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May 2nd, 2013

Central Maine Power Files For Electric Distribution Rate Increase

by Andrew Price, President & COO

Central Maine Power Company (CMP), the transmission and distribution (T&D) utility for southern and western Maine, filed preliminary paperwork yesterday at the Maine Public Utilities Commission (MPUC) seeking to increase distribution rates for the 2014 to 2019 period. Electricity transmission costs – the costs to build and operate large high voltage power lines that form the backbone of the electric grid in New England - have been the subject of much debate in New England. Transmission costs have increased sharply over the past couple of years and are likely to keep rising in the future. Distribution costs – the costs associated with delivering electricity from the transmission system to your electricity meter - have been more stable and have consequently received much less attention. This may soon change as T&D utilities, like CMP, look to upgrade back-office system and distribution networks to keep pace with rapid improvements underway to transmission systems.

CMP files for a new distribution service rate plan every five years. The last so-called Alternative Rate Plan (ARP) dates back to 2008. The new plan, ARP2014, will set new distribution revenue requirements for the period beginning July 1, 2014 and ending June 30, 2019.

CMP identifies several factors necessitating an increase in rates including: lower potential to achieve additional gains in its operational efficiency, zero to negative growth in electric consumption, and the need for increased capital investments in their distribution network. Replacement of CMP’s 40 year old billing system is singled out as part of the capital investment plan, as is continued integration of the recently deployed advanced metering system. CMP identified the success of the Efficiency Maine Trust, Maine’s “efficiency utility”, as a large factor in its forecast for declining electricity consumption through 2019. CMP is seeking to decouple its distribution revenue from kWh sales, in an effort to insulate its financial return from fluctuations in power consumption.  

The ARP2014 filing requests a total distribution increase of $18.23 million for the year starting July 1, 2014. Additional increases would follow in each of the next 4 years of the plan as depicted in the following table. CMP projects the annual increase to equate to be between 1.9% and 2.6% of customer’s total bills (including electric commodity and transmission costs).

 

Any increases to distribution rates will be in addition to increases in transmission rates, which we expect to continue for several more years. As discussed in a previous blog, CMP is mid-way through a major upgrade to its high voltage transmission network. CMP, a subsidiary of Spanish energy giant Iberdrola, is spending about $1.4 billion dollars to implement the Maine Power Reliability Project (MPRP). Upgrades to the bulk power transmission system often qualify for socialization across New England. About 92% of CMP’s MPRP will be paid for by ratepayers outside of Maine. That is the good news for Maine ratepayers. The bad news for ratepayers is that they will pay about 8% of the cost of out-of-state transmission line upgrades.

It is impossible to say today, how ARP2014 will impact specific CES clients taking T&D service from CMP. The MPUC may modify CMP’s request during its review and another proceeding at the MPUC will take up the challenge of allocating any approved revenue requirement increase among CMP’s various rate classes. CES will monitor the CMP rate case closely and continue to keep you informed as the case unfolds over the next year.

 

Tags: Central Maine Power Company, ARP2014, Electricity, Maine, Maine Public Utilities Commission, Iberdrola, Maine Power Reliability Project, Transmission, Distribution

 

 

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