April 06, 2020
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9 things to know about the CMP billing probe

Troy R. Bennett | BDN
Troy R. Bennett | BDN
Holly Kozlowski of Saco testifies at a Public Utilities Commission hearing about Central Maine Power billing issues in 2019 in Portland. "I'm shaking with outrage," Kozlowski said.

This Thursday, the Maine Public Utilities Commission is scheduled to conclude its investigation into Central Maine Power’s metering and billing system, which the company rolled out more than two years ago.

The $57 million system, called SmartCare, went online in October 2017. The timing could not have been worse. SmartCare’s debut occurred at nearly the same time as one of the worst wind storms in Maine’s history knocked out power across the state. The storm compounded the rollout of a new software platform that regulators now believe was not properly tested before it was put into use.

Soon after, regulators saw an increase in customer complaints of inaccurate bills and an inability to connect with anybody at the company who could provide an explanation. Nearly 100,000 customers saw their bills increase by 50 percent or more compared with the previous winter.

In the following months, angry ratepayers organized online and filed a class action lawsuit. More than a year after the system went online, many customers continued to share stories of what they believed to be inexplicably high bills.

Regulators opened an initial investigation into the company’s billing system in March 2018. The nearly two years of investigations have included two independent audits of the SmartCare system, an analysis of more than 4 million bills, and several days of testimony and cross-examination.

Linda Coan O'Kresik | BDN
Linda Coan O'Kresik | BDN
Margaret Gordon, 69, of Norridgewock, and her daughter, April Gordon, talk about the billing problems they have with CMP.

Through that investigation and a concurrent investigation into the company’s rates, regulators have found numerous problems with how CMP tested SmartCare before rolling it out, dozens of software defects in SmartCare, a long-neglected problem with the company’s “smart meters” and deficient customer service. The investigation has not, however, found an underlying issue with SmartCare that has caused, or is causing, bills that are higher than they should be.

Earlier this month, the commission staff issued a report with recommendations that the three commissioners will use to inform their Thursday decision. In the report, the staff determined that there is no “systemic” issue with the system that is causing high bills. But despite this finding, the commission staff also recommended the commissioners force CMP to perform additional testing of SmartCare. It’s a finding that has left some customers confused: If the system works, why would it need more testing?

CMP believes these findings have exonerated the company. The Office of the Public Advocate, which represents ratepayers before the regulators, however, argues the investigation hasn’t gotten to the bottom of SmartCare’s problems. Meanwhile, commission staff say SmartCare needs more testing and still has lots of problems, but none are “systemic.” The high bills immediately after the rollout of SmartCare was a result of unusually cold weather, staff said.

At a Thursday meeting, the three-member public utilities commission is scheduled to determine how to close the investigation and whether or not CMP should face penalties. The Bangor Daily News produced the following explainer to help the public understand what’s at stake.

Was CMP’s software system overbilling customers?

Commission staff determined that although the system had, and continues to have, problems, there wasn’t any evidence that the system was misreading people’s usage and charging them for electricity they weren’t using. Others are not so sure.

The staff report blames the widespread increases in customer bills in late 2017 and early 2018 on an increase in electricity prices that happened to coincide with an exceptionally cold winter. Electricity usage increases in cold weather.

For example, staff pointed out that 13.7 percent of CMP residential customers saw their usage spike by more than 50 percent from the winter of 2016-17 to the winter of 2017-18. That is nearly identical to the proportion — 13.8 percent — of customers of the state’s other major electric utility, Emera Maine, who saw the same 50 percent increase.

Since both groups of customers saw nearly exactly the same jump, the spike cannot be attributed to one company’s billing system, the report said. What the two utilities had in common was weather, staff noted.

In addition, the utilities’ customers send complaints about their electric company to regulators at roughly the same rates.

However, while the report found there is no systemic overbilling, anecdotal ratepayer descriptions of billing problems persist. The commission staff made it clear in their report that it is not yet ready to give SmartCare a clean bill of health.

“By no means does this finding imply that there have been no CMP billing issues,” the staff wrote. “To the contrary, numerous billing defects and errors affected CMP’s customers. … Some of these defects and errors continue to be unresolved today.”

