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Utility Case Timelines Not Immune To Effects Of COVID-19; Uncertainty Abounds

Owing to the expanding impact of COVID-19 on the way business is conducted in the U.S., state utility commissions continue to impose procedural schedule changes in many pending electric and natural gas rate cases. Schedule adjustments have been adopted in prominent rate proceedings in about a dozen jurisdictions.

Several key rate cases that are in their latter stages have been affected and numerous other cases could be affected if the pandemic strengthens its grip on commerce and public health in the coming weeks.

Regulatory Research Associates, a group within S&P Global Market Intelligence, provided key details on March 17 pertaining to initial measures that were taken by some commissions and utilities across the U.S. to respond to the rapidly-changing situation and on March 26 gave an assessment of several pending rate proceedings that have been delayed. The information provided in these articles and below are intended to draw attention to some noteworthy details that address the industry's response to the pandemic. RRA expects additional developments to occur and will disseminate relevant details in a timely manner.

On March 31, RRA highlighted important regulatory developments that are expected to occur during April.

Developments in pending proceedings

Arizona — The procedural schedule has been amended in the pending Arizona Public Service Co. rate case, Docket No. E-01345A-19-0236. The staff of the Arizona Corporation Commission had been expected to file testimony addressing issues other than rate design on May 20. The revised date for this filing is Aug. 3. The company has requested a $68.6 million electric rate increase. Arizona Public Service is a subsidiary of Pinnacle West Capital Corp.

Arizona — An April 1 order issued by the Arizona Corporation Commission in Tucson Electric Power Co., or TEP's, pending case, Docket No. E-01933A-19-0028, the existing schedule has been extended by roughly two months. A hearing will now begin June 24, opening briefs are due July 14 and responsive briefs are to be filed Aug. 4. TEP, a subsidiary of UNS Energy Corp., which is a subsidiary of Fortis Inc., requested a $114.9 million nonfuel electric rate increase premised upon a 10.35% return on equity (53.08% of capital) and a 7.68% return on a $2.727 billion rate base. The request also specifies a 5.76% return on a $3.884 billion fair value rate base. It appears that TEP's request includes a premium of $19.3 million associated with a return on fair value rate base. RRA calculates that the premium equates to an 11.35% ROE and an 8.21% return on original-cost rate base. After consideration of a $38.9 million decrease in base fuel revenues, the ratepayer impact of the request would be a net $76 million rate increase.

California — The California Public Utilities Commission has canceled all public participation hearings in Edison International subsidiary Southern California Edison Co.'s pending 2021 general electric rate proceeding, Application No. 19-08-013. The bulk of the events, in this case, are scheduled for the second half of 2020. Evidentiary hearings are set to begin July 6 and opening briefs are due Sept. 11.

Indiana  Certain aspects of the remaining schedule in Duke Energy Indiana LLC's, or DEI's, pending electric rate case, Cause No. 45253, were recently amended by the Indiana Utility Regulatory Commission. The Office of Utility Consumer Counselor and intervenors filed their proposed orders/briefs on March 30, and DEI's response brief is now due April 8. The parties said the request to the briefing schedule is due to "many parties [that] are transitioning to working at home pursuant to corporate and governmental guidance and directives." The parties also said they "worked to minimize the requested extension in hopes that it would not impact the ultimate date of the order," which could be issued as soon as late-April. DEI, which is a subsidiary of Duke Energy Corp., initially proposed a $394.6 million two-step base rate increase.

Kentucky — Duke Energy Kentucky Inc., or DEK, a subsidiary of Duke Energy Corp., notified the Kentucky Public Service Commission on March 16 that the company is "keenly aware" that circumstances related to the pandemic have "placed a great strain upon government agencies at the federal, state and local levels." DEK said it is its goal to "avoid placing further burdens upon the commission and to help customers who are affected by present circumstances, by delaying the potential effective date of new electric rates [in its pending rate proceeding, Case No. 2019-00271]." The company said it will refrain from implementing a rate change prior to May 1, "to allow the commission more time to focus upon the immediate impacts of [the pandemic] upon all jurisdictional utilities and the customers they serve." DEK initiated the case in September 2019, when the company proposed a $45.6 million rate hike. A final PSC decision had been expected by April 2.

Maryland  Delmarva Power & Light Co.  A Maryland Public Service Commission public utility law judge on April 1 revised the schedule in Delmarva's pending electric distribution rate proceeding, Case No. 9630, such that the key event dates in the case are now pushed back roughly two weeks. A hearing is now scheduled to begin April 27; a proposed order is due June 9; and a final order is expected July 16. The company, which is a subsidiary of Exelon Corp., recently indicated its support for a $17.3 million rate increase based on a 10.3% return on equity (50.53% of capital) and a 7.19% overall return.

