On May 31, Emera Maine – which serves 158,000 retail customers statewide – received approval (Docket No. ER16-1301-000) from the Federal Energy Regulatory Commission (FERC) to react more quickly to substantial losses of load on its system by adjusting its transmission rates.
In its proposal, filed on March 31, Emera Maine explained that, to date, it has used historical load values to determine the allocation of costs, but that this method has resulted in under-recovery of revenue when there has been significant loss of load from year to year.
In addition, Emera Maine stated that, when it fails to recover the full amount of its revenue requirement due to lost load; its transmission customers end up paying higher rates, which “do not reflect their actual share of system use in the current year.”
The utility cited a time in late 2015 when it experienced a significant decrease in its industrial load after two customers– Expera Speciality Solutions and Lincoln Paper and Tissue – curtailed or ceased operations. In its filing, Emera Maine estimated that the total amount of load lost was about 4.7 percent of the average system peak of its biggest subsidiary in the state – Bangor Hydro.
Indeed, the combined peak load for Expera and Lincoln for the 2014-2015 rate year was 26 megawatts (MW) and the average peak monthly load was 19 MW. However, for the 2015-2016 rate year, Emera Maine forecasts that Expera and Lincoln will have an average peak monthly load of only 8.2 MW; and for the 2016-2017 rate year, Emera Maine forecasts that these parties will have an average peak monthly load of only 2.4 MW.
Because the Schedule 21-EM Formula Rate currently requires it to calculate charges for the 2016-2017 rate year based on actual, unadjusted load data from 2015, the load data inputs will be significantly greater than actual loads for 2016-2017. Emera Maine said it believes it will under-recover its revenue requirement for 2016-2017 by approximately $2.1 million.
According to Emera Maine, “This difference will result in per-unit charges for retail customers that do not reflect their fair share of system costs during the year in which the rates are charged.” And, in order to avoid “such an inequitable outcome,” the utility has proposed a limited change to the Schedule 21-EM Formula Rate to permit it to adjust historical load, revenue, and sales data used as inputs to the formula rate to reflect “known and measurable” anticipated changes.
A Conditional Approval
The majority of the FERC commissioners approved the request, under the condition that the utility must implement a “true-up mechanism” and document any rate adjustments in its annual formula update to ensure transparency.
Further, while Emera Maine’s filing was meant to address a situation that jeopardized its revenues, the FERC commissioners said that they tacitly understood that the utility would make similar adjustments in the future – even if it were to correct a situation in which load increases actually had reduced its revenue requirement.
“Moreover,” the commissioners stated, “we note that prohibiting Emera Maine from recovering its revenue requirement could harm customers because Emera Maine may not have the necessary funds for operations.”
A Dissenting Opinion
In a dissenting opinion, Commissioner Collette D. Honorable said that, under the current order, Emera Maine can choose which adjustments to apply – and its choices may not always benefit its customers.
She argued, “This proposal also allows Emera Maine to make its own determinations on which adjustments to apply. To illustrate this point, consider two examples: one where load is decreasing and one where load is increasing. Emera Maine is currently proposing to adjust the load figure used in their formula because several industrial customers are either ceasing or significantly curtailing operations. The loss of an existing load can clearly be considered ‘known and measurable.’ Alternatively, in cases where load is expected to increase and a new industrial customer emerges, I would be concerned that this new industrial customer’s lack of load history could be used to preclude a ‘known and measurable’ adjustment, the type of adjustment that would benefit customers generally. These similar examples lead me to believe that Emera Maine’s proposal is unbalanced.”
The commissioner concluded, “While I am sympathetic to Emera Maine’s current situation – one that might have resulted in a $2.1 million under-recovery of its revenue requirement for 2016-2017, absent the commission’s action today – I do not believe the adjustment mechanism proposed by Emera Maine is just and reasonable.”