Maritime Electric is increasing its electricity rates by about $3.70 a month on Jan. 1.
Jason Roberts, the company's CEO, said the increase is partly to make up for the revenue lost as a result of the lengthy rate application process and the COVID-19 pandemic.
"We're an essential service, so we still have to have trucks rolling and be providing services calls," he said.
The increase, which is about three per cent annually, is based on a typical residential customer who would use about 650 kilowatt hours (kWh). The Island Regulatory and Appeals Commission (IRAC) had approved the increase late last year and scheduled it for March 2020, but Maritime Electric requested it be deferred as a result of COVID-19.
The company had originally applied for a 1.1 per cent increase per year in November 2018. It was set to be in effect over three years starting in 2019. Despite the deferral, the increase is still set to remain in effect until Feb. 28, 2022, as originally intended.
"(So it's) the accumulation of what would have been 1.1s over three years, essentially being three per cent in that one year," Roberts said.
Part of the increase goes toward a revenue shortfall account to help the company recover a forecasted $2.7 million. In its decision, IRAC expressed hesitancy to permit the account because the company has a history of over-earning – for example, it over-earned about $28.5 million between 2011 and 2019.
The account is based on what the company needs to meet its revenue requirement for 2020. IRAC's third-party reviewer suggested Maritime Electric has an "inherent bias" to overstate its revenue requirement to ensure it meets its maximum allowed rate of return in a given year.
However, Maritime Electric has incurred expenses without a corresponding increase in revenue, such as following post-tropical storm Dorian in 2019. As well, there has been no rate increase for three years, and the application was drawn out by about nine additional months, so IRAC permitted the account.
"To balance the interest of both the customer and the utility," Roberts said. "It's been a challenging year, and it takes time to work through some of these processes."
Roberts noted that they won't be seeking to recover revenue related to COVID-19 from customers as the $3.70 rate increase already factors into the shortfall account.
Maritime Electric is also required to file a new rate structure that includes changes to what's known as the residential second block, which allows customers to pay less once they cross a certain threshold of electricity usage.
"The commission has requested that Maritime Electric use this opportunity to present an innovative rate structure," an IRAC summary on its decision reads, "that is reflective of the unique mix of customers and classes of customers that the company serves."
Roberts said a study has already been filed but that the consultation phase – namely with representatives of the farming industry – was delayed along with everything else. Once that phase is completed, a proposal will be made in 2021.
"It's a starting point for discussion on what rates could look like," he said.
Daniel Brown, Local Journalism Initiative Reporter, The Guardian