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Rate case activity slips, COVID-19 proceedings remain at the forefront in August

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Rate case activity slips, COVID-19 proceedings remain at the forefront in August

A relatively modest amount of rate case activity took place in August, with a handful of initial filings and decisions occurring. State regulators and utilities continue to grapple with the short- and long-term effects of the coronavirus pandemic, with several states extending moratoriums on service disconnections while other states head in the opposite direction.

State-specific responses to the COVID-19 pandemic in August

As the reign of the COVID-19 pandemic marches on and policymakers struggle with concerns that a resurgence will occur as social distancing restrictions loosen, there has been an increasing amount of discussion among utility regulators about whether to extend existing mandatory moratoriums on utility service terminations or allow them to expire. Similarly, the utilities have taken different approaches on whether to terminate voluntary moratoriums or extend them further.

On Aug. 31, Avista Corporation subsidiary Alaska Electric Light and Power Co., or AEL&P, submitted a compliance update with the Regulatory Commission of Alaska and stated that effective Oct. 1, the utility will resume disconnections of service for customers who have delinquent balances and who have not submitted to AEL&P a signed statement of COVID-19-related financial hardship and a signed deferred payment agreement. AltaGas Ltd. subsidiary ENSTAR Natural Gas Co. submitted its compliance update with the commission Aug. 26, stating that effective for billings on or after Sept. 1, it would resume service disconnection with respect to commercial, i.e., nonresidential, general-service customers.

Delaware Gov. John Carney extended the state of emergency and each of its related provisions Aug. 5, including the moratorium on utility disconnections until Sept. 4.

The Hawaii Public Utilities Commission voted Aug. 25 to extend the state's moratorium on utility service disconnections through the end of 2020.

The Maryland Public Service Commission issued an emergency order Aug. 31 extending the moratorium on utility service disconnections to Nov. 15 from Sept. 1. Under the emergency order, termination notices could be issued as early as Oct. 1, but service could not be shut off for 45 days following the notice. Residential customers in arrears would have 45 days from receipt of a notice to work out a payment plan with their utility or to apply for energy assistance programs. Customers who take either action would not have their service disconnected.

On Aug. 21, New Jersey Gov. Phil Murphy announced that the state's water, gas and electric utilities agreed to extend their voluntary moratorium on customer shut-offs through Oct. 15 and agreed to offer customers flexible extended deferred payment plans of between 12 and 24 months.

On Aug. 7, Duke Energy Corp. subsidiaries Duke Energy Carolinas LLC and Duke Energy Progress LLC requested authority from the North Carolina Utilities Commission to defer incremental expenses associated with the COVID-19 pandemic for potential recovery in a future rate case. However, the utilities are not seeking to defer lost revenue due to lower electric load.

Pennsylvania Public Utility Commission Chairman Gladys Dutrieuille issued a letter Aug. 10 directing utilities and other interested parties to offer comments regarding amendments to the existing service termination moratorium and other coronavirus-related customer protections. Written comments are due Aug. 18. The PUC had been expected to consider whether it should lift the COVID-19-related mandatory moratorium on utility service disconnections at its Aug. 27 open meeting. However, the PUC postponed the discussion until its next open meeting, scheduled for Sept. 17.

On Aug. 10, the Tennessee Public Utility Commission voted to lift the ban on utility service disconnections effective Sept. 28.

The Public Utility Commission of Texas adopted a transition plan Aug. 27 that allows customers to apply for benefits, including protection from a service shut-off for nonpayment, under its Electricity Relief program through Aug. 31, but the benefits themselves would not expire until Sept. 30.

On Aug. 24, the Virginia State Corporation Commission extended the mandatory moratorium on utility service disconnections through Sept. 16 as the General Assembly debates issues related to COVID-19 in a special session convened Aug. 18.

On Aug. 20, the Public Service Commission Of Wisconsin extended the moratorium, which had been scheduled to expire Sept. 1, to Oct. 1. The commission is to again consider whether to extend or rescind the moratorium at a Sept. 17 meeting.

READ MORE: Sign up for our weekly coronavirus newsletter here, and read our latest coverage on the crisis here.

