Maritime Electric rate hike denied by regulator

There will be no rate hike for Maritime Electric customers on P.E.I. until at least March 1, 2020, the Island Regulatory and Appeals Commission has ruled in a written decision.

In November 2018, Maritime Electric applied for a 1.1 per cent rate increase each year from from March 1, 2019, to Feb. 28, 2022, for the "typical customer" in each of its rate classes.

It has been a challenge to get that forecast component right. It's a changing market.— Kim Griffin

In July 2019, Maritime Electric revised its application, seeking an average rate increase of 0.7 per cent over the three years. At the rate hearings in August, the utility advised that the actual proposed rate increase would be 1.7 per cent in year one, no increase in year two and a 0.8 per cent increase in year three.

The utility said it needed the increase to offset its rising costs of doing business.

But in its decision dated Sept. 27, IRAC said it is not satisfied Maritime Electric's annual revenue forecasts are "reasonable, accurate or reliable."

"As such, the commission is not prepared to approve the rates that are derived from those forecasts," the decision says.

"Instead, the commission orders that the rates currently in effect for the period from March 1, 2018, to February 28, 2019, shall remain in effect until February 28, 2020. As such, there shall be no change in rates for any rate class until March 1, 2020."

$10 million in over-earnings

In its written decision, IRAC pointed out Maritime Electric had underestimated its net earnings for 2018 by more than $5.3 million, and said its "concerns are compounded by the level of over-earning that the company has experienced since at least 2011."

Under the Energy Accord, Maritime Electric must refund to customers earnings in excess of its allowable rate of return. IRAC said Maritime Electric did not forecast any over-earnings for the next three years, though its over-earnings so far in 2019 are actually $3.3 million, according to IRAC's decision.

Further, Maritime Electric previously did not forecast any over-earnings for 2016, '17 or '18, but in fact the IRAC decision shows the company over-earned approximately $10 million in that time.

Maritime Electric spokesperson Kim Griffin said it has been tough for the utility to accurately forecast revenue .

"The challenge that we're finding is just the changing patterns for our customers in terms of the use for electric heat and heat pumps," Griffin said. "It has been a challenge to get that forecast component right. It's a changing market." 

Over-earnings to be refunded

IRAC said the $10 million in excess earnings from 2016 to 2018 will used to minimize any rate increase from March 1, 2020, to Feb. 28, 2021.

In the event the $10 million is enough that no rate increase is necessary, any remaining over-earnings must be fully refunded to ratepayers by Feb. 28, 2022, IRAC said.

Also in its decision, IRAC allowed Maritime Electric to continue to earn its current maximum return on average common equity of 9.35 per cent based on 40 per cent average common equity in each of 2019, 2020 and 2021.

Denied rate structure request

Maritime Electric had also requested a change to rate structures for its heavy power users, such as large-scale farmers.

Those customers currently get reduced rates on some of their electricity once they use a certain amount. The utility wants to raise the amount of power that needs to be used before that discount kicks in.

In its ruling, IRAC denied that request, saying it first wants Maritime Electric to do a comprehensive study on its rate structures.

That has to be completed by July of next year. 

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