It’s these continued problems, more than two years after CMP switched billing systems, that led Public Advocate Barry Hobbins to argue that it’s impossible to conclusively determine the system isn’t overbilling customers.

In a response to the staff report, he said that two different audits found “no specific flaw” that led to overbilling. However, “there remain thousands of unresolved high bill complaints,” he said, and the investigation has not solved them.

It is wrong to assume that all high bills can be blamed on the weather and a price increase, Hobbins and his staff said. “It is more reasonable” to believe some number of high bill complaints can be blamed on “some as yet undiscovered flaw in the SmartCare system,” Hobbins said.

The initial audit, which determined weather caused the billing spikes, also identified 30,000 bills — out of 4 million examined, or 0.8 percent — that showed a discrepancy between the bill SmartCare issued and the customer’s meter, Hobbins said.

Still, though the commission staff said both human and software error resulted in the company issuing bills with incorrect information, none of these errors were a “root cause of the significant bill increases many customers experienced” during the winter after the SmartCare implementation.

What problems did the investigation find with SmartCare?

Any rollout of a large and complicated software system like SmartCare is going to have some bugs and glitches that need to be corrected. Liberty Consulting, the group regulators hired to audit SmartCare, said the number of SmartCare’s documented defects were at the high end of the normal range for this type of software rollout.

However, Liberty only examined bills from the first six months following SmartCare’s rollout. As the public advocate pointed out, part of the issue with SmartCare is that people continue to discover new defects. Commission staff noted that it was not the number of defects that it was concerned about. “Instead, the problem was how the company responded to them,” the staff wrote.

The commission’s investigation has identified 73 separate defects with the SmartCare system that affect customers bills. Some of these are called “presentment” defects: errors that cause paper bills to display inaccurate information, despite the underlying data being accurate.

Other defects cause bills to be calculated incorrectly and result in the customer being charged the wrong amount. The commission staff report described CMP billing people incorrectly when they moved in or out of properties, which resulted in CMP billing “the wrong person for the correct usage.” Many other customers didn’t receive any bills at all for months on end.

In most cases, CMP has fixed the defects and made corresponding adjustments to customer accounts. But some defects are still unresolved. Others affected an unknown number of customers.

“These defects cause the Commission great concern,” the commission staff wrote. They noted that even the “presentment” errors cause customers to wonder if their bill is being calculated correctly. “The length of time it has taken for CMP to correct some of these defects in SmartCare only makes matters worse.”

Hobbins argued that it is impossible to determine if all the defects have been identified.

CMP’s attorneys said that “any customer impacts” resulting from “errors and defects” have been addressed by the company, which paid out roughly $1 million to 21,000 customer accounts between October 2017 and November 2019.

Do smart meters have anything to do with these problems?

Smart meters are meters that communicate customer usage information directly to an electric utility, eliminate the need for meter readers and implement real-time pricing. CMP began installing them across its service territory in the early part of past decade, with help from $95 million in federal funding. However, the meters need a “smart” software platform to communicate with to realize their potential benefits. That need is why the company rolled out SmartCare.

The investigation found that many CMP smart meters had a defect that could register the wrong usage under a very specific set of circumstances after an outage. The PUC staff determined these issues to be “rare,” as they only arose during “unusual events” timed with “extremely tight timeframes.” CMP determined that since 2013, 1,649 meters likely over registered usage due to this defect. The company estimated the value of this overbilling at $50,155. It has offered to refund this amount to customers.

Linda Coan O'Kresik | BDN
Linda Coan O'Kresik | BDN
Michelle Ricardo from Dixmont is one of many customers who has been having issues with Central Maine Power.

Commission staff determined that CMP had a “clear reason to address the issue” by 2014. But it did not. CMP’s failure to address this issue “until its customers were already questioning the accuracy of CMP’s metering and billing system… likely contributed to customers’ distrust and lack of confidence in the company’s ability to accurately meter and bill them,” commission staff wrote.

Did CMP not test the system before rolling it out?