Rate case filings

During August, seven rate proceedings, three electric and four gas, were initiated, as shown below.

The rate changes requested in these cases aggregate to a net increase of roughly $268.3 million. In one proceeding, which is a limited-issue case, the rate of return was not an issue as it had been determined in a prior rate proceeding. In a separate proceeding, a settlement was filed to avoid a base rate case filing and was silent in terms of return on equity. In the cases where the companies are seeking new authorized returns on equity, the utilities requested equity returns ranging from 9.1% to 10.45%.

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Resolved rate cases

Five rate proceedings, one electric and four gas, were resolved during the month, as shown below.

The rate changes authorized in these cases aggregate to an increase of approximately $209.8 million. In one proceeding, it was resolved by a black box settlement and the equity return was not specified. In a separate case, the company withdrew its initial rate request. In the decisions where new ROEs were specified, the companies were authorized equity returns of 9.35% and 9.9%.

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Significant non-rate-case activity

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

On Aug. 19, the staff of the Kansas Corporation Commission requested that the commission begin an investigation of the Evergy Inc.'s five-year "sustainability transformation plan" that calls for increased capital expenditures focusing on electric transmission and distribution investments, a reduction of approximately $330 million in operating and maintenance expense by 2024 relative to 2018 levels, a reduction of approximately $145 million in fuel and purchased power expense between 2019 and 2024, and expedited CO2 emission reductions via coal plant retirements and the expansion of renewable energy.

The Missouri Public Service Commission has opened a "fact-finding investigation" into Evergy Inc.'s recent decision to implement changes to its business on a stand-alone basis instead of pursuing a merger. The two strategic options had been supported by activist investor Elliott Management Corp. in an effort to unlock incremental value for Evergy shareholders.

The state's electric utilities' responses to Tropical Storm Isaias, which knocked out power to numerous New York customers, some for more than a week, drew the ire of Gov. Andrew Cuomo, who has publicly criticized the utilities for lack of preparedness and poor response to the outages. Following an Aug. 5 directive from Cuomo, the New York Public Service Commission opened an investigation in Matter No. 20-01633. Growing storm response concerns prompted Cuomo to announce Aug. 24 that he intends to propose legislation to expedite and clarify franchise revocation procedures as well as increase penalties for utilities that fail to properly prepare and respond to a storm. As part of the initial investigation related to Tropical Storm Isaias, the staff of the PSC issued notices of apparent violation letters to several of the state's electric utilities Aug. 19 regarding their storm response.

In the context of a quarterly utility earnings review, the Pennsylvania Public Utility Commission on Aug. 6 established the proxy ROEs to be used by the electric, gas and water utilities for the purposes of prospective quarterly revenue requirement adjustments under the utilities' distribution system improvement charges. The PUC unanimously approved a "Report on the Quarterly Earnings of Jurisdictional Utilities" for the 12 months ended March 31. 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, 10.10% for gas utilities and 9.90% for water utilities.

In a legislatively mandated triennial earnings review for American Electric Power Co. Inc. subsidiary Appalachian Power Co., the Virginia State Corporation Commission filed testimony Aug. 13 stating that the company had earned a combined equity return within the target ROE range identified in the statute for 2017, 2018 and 2019 for its legacy generation and distribution businesses.

Commission composition-related developments

The Florida Public Service Commission Nominating Council submitted four applicants to Gov. Ron DeSantis, a Republican, on Aug. 12 for consideration for a four-year term beginning in January 2021. Commissioner Donald Polmann, whose term expires in January 2021, was on the list, in addition to state Reps. Michael La Rosa and Holly Raschein and Sen. Thomas Lee. DeSantis appointed La Rosa on Aug. 21 to a four-year term on the PSC starting Jan. 2, 2021. La Rosa's appointment marks the governor's first PSC pick since taking office.

Regulatory Research Associates is a group within S&P Global Market Intelligence.

For a complete, searchable listing of RRA's in-depth research and analysis, please go to the S&P Global Market Intelligence Energy Research Library.

For a full listing of past and pending rate cases, rate case statistics and upcoming events, visit the S&P Global Market Intelligence Energy Research Home Page.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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