Missouri — In Empire District Electric Co.'s pending rate proceeding, Case No. ER-2019-0374, the Missouri Public Service Commission recently held a procedural conference in which it solicited the parties' input regarding the logistics of handling an upcoming evidentiary hearing, which is set to begin April 14. The PSC said it would "like an update as to any resolved issues and the likelihood of the parties reaching an agreement as to unresolved issues, without discussing the specifics of settlement negotiations." Empire, a subsidiary of Algonquin Power & Utilities Corp., filed for a $26.5 million base rate increase premised upon a 9.95% return on equity (51.91% of capital) and a 7.5% return on a rate base valued at $1.457 billion. A decision is expected in June and at this point the commission has not indicated that this time frame is in jeopardy.

New Hampshire  Liberty Utilities (Granite State Electric) Corp  A hearing to consider a potential settlement scheduled for March 27 and March 31 in Liberty Utilities' pending electric distribution rate case, Docket No. DE-19-064, has been postponed until April 7. Liberty Utilities, an Algonquin Power & Utilities Corp. subsidiary, is seeking a $6.7 million rate increase to recover capital investments since its last rate case.

New Hampshire  Public Service Co. of New Hampshire, a subsidiary of Eversource Energy, agreed to an extension of the procedural schedule for up to three months in the company's pending electric distribution rate proceeding, Docket No. DE-19-057. The New Hampshire Public Utilities Commission staff said that it will explore potential hearing dates in late June and early July. The company has agreed to waive its "statutory right to the 12-month investigation time-frame" for the PUC to consider the merits of the proposed rate change. An interim rate hike was implemented in July 2019. Public Service Co. of New Hampshire supports a $69.3 million base rate increase.

New York  New York State Electric & Gas Corp., or NYSEG, and Rochester Gas and Electric Corp., or RG&E, have been in settlement negotiations since October 2019 regarding their pending electric and gas rate proceedings and recently reached an agreement in principle. The parties to the proceeding were in the final drafting stages of the agreement prior to the pandemic outbreak in New York. The parties to the proceeding held a conference call on March 26, and on the call, NYSEG and RG&E agreed to extend the suspension period in their pending cases until mid-September and present a proposal to address several of the issues related to the effects of the pandemic on these proceedings. NYSEG and RG&E are part of Avangrid Inc. The ultimate parent of NYSEG and RG&E is Iberdrola SA.

North Carolina — Duke Energy Carolinas LLC, or DEC, on March 16 requested that the North Carolina Utilities Commission, or NCUC, take the "extraordinary action" to suspend the procedural schedule in the company's electric rate case, Docket No. E-7, Sub 1214 and postpone a previously scheduled March 23 evidentiary hearing for up to 60 days, "subject to the commission's calendar and an evaluation of the health and safety risks of a hearing commencing on that date." The DEC said this action is "consistent with the currently declared states of emergency and is appropriate to protect the public health and safety, including the health and safety of the commission, its staff, and all parties and their representatives." The company filed rebuttal testimony supporting a $464.7 million rate increase. Notably, the DEC said it would waive its right under state law to implement its requested increase on an interim basis prior to issuance of a final NCUC decision to "alleviate any concern of the commission in this regard." However, the company said it will "carefully evaluate" whether to seek at future commission approval to implement an interim rate increase "or any other appropriate accounting treatment available to the company to mitigate potential impacts from the postponement." A final decision had been expected by April 30. The NCUC approved the DEC's motion later in the day on March 16. DEC is a subsidiary of Duke Energy Corp.

The NCUC took action on March 24 to suspend the procedural schedule in Duke Energy Progress LLC's, or DEP's, pending electric rate case, Docket No. E-2, Sub 1219. The presiding officer found "good cause to suspend the procedural schedule in this matter, including the dates for the filing of direct and rebuttal testimony and exhibits, and to continue the expert witness hearing currently scheduled for May 4, 2020, pending further order of the commission." DEP, which is also a subsidiary of Duke Energy Corp., requested a $586 million base rate increase and had sought to implement the rate change no later than Sept. 1.

Pennsylvania — In UGI Utilities Inc.'s pending gas distribution rate case, Docket No. R-2019-3015162, action has not yet been taken on a recent request by the Bureau of Investigation and Enforcement of the Pennsylvania Public Utility Commission to suspend the procedural schedule and a new schedule be developed "upon the resumption of normal operations of the commission." The bureau said the closing of its offices will "render it extremely difficult, if not impossible" for it to fulfill its duties pertaining to investigating the company's rate change proposal. In addition, the bureau said it will be "severely hampered in its ability to function as an investigating arm and statutory party" to the case if its witnesses and attorneys are unable to access records at the bureau's offices when they are closed. The bureau also noted that recent interest rate actions taken by the U.S. Federal Reserve "make it almost impossible to fairly evaluate the assumptions made in the company's return on equity testimony." The parties are currently due to file testimony in the case on April 22. An evidentiary hearing is set to begin June 3. The parent of UGI Utilities is UGI Corp.

