Delaware energy regulators push back on Delmarva Power rate increase request

Why Should Delaware Care?
Delmarva Power is the largest energy provider in the state, serving more than 300,000 customers. Those customers will soon see a modest increase on their electricity bills, but that increase is less than what was originally proposed after mounting political pressure placed on the utility. 

After months of political pressure over rising electric bills, Delaware energy regulators rebuffed Delmarva Power by approving only part of the utility’s scaled-back rate increase request.

And Delmarva Power representatives say the decision was unlawful. 

It was made last week within the confines of a gray government office where newly-appointed members of the state’s Public Service Commission discussed how they could ease the struggles residents face paying their rising power bills.

“There’s a lot of pain out there,” Commissioner Michael Richard said during the meeting.

Just two months earlier Gov. Matt Meyer had appointed Richard and three others as new members to the Public Service Commission, which is in charge of approving rate-increase requests submitted by private utility companies.

Following the appointments, Meyer publicly pressured the commission to freeze electricity rates. Delaware lawmakers also passed a bill last month limiting the amount of infrastructure spending Delmarva Power — the state’s largest utility company — could pass on to customers. 

The politicians’ moves followed more than a year of growing antipathy among Delaware residents toward rising power bills. The mood was palpable to regulators and to Delmarva Power itself.  Even before the governor began his pressure campaign, the utility company in early June cut its recent rate hike request in half. 

But Public Service Commission members said the utility didn’t go far enough. During a July 1 meeting to discuss the rate increase, Richards noted that Delaware was about to enter “a huge heat wave.”

“So it’s particularly cruel for people to not only wonder how they are going to survive this … but then also think about the electric bill that’s about to come,” Richard said during the meeting.

Ultimately, the Public Service Commission determined it could not fully freeze Delmarva Power’s rates, but decided to approve only part of the company’s reduced rate hike request.

The decision came despite arguments from the utility’s lawyers that the regulators did not have the authority to do so. 

“My suggestion is, if you don’t like it, appeal it,” said Commissioner Regina Iorii, also a new appointee, in response to those objections. 

On Wednesday, Delmarva Power spokesperson Matthew Ford maintained that regulators “did not have discretion” to cut back the rate hike as much as they did. He did not say whether the company would appeal the order. 

Last week’s Public Service Commission decision on the rate increase is only a part of the ongoing proceedings to determine how much money Delmarva Power will ultimately be able to recoup from its infrastructure expenses, including building substations and burying power lines. 

While the decision will allow Delmarva Power to increase electricity bills for the average Delaware home by just under a dollar, there could be additional increases in the coming months as part of this case.

Still, the commission’s vote shows a shift in the body’s public rhetoric.

Representatives of the Public Service Commission declined to comment, but said the body will issue a written order on from the rate decision on July 15. 

A fight over recouping costs

Regulated utilities like Delmarva Power make money by recouping the costs of infrastructure upgrades — plus about 10% profit — through electric rate increases.

In January, Delmarva Power filed its third rate hike request in five years because of recent infrastructure upgrades. 

The debate over whether to approve that request is still ongoing. But while it happens, utilities can temporarily increase consumer costs to make sure the company can pay for those upgrades without borrowing too much money. 

If the Public Service Commission decides the infrastructure upgrades were not necessary, customers would be refunded for that temporary rate increase. 

Delmarva Power initially asked for $44.6 million in new revenue from base rates, as well as moving $23.2 million from a temporary price hike known as a Distribution System Improvement Charge into the base rate, making those costs permanently higher for customers. 

That request would have raised the electric bill of an average user by $6.42 per month, or 4.13%, according to Delmarva. 

But after political pressure, the utility in June voluntarily lowered the request to $28.6 million, reducing the average rate hike to $3.39 per month.

“We hear our customers loud and clear that we need to be very careful and make sure that we’re getting the most impact for the dollars that we are investing,” Delmarva Power Regional President Marcus Beal said.

Unsatisfied, the Public Service Commission opted to only approve half of the revenue request and also cut in half the requested Distribution System Improvement Charge. 

Delmarva will be able to raise rates further after Dec. 9 if the rate case is still ongoing, based on the provisions of the recently passed legislation that limits the amount of infrastructure spending the utility can pass onto customers. 

In a filing submitted Tuesday, Delmarva Power agreed to again lower the requested new revenue, this time to $22.7 million, reducing the average rate hike even further to $2.51 per month.

But the filing appeared to be inconsistent with the Public Service Commission’s order, since it kept the Distribution System Improvement Charge the same. 

Beal said he could not comment on the latest filing because the commission has not yet issued its written order.