CMP to seek 3-year rate hike that would raise average bill by $10

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May 26—Central Maine Power is asking state utility regulators to approve a three-year reliability and grid upgrade plan that could raise bills for the typical home customer by as much as $10 a month by 2026.

The rate hike would support investments to make the distribution system more resilient to storms, restore power faster after outages and enable more renewable power generators to hook up as the state transitions to a cleaner-energy economy. The proposal, however, drew immediate opposition from Gov. Janet Mills, who called the plan to raise rates "outrageous" and said, "I will fight this."

CMP notified the Maine Public Utilities Commission on Thursday of its intent to formally file a detailed rate case sometime this summer. The company has dubbed the plan Powering Maine and characterized it as an attempt to keep distribution rates relatively stable and predictable over the next few years.

For an average home customer using 550 kilowatt-hours a month, the plan would increase a total electric bill by roughly $5 a month in 2023, and up to $2.50 a month in each of the following two years.

An average monthly residential electric bill today, including both distribution and supply, is $126. If the full rate request is approved, it would increase that bill by roughly 4 percent in 2023.

The company also is seeking a return on equity of between 10 percent and 10.5 percent, which it says reflects current market conditions. Return on equity is a measure of profitability and financial performance that's important to investors.

CMP's request is only for the distribution costs associated with bringing power over poles and wires to homes and businesses. It's not tied to electricity supply charges, which have surged this year in response to high natural gas prices and world events. CMP doesn't generate power; it only distributes it.

But Mills said any plan to increase electric bills for consumers already dealing with widespread inflation in the economy "adds insult to injury."

The governor called on CMP to hold off filing for the rate increase but said if the utility goes ahead, she will have the Governor's Energy Office intervene in the case to oppose it.

If the PUC rejects the rate increase, she said, it would send a "clear message to our utilities that their focus needs to be on improving performance, reducing cost burdens and restoring trust."

Acknowledging the impact of any rate increases on household budgets weighed down by today's high inflation and energy prices, CMP's president and chief executive, Joseph Purington, said the investments are needed to continue progress on updating the electric grid. The trick is finding a balance in spending that makes the distribution system more resilient but isn't an undue burden for customers, he said.

"CMP must continue to make smart system updates that improve reliability now and enable the company to successfully perform our role in helping Maine meet its climate change goals," Purington said.

CMP's multiyear rate request comes as the manner in which utilities decide how to make investments in their infrastructure is about to undergo a historic change.

In early May, Mills signed L.D. 1959. The new utility reform law beefs up utility accountability, but it also requires companies the size of CMP and Versant Power to take part in an "integrated grid planning" process, aimed at supporting the state's transition to a renewable energy economy and meeting aggressive climate action goals.

Rate increases are never welcomed by customers, but CMP's ask carries excess baggage.

Although the company's performance benchmarks have improved with the PUC in recent years, CMP and its domestic parent company, Avangrid, remain unpopular with many customers and a target of adversaries. A major Avangrid transmission project, the New England Clean Energy Connect, is tied up in court. A campaign to replace CMP and Versant Power with a statewide consumer-owned utility continues to collect signatures in a bid to bring the issue before voters in 2023.

ADVOCATE CALLS FOR SCRUTINY

In an initial reaction to the filing Thursday, Maine's top utility customer watchdog said his office will scrutinize the assumptions behind the rate request. By itself, the proposed increase isn't outrageous, Public Advocate William Harwood said.

"But on top of everything else, the cumulative impact, it adds to the financial burden," he said. "We'll have to take a hard look at their justification."

Harwood also said CMP's request for a return on equity of up to 10.5 percent seems excessive, and that his office would analyze financial markets to recommend a fair return for investors.

"Our preliminary view based on other utility cases indicates a return on equity closer to 9 percent would be reasonable," he said.

Regarding the new utility reform law, existing statutes require utilities to provide "safe, reasonable and adequate service." At issue in the new grid planning process will be how to define reliability, measure to what extent the utilities are meeting the standard now and determine what it would cost to do more, Harwood said.

Approving a rate increase before the PUC adopts those new standards for the state's utilities and starts the grid planning process would be putting the cart before the horse, said Jeff Marks, Maine director and senior policy advocate for the Acadia Center, an organization pushing for policies to protect the environment and transition to clean energy sources.

Marks said the new law will require the utilities to meet new standards to ensure they are using customer revenue wisely, and it also calls for a wide-ranging plan to enhance the state's power grid. Deciding on a rate increase before either measure is in place doesn't make sense, he said.

"These rate hikes show we can't start too soon," Marks said. "With this type of rate hike at this point, we need to start the accountability process."

Marks also said that a comprehensive plan to modernize Maine's electric grid could help keep rates low, and that giving CMP a rate hike to make some changes before the overall plan is even underway would be premature.

The new grid plan, along with new accountability measures, "will shine a spotlight" on how well the utilities are providing electric service to Mainers, Marks said, adding that analysis should be done before CMP seeks a rate hike, not after.