Texas  In a pending rate proceeding, Docket No. 49831, for Xcel Energy Inc. subsidiary Southwestern Public Service Co. on March 26, the Public Utility Commission of Texas administrative law judges granted a one-week extension to the procedural schedule calling for a hearing to begin April 6 and a decision to be issued Sept. 14. The schedule was subsequently abated to accommodate settlement discussions, such that the hearing is to begin April 13. The expected decision date remains intact. The company supports a $136.5 million rate increase.

Recently filed cases

Despite the tumultuous economic developments tied to the pandemic, several utilities recently initiated new rate cases, indicating that not all utility ratemaking activity has ceased.

Delaware  Exelon Corp. subsidiary Delmarva Power & Light Co. filed on March 6 for a $24.3 million electric rate increase in Docket No. 20-0149. Delmarva is seeking a rate effective date of Oct. 6. Delmarva also recently initiated a gas distribution rate case, Docket No. 20-0150, in Delaware, in which the company is seeking a $14.6 million base rate hike. The company proposed a rate effective date of Sept. 21.

Illinois  Ameren Corp. subsidiary Ameren Illinois Co. filed a gas distribution rate case, Docket No. 20-0308, with the Illinois Commerce Commission on Feb. 21, although the details of the request were made publicly available in mid-March. The company seeks a $102 million rate increase. The commission has not yet established a procedural schedule for the case, but a final decision is expected in January 2021.

Michigan  On Feb. 27, CMS Energy Corp. subsidiary Consumers Energy Co. requested a $244.3 million electric base rate increase in Case No. 20697. The Michigan Public Service Commission is required by Michigan statutes to issue a final decision within 10 months of the filing, which is by Dec. 27, 2020.

New Jersey  South Jersey Industries Inc. subsidiary South Jersey Gas Co. filed for a $75.3 million gas distribution base rate hike March 13. A procedural schedule has yet to be established, but based on board rules and past practice, it appears likely that a New Jersey Board of Public Utilities decision would be forthcoming in mid-December, with new rates to take effect on or around Jan. 1, 2021.

Also in New Jersey, it remains to be seen whether the schedule in a rate case that was filed in February 2020 by FirstEnergy Corp. subsidiary Jersey Central Power & Light Co. will ultimately be impacted. The company requested a $186.9 million rate increase in Docket No. ER20020146 premised upon a 10.15% return on equity (52.8% of capital) and a 7.76% return on a $2.599 billion rate base. Currently, a decision is expected by Nov. 19, the end of two consecutive four-month suspension periods provided for in state law. A prehearing conference to establish a schedule, which normally would have occurred by now, has not been held.

New York  Corning Natural Gas Corp. filed on Feb. 27 with the New York Public Service Commission in Case No. 20-G-0101 for approval of a three-year rate plan that would allow the company to implement a first-year rate increase of $6.3 million.

Nevada  Southwest Gas Corp. recently filed with the Public Utilities Commission of Nevada for an aggregate gas rate increase of $38.3 million across its northern and southern districts. A final decision is expected in August.

Oregon  Avista Corp. filed with the Oregon Public Utility Commission for a $6.7 million gas distribution base rate increase on March 16 in Docket No. UG-389. A final decision is likely by year-end 2020.

West Virginia  The Public Service Commission of West Virginia recently adopted a procedural schedule in an expanded net energy cost proceeding, Case No. 20-0262-E-ENEC, for American Electric Power Co. Inc. subsidiary Appalachian Power Co. The schedule provides for staff and intervenor testimony to be filed May 14, rebuttal testimony to be submitted May 27, a hearing to begin June 10 and a final decision is possible in July. Although the procedural order was issued March 18, it remains to be seen whether any of these dates will ultimately be amended. The company seeks an approximate $82 million rate increase that appears to reflect a 9.75% return on equity (50.16% of capital) and 7.28% overall return, as was authorized in the PSC's February 2019 base rate case decision in Case No. 18-0646-E-42T for Appalachian Power and affiliate Wheeling Power. The companies request that the PSC approve new tax reform rider rates effective July 1, 2020, to return the companies' remaining unprotected excess accumulated federal deferred income tax balance of approximately $52 million to ratepayers over a one-year period, thereby offsetting part of the requested $82 million increase in ENEC rates.

Wyoming  PacifiCorp, which does business as Rocky Mountain Power, filed with the Wyoming Public Service Commission for a $7.1 million electric rate increase in Docket No. 20000-578-ER-20 on March 4. The company requested a rate effective date of Jan. 1, 2021.

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

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