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April rate case activity dwindles as coronavirus becomes more widespread

A modest amount of regulatory activity occurred during April, as the coronavirus pandemic continues to weave its way into every facet of Americans' daily lives. In any given year, rate case filings typically ramp up in April. However, this year, investor-owned electric and natural gas utilities have been filing rate cases in recent weeks at their slowest pace in nearly a decade and COVID-19 is the likely culprit. There are also delays occurring in rate cases and other pending proceedings due to social distancing requirements.

The coronavirus pandemic is also having myriad procedural and policymaking impacts as there have been delays in elections in certain states. In addition, at this point in the year, legislative activity usually ramps up as state legislatures are typically in the thick of their sessions. However, a majority of states have postponed or adjourned early amid the pandemic, effectively stranding pending legislation in a year when there has been a significant amount of energy-related legislation on the agenda.

States have taken action to preserve universal service, with mandatory or voluntary moratoriums on service terminations in place in all 53 of the state-level jurisdictions followed by Regulatory Research Associates, a group within S&P Global Market Intelligence. In addition, some commissions have begun to address COVID-19 cost recovery issues.

State-specific responses to the COVID-19 pandemic taken in April

The Arizona Corporation Commission recently initiated a proceeding in which the commission is to track the financial impact of the coronavirus pandemic on the state's regulated utilities and ratepayers. In an April 24 filing opening the docket, Commissioner Lea Marquez Peterson said she was not satisfied with the steps taken by the commission, to address the pandemic and noted that she had "some concerns that the commission itself is not taking a more proactive role in seeking to understand and address the financial impacts of COVID-19 on utilities and customers."

On April 10, the Arkansas Public Service Commission issued an order authorizing the utilities to establish regulatory assets to record costs resulting from the suspension of disconnections. In future proceedings, the commission will consider whether each utility's request for recovery of these regulatory assets is reasonable and necessary.

The California Public Utilities Commission has joined other state utility regulators that are beginning to address cost recovery issues for utilities with respect to the COVID-19 pandemic by authorizing each utility to begin tracking such costs. At its April 16 meeting, accessible via remote access online due to the pandemic, the PUC approved a resolution authorizing electric, gas, communications, and water and sewer corporations to establish memorandum accounts to track and seek reimbursement of expenditures associated with helping their customers during the pandemic.

On April 15, the District of Columbia Public Service Commission issued an accounting order authorizing Exelon Corp. subsidiary Potomac Electric Power Co. and AltaGas Ltd. subsidiary Washington Gas Light Co. to defer incremental costs associated with the COVID-19 pandemic.

On April 14, the Idaho Public Utilities Commission adopted a staff proposal to open an investigation to address whether and to what extent Idaho public utilities should be authorized to defer incremental COVID-19 related expenses into a regulatory asset for possible future recovery.

In an order issued April 9, the Kansas Corporation Commission modified an existing stay on all dockets currently before the commission and imposed certain other requirements. Specifically, all existing filing deadlines are to be extended by 30 days. If a party needs an additional extension, they are to request such action in the applicable docket. All hearings are suspended until further notice. All statutory deadlines for commission orders are to remain suspended in pending proceedings until "stay at home" restrictions are lifted or the commission rules otherwise. The commission said that effective immediately, it will resume accepting filings and applications in new proceedings.

The Maine Public Utilities Commission opened an investigation on April 28 to seek input on and analyze how the COVID-19 pandemic will impact the state's energy utilities and customers' ability to pay their utility bills. In addition, the PUC intends to review any new federal efforts or resources that may be available to customers to manage their utility bills, as well as any federal resources available to assist utilities with their ongoing obligations.

The Maryland Public Service Commission joined the ranks of regulators who are getting out ahead of cost recovery issues for utilities with respect to the COVID-19 pandemic, by authorizing each utility to create a regulatory asset to track the incremental costs related to COVID-19. Costs eligible to be deferred as a regulatory asset include expenses incurred "in their efforts to serve customers during this period." The PSC's April 9 order allows the deferral of costs incurred beginning March 16, the date Gov. Larry Hogan issued an executive order banning service terminations for nonpayment and prohibiting the imposition of late fees during the state of emergency, which began on March 6, pursuant to a prior executive order.

Administrative law judges of the New York Public Service Commission issued rulings April 7 denying requests by a consumer group calling for new data to be filed in pending rate cases reflecting the public health and economic crisis resulting from the novel coronavirus.

Rate case filings

During April, four rate proceedings, two electric and two gas, were initiated, as shown below.

Three of the four companies are proposing rate reductions and the rate changes requested in these cases aggregate to a net increase of roughly $49.4 million. Three proceedings are updates under the utilities' formula rate plans, with one proceeding incorporating a deadband around a previously authorized ROE benchmark. In the cases where the companies are seeking new authorized returns on equity, the utilities requested equity returns of 8.38% and 10.95%.

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Resolved rate cases

There were seven rate proceedings, five electric and two gas, resolved during the month, as shown below.

The rate changes authorized in these cases aggregate to a net increase of approximately $44.7 million. In one settled case, the return on equity was not specified. In another proceeding, the utility issued a letter formally withdrawing its rate case petition and requested that the commission close the docket. A third case was a limited issue proceeding that utilized a previously determined equity return. In the decisions where new ROEs were specified, the companies were authorized equity returns ranging from 9.2% to 9.8%.

