IRAC orders Maritime Electric to resubmit its application for smart meters

The Island Regulatory and Appeals Commission has directed Maritime Electric to refile its application to convert Prince Edward Island customers to smart meters, criticizing the company's lack of transparency regarding increased costs.

The company originally applied for the project in November 2022, saying it would cost $48 million. Then in December 2023, in response to questions from IRAC staff regarding the application, Maritime Electric revealed the estimated cost had increased by more than a third, to $64 million.

"Despite this material cost increase, [Maritime Electric] has not filed any evidence regarding the impact on rate base, revenue requirement, or customer rates," IRAC wrote in a letter dated Feb. 14.

The commission wrote that the company "also has not provided any evidence of a positive business case for the project based on the increased project costs."

On top of that, IRAC criticized Maritime Electric over delays in putting its application forward — given that federal funding for the project was approved in March 2022 — and over the company's "failure to voluntarily disclose" the increase in costs until the commission had specifically asked for the information.

Maritime Electric's "actions and requests have delayed the regulatory review process as a whole, including the process of open and transparent public consultation," IRAC said in its letter. "The commission expects that [Maritime Electric] will operate transparently in this and all future matters."

The utility would not make anyone available for an interview on Monday, but it issued a short statement saying it is "in the process of preparing a response" to IRAC's letter.

"Maritime Electric is committed to a continued open and transparent process with IRAC and will ensure the commission is provided with all the relevant information including the strategic scoping and procurement processes that led to the revised project budget," president and CEO Jason Roberts was quoted as saying.

"Our company is fully transparent and committed to addressing the commission's concerns regarding the project." 

Funding expires in 12 months

The federal government announced funding of $19 million for the project last fall. That funding offer will expire March 31, 2025.

Given the timeline and delays, IRAC gave Maritime Electric until March 15, 2024, to resubmit its application.

In its letter, the commission included a non-exhaustive list of information it expects Maritime Electric to include in its new filing, including:

• Justification and an explanation of the due diligence performed with the selection of vendors for the project.
• Disclosure of any relationships between Maritime Electric, its executive, management or board members and the chosen vendors.
• Disclosure of the individuals responsible for project management, their qualifications and experience.
• Calculations of the impact the project will have on the company's rate base, revenue requirements and customer rates, along with the business case for the project based on the updated costs.

The commission also expressed concern that changes in Maritime Electric's proposal run counter to advice from the company's own experts.

For example, IRAC noted that Maritime Electric wants to use a cloud-based software system for smart meters, and questioned the reliability of that "during extreme weather events, such as Hurricane Fiona."

One of the benefits of switching to smart meters touted by Maritime Electric has been the ability of the units to enable two-way communications so the company can pinpoint specific outages.

Time-of-day billing requires meters

P.E.I. Energy Minister Steven Myers said in the legislature this month that the province has been waiting for Maritime Electric to switch to smart meters to allow for time-of-day billing — that is, offering lower electricity rates during off-peak hours.

Myers also said on March 1 that the province offered to pay for the entire cost of the conversion, but Maritime Electric submitted its application to IRAC with no provincial funding in place.

In response to concerns around the cost of the project raised by the Opposition Liberals, Myers said the provincial government could still pay the remaining costs above what Ottawa has offered.

"I want to see the smart meter thing play out, see where it gets to, and we can make a decision as government when the time comes on what we need to do to best protect the ratepayers of Prince Edward Island," he said.

Multiple rate increases

Maritime Electric customers have seen rates go up three times in the past year, with a fourth rate increase application to recover costs from the Fiona restoration still pending. 

There has as yet been no application to increase rates to recover the costs for the switch to smart meters, which IRAC called one of Maritime Electric's largest capital projects to date.

Myers also said this month that the province is exploring the feasibility of taking over both electric utilities in the province — Maritime Electric, which is owned by Fortis Inc., and Summerside Electric, owned by the City of Summerside.