Commissioner developments, rate case activity prevail during January

After a robust December, rate case activity typically experiences a decrease in January. While more rate cases were filed during the month of January 2022 than in December 2021, overall rate case activity — decisions and filings — took a plunge. However, it was still the second most active January within the past five years, according to preliminary data.

Additionally, non-rate case activity in January was fairly modest, with only a slight increase in merger activity. A handful of changes to state utility commissions occurred in January as terms expired, commissioners resigned and new leadership took over. With the 2022 legislative year beginning, over 39 state legislatures convened last month.

Rate case activity typically tends to slow down in January after an exuberant December, and while rate case filings increased last month compared to the prior months, overall activity declined, as observed by Regulatory Research Associates, a group within S&P Global Market Intelligence.

In terms of rate case filings, January 2022 was the most active January in the past five years with a total of 14 rate cases filed. For rate case decisions, in January there was a significant drop in activity following December 2021, and RRA observed the second-lowest number of January rate decisions in any of the past five years.

Regarding equity returns, regulators authorized five new returns this month, ranging from 9% to 9.6%. In 13 of the 14 cases filed during January, utilities requested equity returns ranging from 8.57% to 10.25%.

Rate case filings

As shown in the accompanying table, 14 rate proceedings were initiated in January, including eight electric and six gas cases.

The rate changes requested in these cases aggregate to an increase of roughly $3.05 billion. In one proceeding, which is a limited-issue case, return on equity was not an issue as it had been determined in a prior rate proceeding. In addition, in the cases where the companies seek a new authorized ROE, the utilities requested equity returns ranging from 8.57% to 10.3%.

Resolved rate cases

There were seven rate proceedings — two electric and five gas — that were resolved during the month, as shown in the accompanying chart.

The rate changes authorized in these cases aggregate to an increase of $188.6 million. In two limited issue rider proceedings, the revenue requirement was calculated using a previously determined equity return. In the decisions where new ROEs were specified, the companies were authorized equity returns ranging from 9% to 9.6%.

Significant rate case activity

Consumers Energy Co. recently filed a petition for rehearing by the Michigan Public Service Commission of portions of a recently decided electric rate case Case No. U-20963. According to the Jan. 21 petition for rehearing, the utility argued that the commission order erred in calculating the amount of 2019 historical disallowance of fleet capital costs, in allocating demand-related distribution costs in the cost-of-service study used to establish rates and in calculating a depreciation expense reduction associated with the removal of 2020 Solar Bid Event and solar land acquisition from rates. Correction of the alleged error with respect to fleet capital costs would result in a $1.2 million increase in the approved revenue requirement, the utility indicated. Correction of the alleged error regarding the 2020 Solar Bid Event and the solar land acquisition would result in an increase to the company's revenue requirement in this case of $3.4 million.

M&A activity

In a filing submitted to the Kentucky Public Service Commission on Jan. 4, Kentucky Power Co. and several other entities formally requested commission approval of a transaction that calls for American Electric Power Co. Inc. to sell its Kentucky Power electric utility and AEP Kentucky Transmission Co. Inc. to Algonquin Power & Utilities Corp. subsidiary Liberty Utilities Co. for about $2.85 billion, including the assumption of roughly $1.2 billion of debt. The PSC has jurisdiction over Kentucky Power, but not over AEP Kentucky Transmission Co.

Significant non-rate case activity

There was a modest amount of other non-rate case activity during the month.

On Jan. 26, members of the Arizona Corporation Commission rejected proposed rules which would have required electric utilities to get all of their power supply from carbon-free resources by 2070.

The New Hampshire Public Utilities Commission, on Jan. 7, maintained its decision denying additional funding for energy efficiency programs.

In the context of a quarterly utility earnings review, the Pennsylvania Public Utility Commission on Jan. 13 established the proxy returns on equity to be used by electric, gas and water utilities for the purposes of calculating the revenue requirements for the prospective quarterly adjustments under the utilities' distribution system improvement charges. Based on the report, the PUC indicated that prospective revenue requirement adjustments under the distribution system improvement charge will reflect ROEs of 9.45% for electric utilities, 10.2% for gas utilities and 9.80% for water utilities. These ROEs are the same as those set following the release of the previous quarterly report in October 2021 covering the quarter ended June 30, 2021.

The Public Service Commission of Wisconsin is taking input from stakeholders regarding the pursuit of performance-based regulation, intended to inform commission decision-making as Wisconsin transitions to zero-carbon electricity consumption by 2050. The commission held a workshop with stakeholders to receive input on the topic on Jan. 11. Various performance incentive mechanisms were discussed, including offering "adders" to a company's overall return on equity for achieving certain performance targets or, vice versa, penalizing the company by reducing the ROE for missing targets.