CMP did test the system, but it cut corners and deviated from industry testing standards, according to commission staff.

In fact, the staff recommended to the commissioners that they require CMP to hire a third-party to do more testing of their system. CMP has agreed to additional testing, but disagrees that it didn’t properly test its system.

Could CMP go back to its old billing system?

Hypothetically, it could. CMP has been maintaining its old customer billing system at a cost of roughly $1 million a year since the PUC began looking into the company’s billing issues.

Commission spokesperson Harry Lanphear declined to answer a question about the possibility of going back to the old system, citing the ongoing investigation. CMP spokesperson Catharine Hartnett said doing so “would have made no sense” because “as two internal audits and three independent audits have demonstrated, there is no systemic problem with the new system.”

What will regulators do in response to all of this?

Although nothing can be known until the PUC’s three commissioners meet Thursday, the commission’s staff has recommended a series of measures to ensure CMP improves. These are both part of the investigation into the metering and billing system, and the concurrent examination of CMP’s rates, which the commissioners are also scheduled to vote on Thursday.

While commission staff determined that there is no “systemic” problem with SmartCare, they are not ready to let SmartCare, or CMP, off the hook.

Commission staff want CMP to hire an independent inspector to provide additional testing of SmartCare. CMP, not ratepayers, would pick up the bill for this testing. The staff also want CMP to set up a program that would allow customers to contest their bills and have a third-party audit their electricity usage to determine if the bills are accurate.

But while the staff recommended these measures, and others, to help CMP customers, they also encouraged the commission to punish CMP for its missteps.

How does the staff propose to punish CMP?

By reducing the amount of profit CMP is allowed to make. Like utilities across the United States, CMP is allowed to operate as a monopoly in exchange for heavy regulation. Part of that regulation involves determining how much money CMP can make off its ratepayers, who cannot switch providers like they could in a free market.

Staff recommended that the commission reduce the amount of money CMP’s shareholders can make by $4.9 million. It would be the largest penalty the commission has ever given a utility due to poor management, staff noted, adding that the rate of return CMPs’ investors would be allowed to earn would be lower than any other utility in the country.

Staff want that penalty to remain in effect until CMP passes a series of customer service benchmarks related to call times and delayed and inaccurate bills for a full year.

To put that number in perspective, CMP’s parent company Avangrid stands to make about $60 million a year from the proposed New England Clean Energy Connect transmission line through western Maine.

However, despite all this, the staff still recommends that CMP be allowed to increase the rates it charges for delivering electricity, just not as large an increase as the company would have gotten without the penalty. Staff recommended an increase of $20.45 million in annual revenue for the company, or an increase of 8.1 percent. This works out to a 2.45 percent increase in electricity prices for residential customers. It is less than half of the $44.7 million increase CMP requested.

How much can regulators fine CMP?

It’s unclear. State regulators cannot just hit utilities with whatever punishments they want. The Supreme Court has determined that state regulators must allow utilities to make a fair revenue. Failure to do so is an unconstitutional seizure of private property.

In theory, if regulators punish the utility too much, then investors could pull their money out and invest it where they could get a better return on their investment. If that happened, CMP might not be able to raise enough capital to build and maintain its electrical grid, which could ultimately hurt ratepayers.

The regulatory environment and CMP’s monopoly status create a dilemma for regulators. Punish too little, and CMP can, in effect, “get away” with poor management. But punish too much, and regulators risk putting the matter before the courts and could — in theory — end up hurting the company’s ability to deliver service.

It is this narrow avenue for regulation among investor-owned utilities that has led Rep. Seth Berry, D-Bowdoinham, to introduce a bill that would replace both CMP and Emera with a public utility owned by ratepayers.

Has CMP fired anybody for all of these problems?

Not publicly. The company does not disclose personnel matters, CMP spokesperson Hartnett said, but it has increased the number of call center representatives, hired a new vice president for customer service and launched a new nine-person business liaison team that resolves issues between systems and service.

Maine Focus is a journalism and community engagement initiative at the Bangor Daily News. Questions? Email mainefocus@bangordailynews.com.

 


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