Why Should Delaware Care?
With a regulated utility market, most providers operate in monopolies for their service areas, which makes their oversight crucial to keeping costs manageable for consumers. Recent outrage over billing spikes this winter has led a push to reform oversight of Delaware’s only regulated electricity provider, Delmarva Power.
After weeks of outrage from residents concerned about a doubling or even tripling of Delmarva power bills, Gov. Matt Meyer and Democratic leaders are backing a new tough stance on the power company.
The state legislature will begin considering a flurry of bills today that would increase the oversight on power distributors and regulators, while also seeking to rebuff attempts by Delmarva Power to raise or restructure its rates.
Meanwhile, Gov. Matt Meyer is preparing a new, tougher attitude on Delaware’s relationship with its only regulated, for-profit power distributor That includes attempting to coerce Delmarva Power to write-off some of those recently troubling costs to consumers.
“We’ve spoken to them already, and if they don’t do what we say, there are consequences for doing that,” he told Spotlight Delaware this week.
Legislation seeks changes
State Sen. Stephanie Hansen and Rep. Debra Heffernan, the Democratic chairs of the Senate and House energy committees, have filed four bills – Senate Bill 59, 60 and 61, and House Bill 50 – that will enact new transparency and review into rising energy prices. The Senate bills have all received bipartisan support from Republicans as well.
Each of the four bills will be heard in committee hearings today, and public comment can be submitted in person at Legislative Hall, remotely via Zoom or by emailing the bill sponsor through the link below.
To watch the Senate hearing at 10 a.m., click here. To watch the House hearing at 4 p.m., click here.
Perhaps the most significant bill of the bunch is SB 59, which seeks to change the standard by which the Public Service Commission, the appointed state board that regulates public utilities, thinks about proposed increases to consumers.
Delaware currently uses what is known as the “business judgment rule,” which essentially asks whether an investment made by a utility company was in its best interests as a company. Legislators are seeking to instead apply a stricter “prudence” rule, which asks whether it was in the best interests of consumers for such an investment. Delaware is one of only two states to not use the prudence standard, which bill sponsors argue makes it too easy for utilities’ to justify expenses to be recouped by rate hikes.
For example, a utility may decide to expand the size of its facilities, but overbuilds those facilities at a cost of $3 million, even though a smaller $1 million expansion would be adequate to serve its customers and anticipated future growth. Under current standards, the PSC may not be able to disallow the more expensive project, but under a prudence standard it could.
“The reality is that public utilities are regulated monopolies. Practically speaking, a public utility company like Delmarva Power has no competition in its service territory and, therefore, does not face the economic risks that a for-profit, non-utility company must face,” Hansen said in a statement. “We owe it to the public to ensure that our utility companies are held accountable for their actions and won’t be allowed to impose undue price increases on their customers.”
SB 60 places a $125 million annual cap on capital improvements to Delmarva Power projects – which would also limit the amount of rate hikes it could possibly ask from ratepayers – while also prohibiting the company from submitting lobbying expenses or political contributions for reimbursement as well.
The third Senate bill, SB 61, would require that votes taken by PJM Interconnection, the regional network operator that ensures electricity produced by generators makes it to distributors, are public. PJM has come under scrutiny after its delays in approving new renewable energy generators have created an imbalance in the supply-and-demand market, driving up the wholesale cost of power.
Today, utilities vote in private on rules at PJM that have an impact on electric rates, grid reliability, and clean energy projects.
Public advocate could change
Gov. Meyer said that he would soon announce a nomination for Delaware’s Public Advocate – an appointed role that represents the interests of residents in the review of utility rate hikes. The current public advocate, Ruth Ann Price, is still serving in an acting capacity, and Meyer said he would consider her and other candidates for a fully confirmed role.
“We just want somebody who’s going to aggressively look at anything Delmarva [Power] does,” he told Spotlight Delaware.
Meyer said that he would also move to reappoint Commissioner Harold Gray to the Public Service Commission after a decade of service on the five-member panel. Gray is a retired Hercules chemist and a past president of the Organization of PJM States Inc. (OPSI). The terms of his four colleagues don’t expire until next year.