Legislative and policy activity

On Jan. 7, North Carolina Gov. Roy Cooper issued an executive order to increase statewide climate goals by slashing greenhouse gas emissions in half by 2030 compared to 2005 levels and reaching net-zero emissions "as soon as possible," but no later than 2050.

Pennsylvania Gov. Tom Wolf, on Jan. 10, vetoed a resolution put forth by state legislators in late 2021 opposing the governor's decision for Pennsylvania to participate in the Regional Greenhouse Gas Initiative, or RGGI. In vetoing the resolution, Wolf said the RGGI regulation "is a vital step for Pennsylvania to reduce carbon emissions and achieve our climate goals. Addressing the global climate crisis is one of the most important and critical challenges we face." Wolf stated that regulation is legal under the state's Air Pollution Control Act. Wolf also contends that the "resolution is also procedurally defective, as the General Assembly failed to adopt it within the statutory timeframe prescribed in the Regulatory Review Act."

Despite an official opinion issued by Virginia Attorney General Mark Herring on Jan. 11 stating that the Virginia governor cannot, by executive order or other administrative remedy, withdraw Virginia from RGGI, Gov. Glenn Youngkin issued an executive order seeking to do just that soon after taking office. The order, issued shortly after Youngkin was sworn into office Jan. 15, seeks to "reevaluate Virginia's participation in the Regional Greenhouse Gas Initiative and immediately begin regulatory processes to end it."

Court activity

In a Jan. 10 decision, the New Mexico Supreme Court rejected constitutional and technical challenges to the state's Energy Transition Act, which allows utilities to securitize the costs of transitioning from coal power.

Commission composition-related developments

Several key commission composition-related developments occurred in January.

Commissioner James Griffin has announced he will be leaving the Hawaii Public Utilities Commission upon the end of his term in June. Griffin, who is also the PUC chairman, has been serving as commissioner at the PUC since June 2017, following his appointment to the position by Gov. David Ige. Gov. Ige has not yet appointed a replacement.

Idaho Gov. Brad Little, a Republican, nominated two individuals to the Idaho Public Utilities Commission to replace former PUC President Paul Kjellander, who retired in December 2021, and PUC commissioner Kristine Raper, who left the PUC on Jan. 21 for a job in the private sector. Little nominated John Chatburn to replace Kjellander and will serve a term that expires in January 2023. Little also appointed John Hammond to fill the vacancy created by the departure of Raper. If confirmed, Hammond would serve the remainder of the vacated term which expires in January 2027. Commission appointments are subject to confirmation by the Idaho Senate, which convened Jan. 10.

On Jan. 26, Illinois Gov. JB Pritzker appointed Ann McCabe to a five-year term on the Illinois Commerce Commission. McCabe previously served on the Commission from March 2012-January 2017. McCabe's appointment is subject to confirmation by the Illinois Senate.

The members of the Louisiana Public Service Commission elected commissioners Lambert Boissiere III and Michael Francis as chair and vice chair, respectively. In Louisiana, PSC commissioners are elected, one from each of five state districts. Commission chair and vice chair terms are typically for one year.

On Jan. 11, the Nebraska Public Service Commission members elected Commissioners Dan Watermeier and Mary Ridder to serve as chair and vice chair, respectively. Watermeier, who served as chairman for the past year, is currently serving a commissioner term that extends to January 2025. Ridder is serving a commissioner term that extends to January 2023.

New Hampshire PUC general counsel F. Anne Ross joined the PUC as a special commissioner for a term extending into 2024 following her confirmation at the New Hampshire Governor & Executive Council's Jan. 12 meeting. The state's utilities, consumer advocates and the New Hampshire Department of Energy had called for the appointment of one or more special commissioners to assist in the commission's regulatory proceedings following recent commissioner appointments to the PUC that could present conflict of interest concerns in certain dockets.

The North Dakota Public Service Commission is down a member after Gov. Doug Burgum appointed Commissioner Brian Kroshus to head the North Dakota Office of State Tax Commissioner. Kroshus' new position began Jan. 4. While Burgum has not yet announced a replacement, whoever the governor appoints must run for election in November 2022 if they wish to serve the remainder of Kroshus' term, which expires in December 2026.

Jehmal Hudson became chairman of the Virginia State Corporation Commission, effective Feb. 1, replacing Judith Jagdmann. Hudson was elected chairman on Jan. 27, by his fellow commissioners as part of the traditional annual rotation of the chairmanship among the commission members. He will serve a term as chairman that extends to Feb. 1, 2023; his term as a member of the commission extends to February 2026.

Additionally, the Virginia House of Delegates Commerce and Energy Committee held an interview and certification hearing for Angela Navarro on Jan. 18, but a resolution to reelect her was not advanced to the full House at that time. Assuming a resolution advances and is passed by the full House, a similar process would be conducted in the Senate.

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