BANGOR, Maine — Customers of Bangor Hydro Electric Co. could see their electricity bills increase by more than $4 a month if state regulators approve two rate changes the company is requesting. Customers of Maine Public Service Co. could also see their bills increase.
On Nov. 1, Bangor Hydro filed a request with the Maine Public Utilities Commission to increase what are known as its “stranded cost” rates. If approved, the rate increase would raise the typical residential customer’s monthly electricity bill, which the company said is about $80, by approximately $1.64, or roughly 2 percent, according to a letter the company sent to customers earlier this month. A typical residential customer uses 500 kilowatt-hours per month.
The proposed stranded cost rate increase would not affect customers of Maine Public Service, Susan Faloon, a spokesperson for Bangor Hydro, told the Bangor Daily News on Thursday.
In addition, Bangor Hydro and Maine Public Service, which currently operate under common ownership and will officially merge at the end of the year, plan to file a joint request in December asking for permission to increase their distribution rates. If approved, that requested change would increase the typical residential customers’ electricity bill by $2.50 a month, or roughly 3 percent, according to another letter sent to customers earlier this month.
If regulators approved both rate-change requests as filed, Bangor Hydro’s typical residential customers could see their monthly bills increase by $4.14 a month. Because of a wide variance in electricity usage by commercial customers, the company doesn’t release estimates for how the requested rate increases would affect commercial customers, but Faloon said most commercial customers will see percent increases of similar magnitude — roughly 2 percent for the stranded cost rate and 3 percent for the distribution rate — depending on the components of their rates.
However, the two rate-increase requests are not done deals, according to Tom Welch, chairman of the PUC. While a “stranded cost” rate-increase request tends to be a “straightforward exercise,” requests to increase distribution rates are often more contentious, Welch said.
“Stranded costs” are those costs related to long-term energy contracts Bangor Hydro signed with electricity generators, like biomass plants, prior to the restructuring of Maine’s electricity industry in 2000. Those contracts force Bangor Hydro to buy electricity for a locked-in price that in most cases is higher than the current market price. By law, electric utilities like Central Maine Power and Bangor Hydro are able to recoup those “stranded costs” by passing them along to existing customers.
Stranded costs end when the long-term contracts — which were signed in the 1980s and 1990s — are complete, Welch said. While most of CMP’s stranded costs are gone, he said Bangor Hydro “has a few more years.”
The company’s previously approved stranded cost rates expire in March 2014. It is asking the PUC to approve a stranded cost revenue increase of approximately $4.7 million, or 23 percent more than the previous rate.
The PUC doesn’t rubberstamp companies’ requests for stranded cost rate increases, but they’re not usually contentious because it’s purely the difference between what Bangor Hydro is forced to buy the electricity for and what it can sell it for on the current market, Welch said.
“We make sure their predictions are accurate and reasonable, but basically it’s not a question of something should or shouldn’t be done, but a question of whether the numbers are accurate,” Welch said. “It tends to be a straightforward exercise.”
Distribution rate change requests are a different matter. Those cases are “more complicated and contentious litigation, as rate cases always are,” Welch said. “That’s more than just checking if the numbers are accurate. It involves a more in-depth review.”
The companies have filed a noticed that it will be requesting that the PUC allow its distribution rates increase beginning on Oct. 1, 2014.
The distribution rate-change request would increase the companies’ revenue by nearly $7 million, or 9.4 percent, according to the letter. It would be the first distribution-rate change to go into effect for Bangor Hydro since 2008 and the first for Maine Public Service since 2007, Faloon said.
Faloon said the companies are requesting the increase in its distribution rate to help it cover necessary investments the company needs to make, including in its distribution network, and to purchase a new customer information management system. The current system is more than 15 years old, she said.
The company is also facing higher health care costs for its employees, she said.
Tim Schneider, the Maine public advocate, said his office looks closely at any utility companies’ request to increase rates for customers. He echoed Welch’s comment that the stranded cost rates are often not contentious. “The costs are what they are,” he said. His office has filed as an intervenor in the case.
Once the companies file their formal distribution rate-change request, Schneider said his office will be taking a close look at it. “Typically,” he said, “what [companies] get is something less than they ask for.”
An initial meeting on the stranded cost rate case is scheduled for the morning of Nov. 19 at the PUC’s offices in Hallowell.