Maritime Electric applies to P.E.I. regulator for rate hike to cover $37M in Fiona costs

Maritime Electric has applied to the Island Regulatory and Appeals Commission to recover $37 million in Fiona restoration costs through a customer rate increase that would come into effect in March.

And its application points out that the P.E.I. government has not come through with any support in the wake of the federal government denying it access to a disaster relief fund.

If approved, the utility's rate per kilowatt hour would increase a further 2.9 per cent for residential customers. That's on top of a rate increase that was already approved for 2024 of 2.5 per cent.

Overall, the company said a residential customer using 650 kWh of electricity per month would pay about $10 more on their monthly bill.

This would be the third rate increase in less than a year. Overall, rates would end up 12 per cent higher as of March 1, 2024, than they were a year previously.

The company is seeking to recover:

• $19.3 million in capital costs for equipment that was replaced after the storm;
• $15.3 million in operating costs for repairs to the electrical system; and
• $2.4 million in interest costs the company has been paying while deferring payment of recovery costs.

Under the proposed plan, the utility would recover all its reconnection costs from the 2022 post-tropical storm within five years. After that time, the Fiona rate hike would be rescinded.

While the company notes in its rate increase application that a year ago, P.E.I. Premier Dennis King "indicated that government funding would be available to offset the restoration costs… to date the company has not received any indication that government funding is forthcoming."

The federal government has said Maritime Electric does not meet the definition of a small business under DFAA, the Disaster Financial Assistance Arrangements program, and thus does not qualify for support. 

In its application to IRAC, Maritime Electric said any government funding that ends up being provided would be used to offset costs so that customers don't have to pay more.

"We are very sensitive to the costs of servicing our customers," Maritime Electric CEO Jason Roberts said in an interview Monday. "Our team works very hard each and every day to keep the costs as low as possible."

All but two of Maritime Electric's roughly 83,000 customers were left without power immediately after post-tropical storm Fiona hit the province on Sept. 24, 2022. It took up to three weeks to restore power to all customers, with the average outage lasting a week.

40,000 fallen trees from Fiona

The company estimates 40,000 fallen trees and tree limbs had to be cleared from the electrical system in order for all power to be restored.

In Fiona's wake, the utility was criticized by the province's electricity regulator for spending just a fraction of what other utilities in the region spend each year on vegetation management — that is, selectively trimming trees growing near power lines so that they are less likely to fall in such a way that they take out stretches of power line.

At the time, Maritime Electric was on a schedule to conduct tree trimming along Island distribution lines once every 35 years, compared to once every eight years for Nova Scotia Power.

Maritime Electric has since pledged to increase its budget for vegetation management.

But in its application to recover Fiona costs, the company says "the vast majority" of trees that came down on power lines that weekend fell from outside the right of way where the company is permitted to trim trees.

"For this reason, the level of damage on the electricity system from Fiona would not have been materially reduced had the company invested additional resources into traditional vegetation management prior to the onset of Fiona."

Maritime Electric was negligent in its vegetation management. It did not keep up with industry standards even for the Maritimes...— Liberal MLA Rob Henderson

A company review of power lines after post-tropical storm Dorian hit the Island in 2019 found 74 per cent "require[d] urgent vegetation management to avoid a significant deterioration of reliability" in P.E.I.'s electrical grid.

Liberal MLA Rob Henderson said that should not be a problem passed on to people who buy power to light and their homes.

"Maritime Electric was negligent in its vegetation management," he said on Monday. "It did not keep up with industry standards even for the Maritimes and now we're paying a higher rate of this cost because you're paying overtime for the workers that had to come in here and do this particular work." 

The company says it had to replace 1,275 distribution poles, 445 transformers and 140 kilometres of conductor wire because of Fiona. But it said 81 per cent of its capital costs were actually to pay for crews to clear downed trees.

The company had 70 line and vegetation crews in place when the storm hit, but by mid-October 2022, that number had reached 264.

In its application, the company also asked IRAC to allow it to use all Fiona restoration costs in the calculation of its profit margin or rate of return.

The company incurred these Fiona-related costs to restore service as part of its obligation to serve customers. These costs were prudently incurred and reasonable in the circumstances.— Maritime Electric submission to IRAC

"It's important that you have a financially strong utility," Roberts said. "So having recovery of those costs and being appropriately financed and an appropriate capital structure is beneficial to customers in the long run because it gives you lower overall costs of borrowing."

Maritime Electric is able to earn a return on investment at a baseline of 9.35 per cent under P.E.I.'s Electric Power Act. Earlier this year, the province agreed to raise the ceiling on that to 9.7 per cent, provided rates are set using the lower profit margin as the basis for revenue generation.

"The company incurred these Fiona-related costs to restore service as part of its obligation to serve customers. These costs were prudently incurred and reasonable in the circumstances," the company explained in the preamble to its request to IRAC to be able to earn a profit on restoration costs.

In a statement, the P.E.I. Liberal Party called it "unacceptable that Islanders, already burdened by a cost-of-living crisis, should bear the brunt of the utility company and Premier King's failure."

The party urged the government "to protect the interests of Island taxpayers rather than facilitating unjustified financial burdens on the hardworking people of our province."

CBC News reached out to the premier's office and the P.E.I. Department of Environment, Energy and Climate Action but did not receive a response by publication time.