Home

Consulting

Maryland PSC Staff Recommend Allowing Higher Pepco, Delmarva SOS Rates to Take Effect

Email This Story
January 25, 2011

Maryland PSC Staff have recommended that increased SOS rates at Pepco and Delmarva, to reflect higher cash working capital costs, be allowed to take effect February 1, 2011, provided that the utilities keep a detailed and accurate account of all amounts received under the rate increase to facilitate any potential refund once a final order on the appropriate level of the SOS administrative charge is issued (Case 9226 & 9232).

As only noted in Matters, the Pepco companies stated their intention to put the higher cash working capital cost recovery into place February 1, 2011, because they argued that the maximum 150-day tariff suspension period had passed without Commission action (see 1/19 for amount of increase per class). The utilities filed revised tariffs with a February 1, 2011 effective date on January 18, 2011.

Staff's comments make no mention of the July 9, 2010 letter order in which the Commission rejected the tariffs filed by the utilities on April 30, 2010, to implement higher cash working capital costs.

The April 30 tariffs sheets followed the utilities' original March 9, 2010 filing of revised tariff sheets to implement the higher cash working capital (CWC) costs. Staff's omission of any discussion of the July 9 letter order is even more perplexing given that "Staff's review of the record indicates that the tariff filed on April 30, 2010 ... whether intended or not intended by the Company, superseded the tariff filed on March 9, 2010, since they constituted the same pages and were for the same purpose, to implement an increase in the SOS rates to reflect an increase in CWC costs."

Thus, Staff's omission of the July 9 letter order does not stem from the fact that the letter order related to the April 30 tariffs rather than the original March 9 tariffs, and Staff did not argue that the July 9 letter order is inapplicable to the March 9, 2010 tariffs since it related to the April 30, 2010 tariffs.

The Office of People's Counsel argued that the utilities may not implement the higher cash working capital costs as a matter of law, arguing that the tariff sheets filed on January 18, 2011 to implement higher cash working capital cost recovery as a matter of law actually represent new tariffs and cannot be implemented under the expiration of the 150 day suspension period of a different tariff.

Notably, the utilities' tariff sheets, in each submission relevant here, only contain all-in generation rates, and not the rate of the individual SOS components such as the level of cash working capital costs (the term all-in as used here meaning including all components of SOS and not other bypassable riders). In other words, the March 9, 2010 tariff reflected higher SOS rates due to higher cash working capital costs through the period ending September 30, 2010, but did not parse out the actual incremental cash working capital rate.

The tariffs filed on January 18, 2011 naturally reflect different SOS pricing periods due to the passage of time, though they reflect the same cash working capital cost additions. However, because the only rate listed is the all-in generation rate, the rates shown are different than those listed in the March 9, 2010 filing, as they represent new SOS pricing periods, which OPC said makes the January 18, 2011 tariffs a new filing which cannot be placed into service by operation of law at this time.

OPC also argued that the March 9, 2010 tariffs were not accurate as they omitted listing "Incremental Cash Working Capital Component" as a component of SOS, which the new tariffs filed on January 18, 2011 do. This further change from the original March 9, 2010 filing contravenes the statutory requirement that the public service company shall "plainly" set forth with 30 days advance notice to the public all "changes" the company proposes to the rate schedules "currently in force," OPC said.

While Staff favors allowing the higher SOS rates to take effect, subject to tracking and potential refund, Staff did offer an alternative argument under which, based on a broad reading of the recent Court of Special Appeals opinion in Severstal Sparrows Point, LLC v. Pub. Serv. Comm'n (see 9/20), SOS rates are not eligible to become effective by operation of law.

Severstal Sparrows Point comes into play because, in the decision, the Court addressed the relationship of Title 4 of the Public Utility Companies Article and the establishment of SOS rates, and Title 4 also contains the provision allowing utilities to place tariffs into service after a 150 day suspension as a matter of law.

In the proceeding leading to Severstal Sparrows Point, the Commission had invoked its broad authority to ensure just and reasonable rates, contained in Title 4, as allowing the mitigation of SOS rates at issue in Severstal Sparrows Point. However, the Court ruled that, "before July 1, 2003, the PSC retained its Title 4 powers with respect to SOS and, after that date, its powers to regulate SOS were limited to those set forth in Section 7-510."

Under a narrow reading, Staff said that the Court's finding would only be read as limiting the Commission's ability to use its "just and reasonable" authority in Title 4 to determine SOS rates. However, if the case were interpreted broadly, Staff noted that Severstal Sparrows Point could be read as making the entirety of Title 4 inapplicable to the SOS process.

If this were the case, then § 4-204, the provision in Title 4 allowing tariffs to automatically take effect after 150 days, would be inapplicable to SOS tariffs, and Pepco and Delmarva would not be able to rely on the operation of law provision to raise SOS rates are they are seeking to do. While Staff discussed this legal view, it was not Staff's primary recommendation.

The Commission will address the issue at its January 26 meeting.

Email This Story

HOME

Be Seen By Energy Professionals in Retail and Wholesale Marketing

Run Ads with Energy Choice Matters

Call Paul Ring

954-205-1738

Energy Choice

Matters

About