CMP kept $2.6 million too much in customer deposit money, court rules

Leigh Saufley
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Posted April 08, 2014, at 5:49 p.m.
Last modified April 08, 2014, at 7:44 p.m.

PORTLAND, Maine — The Maine Supreme Judicial Court ruled on Tuesday that Central Maine Power Co. kept $2.6 million more in deposit payments than it should have, a move state regulators say threatened to inflate customers’ rates.

In a ruling written by Chief Justice Leigh Saufley, the state’s highest court affirmed a decision by the Maine Public Utilities Commission demanding that CMP correct what the commission called a misapplication of funds.

“That’s $2.6 million that ratepayers, under CMP’s calculation, should have been paying,” said Tom Welch, chairman of the Maine Public Utilities Commission, on Tuesday. “Under the commission’s calculation, that’s $2.6 million that ratepayers shouldn’t have been paying, and the court sided with us.”

The power company argued in court that the conflict resulted from different interpretations of complex rules, and that the commission shouldn’t have been allowed to require a massive shift of already allocated funds without giving CMP fair notice of the panel’s interpretation.

“It was a matter where the rules were … ambiguous,” said CMP spokesman John Carroll. “We interpreted them one way and they interpreted them another. The court gave a lot of deference to the commission, and we respect that. We consider the case resolved.”

CMP delivers electricity to more than 600,000 homes and businesses over 11,000 square miles of central and southern Maine.

In Maine, companies that maintain the transportation and distribution of electricity, such as CMP, and those that generate the electricity being delivered must legally be separate entities, although their fees are combined on customers’ bills.

When customers in the state do not explicitly choose an alternative energy provider, they get a default electricity generator chosen through a commission bidding process and designated as “standard-offer service.”

In some cases, standard-offer customers with poor credit history are required to pay up-front deposits for electricity.

During the 2008-2010 time period reviewed by the commission, CMP kept those deposits when customers fell behind on payments. The commission argued — and the court agreed — that CMP should have been sharing that deposit money with its energy supplier partners, in the same way that the two entities share monthly bills.

Because the suppliers weren’t getting their fair slice of the deposit money, the commission argued, the suppliers were having to carry too much in reserves to cover bad customer debt, while CMP was carrying too little.

That inequity artificially inflated the suppliers’ debt risk, which is factored into how much in “adder” fees CMP tacks on to energy supply costs and, by extension, customer bills.

The court ruled that CMP must shift $2.6 million in deposit funds back toward the suppliers, a move expected to help control the adder fees paid by customers.

“This is basically a direct hit on money they would have otherwise earned, and our position is that had they accounted for it properly, it never would have gone toward their earnings, it would have gone toward ratepayers,” Welch said. “This is a very distinct account, and this money is not going to be charged to ratepayers, period.”

The Maine Public Utilities Commission is responsible for making regulatory rulings and recommendations to the Legislature on electricity, natural gas, water utilities and telecommunications.

Carroll said the court ruling means CMP will have to carry more reserves to cover the company against unpaid customer debt moving forward, while energy suppliers will have to carry less.

“Although we appealed the ruling, we booked this loss last year,” he said. “This doesn’t cause us any particular challenge, and it really has no effect on rates.”

 

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