The commission is required to have a political balance – or no more than three members of any political party – and must have representation from each county and the city of Wilmington, per the state code.
When asked why he decided to reappoint a commissioner if dissatisfied with the current tenor, Meyer said that change can come from the top.
“Part of it is getting some new blood in there, but part of it too is just making the tone a little bit different: That, I as governor, want us to be aggressive with Delmarva. I don’t want us to sit back and just kind of nod when they present numbers that people don’t understand,” he said. “We’ve got to get the details.”
The PSC cases
State legislators also plan on Wednesday to take their protests directly to the Public Service Commission, where they will oppose a proposed natural gas rate hike by Delmarva Power.
Delmarva is seeking a $42 million adjustment to its rate structure for about 140,000 natural gas customers, which includes virtually all of New Castle County above the C&D Canal. That increase, if approved, would result in an average monthly bill increase of $13 per customer beginning in April and lasting one year.
The increase seeks to recoup investments that Delmarva made to its service pipeline and a liquid natural gas storage facility, but also costs that it held over from delayed billing during the COVID pandemic.
Rep. Frank Burns is scheduled to attend today’s commission hearing to voice the House Democratic Caucus’ opposition to the rate hike.
“The people of Delaware need relief. Not only is this the largest rate increase Delmarva power has ever requested, it would also increase the amount of money going directly to Delmarva’s shareholders by 10% … This is unacceptable and we urge the PSC to reject this rate increase or require serious amendments prior to approval,” a letter from the lawmakers said.
At the same meeting, Delmarva is also seeking the commission’s approval to begin seeking performance-based rate structures, which essentially means they want the regulator to review and approve potential network investments up to three years ahead of expenditure.
Competing RGGI bills
One place where there isn’t bipartisan agreement is how to utilize the Regional Greenhouse Gas Initiative (RGGI) to the benefit of consumers.
The RGGI is an 11-state cap-and-trade program for carbon dioxide emissions. At its simplest, the initiative places limits on how much carbon dioxide can be emitted by the largest coal, oil and natural gas-fired power plants in the region. To emit the greenhouse gas, power plants must purchase allowances at auction or on a secondary market.
In the 15 years of RGGI’s existence, emissions have fallen 44% as of 2022, which is faster than non-RGGI states.
The prices of the needed allowances spiked sharply last year though, reaching a high of $25.75 per short ton of carbon dioxide before falling slightly. Critics say these costs only drive up the cost of producing power at a time when the region needs more supply.
The proceeds of the quarterly auctions flow back to the states, which invest the funds in energy efficiency projects, low-income assistance and more.
Democrats are lining up behind HB 50, which would create the Green Energy Fund that would assist families who are at or below 350% of the federal poverty rate, which equates to $112,525 in annual income for a family of four or about $54,000 for an individual. Funding would come from the RGGI auction proceeds.
The bill would also allocate additional funding to Delaware’s Low-Income Home Energy Assistance Program, which provides bill pay assistance to those at 60% or less of state median income (SMI), which for a family of four equates to an annual income of less than $72,577.
The legislation would sunset three years after enactment.
“These programs will provide immediate relief to those who need it most, and as an added bonus, they do so without adding any extra cost to the state,” bill sponsor Rep. Heffernan said in a statement.
Meanwhile, Republicans are lining up behind Senate Bill 63, which would remove Delaware from RGGI altogether. Another yet-to-be-filed bill would seek to bypass state programs and send RGGI auction proceeds directly back to all Delmarva Power ratepayers.
“For too long, Delawareans have been saddled with ever-increasing electricity costs due to misguided energy policies. The burden falls hardest on working families, seniors on fixed incomes, and small businesses struggling to keep up. While the push for renewable energy is well-intended, the reality is that Delaware’s current mandates have led to higher costs, unreliable supply, and an overdependence on imported energy,’ the Senate Republican caucus said in a statement.
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