CHARLOTTETOWN, P.E.I. — P.E.I.’s energy minister is planning to intervene in Maritime Electric’s application to raise power rates by three per cent per year for three years.
Steven Myers told SaltWire Network that he takes issue with the proposed increase in profits the utility is petitioning for from the Island Regulatory and Appeals Commission (IRAC).
“With the cost of living rising and the hurt that’s put on people in their homes, I think it’s important to intervene on this for a number of reasons,” said Myers in a June 23 telephone interview.
“Three per cent is a big raise and a guarantee on a return on investment to 9.95 per cent is pretty disappointing to hear at a time when people are hurting so bad. To think that someone would think they’re entitled to make that kind of guaranteed profit … we’re going to intervene to see if we can stop it.”
Maritime Electric issued a news release on June 20.
“We understand that customers have increased expenses all around them,” said Jason Roberts, Maritime Electric president and CEO. “We have worked to manage operational expenses and investments, and the proposed rate increases are reflective of traditional inflationary increases.”
At a glance
In its rate increase application, Maritime Electric provided a breakdown of the increase in the average customer costs of electricity, 2023-2025. Here’s how the proposed three per cent rate increase breaks down:
- 46 per cent – energy-related costs
- 15 per cent – depreciation
- 13 per cent – return
- 10 per cent – operating costs
- 6 per cent – taxes
- 5 per cent – finance charges
- 4 per cent – other
Roberts spoke to SaltWire Network later that day. He didn’t address the increase in return on equity (ROE) specifically but said the utility’s expenses are going up and it has some pricey activities slated for the coming years like an improved vegetation management plan to reduce the number of power outages caused by trees and branches falling on lines and the demolition of its former power generating station on Cumberland Street in Charlottetown.
“We work very hard to keep our costs down,” said Roberts to SaltWire.
He also said that the proposed three per cent increase is in line with traditional inflation rates and doesn’t mirror the current inflation rate in P.E.I., which is around six to eight per cent right now.
The biggest expense for the utility is purchasing energy from the Island’s wind farms and Point Lepreau in New Brunswick. The remaining energy supply comes from an energy purchase agreement (EPA).
Roberts said his team works hard to negotiate the best possible prices on the contracts.
“We have a very skilled and talented team here, and they devote a lot of effort to sourcing the cheapest supply for our customers, the most reliable supply for our customers,” he said.
“It’s the part where they’re trying to guarantee themselves extra income that I’ve got the problem with." — Environment and Energy Minister Steven Myers
Bigger returns
Myers is not disputing increases to cover rising costs, saying the regulator, IRAC, would likely allow that in any case.
“It’s the part where they’re trying to guarantee themselves extra income that I’ve got the problem with,” he said.
In its June 20 general rate application, Maritime Electric asked to increase its ROE from 9.35 to 9.95.
The added return and the overall rate increase are “closely tied together,” said Myers.
“That (increased ROE) makes up 13 per cent of the total rate increase, so in order to intervene, the province must intervene in the whole rate increase,” said Myers. “It would be over a million dollars of profit extra next year alone if it was approved.
“I think with the climate that we’re living in with the cost of everything going up so fast, it would be ridiculous to allow that to happen.”
In its application to IRAC, Maritime Electric said it is not guaranteed to earn the entire ROE and said in 2020, the utility only netted 9.30 per cent of a possible 9.35.
Maritime Electric’s application said the increased ROE is within the Fair Return Standards for utilities set by the Supreme Court of Canada in 1929.
“In addition to being fair to the utility, adhering to the Fair Return Standard is beneficial for customers who can continue to obtain utility service from a utility operating on a financially strong and sustainable basis,” said the application.
The next step for Myers is to gather a team and prepare an intervention document with details of the desired changes.
Myers also said P.E.I. should re-evaluate the regulations around electricity.
“I think that we have to have a serious look at how other Islands, in particular, deal with the regulation of energy. We have a lot of changes coming through renewables and distributed energy opportunities, from rooftop solar and those types of programs, that are going to change the way electricity is delivered anyway.
"So, we have to make sure that our regulatory model is built in a way that’s not necessarily guaranteed profits but profits earned on targets.”
Alison Jenkins is a reporter with the SaltWire Network in Prince Edward Island. [email protected] @AlisonEBC