The proposed rate increase was also criticized by Our Power, a group advocating for CMP and Versant Power to be replaced with a consumer-owned utility, rather than investor-owned companies.

The increase "is far more than CMP customers can handle right now," said Andrew Blunt, interim executive director of Our Power.

Blunt said the utility's proposal to put most of the money into improving the reliability of its electric grid "is long overdue," but he said bigger customer bills will make it easier for Our Power to gather support to put its plan to buy out CMP and Versant before Maine voters. The organization hopes to have enough signatures to gain a spot on the ballot next year.

"Every time they file for a rate increase, it makes ratepayers a little more angry, and for good reason," Blunt said.

RATE HIKE WOULD FUND UPGRADES

The precise details of the Powering Maine plan won't be available until summer, but broadly speaking, it covers a handful of topics.

— Automation: The company wants to invest in smart-switch technology to minimize the number of customers affected by an outage and allow its Augusta control center and line crews to restore power more quickly. On Maine's coastal peninsulas, for instance, it's common for 1,000 homes to lose power if a circuit trips when a tree falls on a wire during a storm. Adding more switches that can be controlled remotely could cut the number of impacted homes to between 300 and 500, the company said.

— Infrastructure: Installing stronger poles and coated wires that resist short circuits also are part of the package, as is more tree trimming. Falling trees and branches are the leading cause of outages in Maine, a condition being made worse by stronger storms linked to a changing climate.

— Customer tools: As more electric cars come on the road, CMP wants to offer special rates that reward customers for charging when demand is lower, such as overnight. These time-of-use rates are common in other states. Customers with battery storage at their homes or business also could receive credits for feeding power back into the grid when demand is highest.

— Renewable energy: CMP has been criticized for not doing enough to help connect the hundreds of solar-electric projects proposed in recent years. The company recently entered into a settlement agreement with the solar industry aimed at speeding the substation and other equipment upgrades needed to accommodate the influx. The company wants more revenue to expand the effort.

These and other measures would cost between $90 million and $105 million. In preliminary estimates for the PUC, CMP says it would need an additional $45 million to $50 million in the first year, $25 million to $30 million in the second year and $20 million to $25 million in the third year.

NEW LAW'S IMPACT UNCLEAR

It's too early to know how the state's new integrated grid planning law will impact the rate case, but some clarity may emerge in the months ahead.

The law directs utilities to develop a range of scenarios every five years, reflecting potential changes such as higher growth in electricity demand brought on by a shift to electric vehicles and heat pumps. They must forecast the energy they'll need to meet those needs.

This process will kick off when the PUC begins a specified grid planning procedure in November. The utilities then will have 18 months to file plans based on the outcome, which will be subject to public comment.

By December 2023, the utilities also must submit to the PUC a 10-year plan with specific actions for addressing the expected impacts of climate change.

"The commission may use the plan and the input received from interested parties in rate cases or other proceedings involving the transmission and distribution utility," the law states.

The law authorizes the agency to hire an attorney and two utility analysts, and use consultants to study similar investor-owned utilities and regulatory efforts. The roughly $900,000 total cost will be borne by ratepayers.

"The way I think about it is that the integrated grid planning process with stakeholder input may impact utility investment decisions, which ultimately will be evaluated in rate cases," said Philip Bartlett, the PUC's chair.

The long lead time in setting up the reliability targets at the PUC makes it unclear how or if CMP's pending rate case will be affected, said Purington, the CMP executive. But noting that the law contains penalty provisions up to $1 million for failure to meet the standards, he said the company would have to calculate whether it has enough revenue to comply or if it would need to ask for more.

LAST CMP RATE CASE IN 2018

CMP last filed for a distribution rate hike in fall 2018, seeking an increase of $44.7 million. Before that, rates hadn't changed since 2014.

In February 2020, the PUC authorized an increase of $17.4 million, or roughly 7 percent over the then-existing revenue requirement. It equated to a 2 percent hike in an average residential bill, edging up from $86.18 a month to $88.87.

The rate increase was less than half of what CMP had asked for. It was accompanied by a 1 percent reduction in the company's return on equity. The reduction, from 9.25 percent to 8.25 percent, added up to a nearly $10 million penalty over the 18 months it was in effect. It was a record reduction for the PUC, levied in response to CMP's customer service failures following the rollout of a new billing system in 2017.

The action reflected findings of a 2019 Press Herald investigation that found officials at CMP, Avangrid and Iberdrola, their Spanish parent company, cut corners, skirted best industry practices and failed to adequately test a new, error-prone billing system launched in fall 2017. The meltdown of the $56 million billing system revealed a longstanding pattern of corporate mismanagement.

The penalty was lifted last February, after CMP met new service quality benchmarks over the period, although the PUC also opened a new and ongoing investigation into CMP's management and relationship with Avangrid.

CMP is the state's largest electric utility, with 646,000 customers mostly in southern and central Maine. It operates 23,500 miles of distribution lines and 2,900 miles of transmission lines.

Staff Writer Edward D. Murphy contributed to this report.