to intervene in this case, which will continue on March 31.

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