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Significant other rate case activity

Sempra Energy subsidiaries Southern California Gas Co. and San Diego Gas & Electric Co. on April 9 filed a joint petition to modify the 2019 general rate case final decisions by the California PUC. The utilities are seeking to implement rate adjustments for third and fourth attrition years 2022 and 2023 consistent with the commission's recent rulemaking to change the current three-year rate case cycle for energy utilities to a four-year cycle.

Intervenors in Edison International subsidiary Southern California Edison Co.'s, or SCE's, pending electric rate case (Application 19-08-013) are challenging the utility's request to institute interim rates this summer, claiming the increase would be counterproductive amid the current COVID-19 pandemic. The Utility Reform Network, the Public Advocates Office and the Small Business Utility Advocates have requested the California Public Utilities Commission order a stay of SCE's request for interim rate recovery. In reply comments submitted April 6, SCE argues that the interim increase is needed to help maintain its financial stability as well as promote rate stability.

ALLETE Inc. subsidiary Minnesota Power Inc. has proposed a "creative" resolution to its pending electric rate case with the Minnesota Public Utilities Commission by reducing its request to recover only revenue from a large, wholesale market contract that expired in April. The utility on April 23 filed with the PUC an emergency petition for approval to move asset-based wholesale sales credits to the fuel adjustment clause and resolve the rate case.

Significant non-rate case activity

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

On April 15, Exelon subsidiaries Baltimore Gas and Electric Co.Delmarva Power & Light Co. and Potomac Electric Power Co., along with FirstEnergy Corp. subsidiary Potomac Edison Co., filed proposals with the Maryland PSC under the state's battery storage pilot program. The Exelon companies propose six battery energy storage system projects totaling 7 MW of nameplate capacity and initial usable capacity of 23.5 MWh.

In testimony filed on April 17, the New Jersey Division of Rate Counsel urged the New Jersey Board of Public Utilities to dismiss four electric vehicle proposals proffered by Public Service Enterprise Group Inc. subsidiary Public Service Electric and Gas Co., or PSE&G, under its Clean Energy Future plan. According to the rate counsel, the programs proposed by PSE&G would "place non-utility property that is not used and useful in the public service into rate base and to permit PSE&G to offer electric vehicle services already available in the competitive market. PSE&G's program would use ratepayer funds to allow PSE&G to undercut competitors, eliminating their ability to provide those services at competitive prices without ratepayer funding."

The New Mexico Public Regulation Commission voted unanimously on April 1, to approve PNM Resources Inc. subsidiary Public Service Co. of New Mexico's proposal to abandon San Juan units 1 and 4 and to securitize the associated costs. In so doing, the commission, or PRC, adopted recommended decisions issued on Feb. 21, by hearing examiners assigned to the abandonment/securitization proceeding, as well as slight modifications including an errata hearing examiner recommendation that was issued on March 2. Final written PRC order or orders are expected to be issued in the near future.

The New York PSC on April 23 authorized the New York State Energy Research and Development Authority to procure at least 1,000 MW of offshore wind in 2020 "in order to maintain New York's trajectory in meeting its clean energy goals." In addition, the PSC's approval provided the authority, or NYSERDA, with the flexibility to evaluate a range of bids totaling 2,500 MW "if the pricing and other terms are sufficiently compelling."

Legislative activity

Policymakers across the country have been grappling with the effects of the coronavirus pandemic for several weeks causing many states to put their legislative sessions on hold. Several state legislatures that are still in session have introduced utility-related legislation in connection with COVID-19, mainly related to prohibitions on service disconnections.

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On April 9, Republican Alaska Gov. Mike Dunleavy signed Senate Bill 241, which, among other things, prohibits a public utility from disconnecting residential utility service for nonpayment if the customer is experiencing financial hardship related to the COVID-19 public health disaster emergency. A public utility is to offer a deferred payment agreement allowing repayment over a period and may not impose interest of late fees on a ratepayer who fulfills the terms of a deferred payment agreement. The legislation makes it a criminal offense for customers to make false statements that they were adversely affected by the virus.

On April 13, legislation was introduced in New Jersey that would direct the New Jersey Board of Public Utilities to prohibit any electric or gas utility from charging a budget billing plan residential customer if the customer incurred a service interruption due to having sustained damage to its residence from the effects of a major emergency event.

In New York on April 8, Assembly Bill 10261 was introduced, which would suspend all utility payments for 90 days in response to the coronavirus pandemic. In addition, late fees would not be collected for any suspended payments. AB 10261 was referred to the committee on consumer affairs and protection.

Virginia Gov. Ralph Northam's office announced April 12 that Northam had signed comprehensive energy legislation known as the Clean Energy Economy Act, which includes a mandate for the state to phase-in a 100% renewable portfolio standard. Northam also signed the Clean Energy and Community Flood Preparedness Act, which includes provisions for a carbon dioxide cap and trade program that comports with the requirements of the Regional Greenhouse Gas Initiative.

Court Activity

In a brief filed with the Supreme Court of South Carolina, Duke Energy Corp. argued that more than $800 million of coal ash cleanup costs disallowed by the Public Service Comm. of South Carolina in previously decided rate cases should have been approved regardless of which Carolina state the ash was located in.

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. (Only for client)

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. (Only for client)

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