Maine Public Utilities Commission Chair Philip Bartlett answered questions Feb. 13 about two Central Maine Power decisions – one to determine if there were ongoing problems with metering and billing, and one about CMP’s 6.9% transmission rate increase which takes effect March 1. He was meeting with the Legislature’s joint committee on Energy, Utilities and Technology.

The committee wanted to hear some justification for the rate increase after the last two years when customers complained about high usage bills, incorrect bills, meter problems and poor customer service, dating from an October 2017 windstorm that knocked power out to hundreds of thousands of customers for several days. The windstorm coincided with CMP’s launch of its new billing system, SmartCare, and highlighted issues with its smart meters. Many customers didn’t get bills for months; others got duplicate bills or “estimated” bills. Some noted their smart meters were running faster than before. A couple of months later, a severe cold snap occurred at about the time CMP customers received their first bills under the new system, and for over 100,000 customers, the bills were more than 25% higher than they had been the year before, in many cases, double or triple what they had been.  At first, CMP blamed the cold snap for high usage, but as more and more complaints occurred, MPUC, the Public Advocate’s office, and the EUT committee got involved and began to investigate the metering and billing systems and CMP’s performance during the restoration of power after the windstorm.

Bartlett said two Supreme Court decisions, Bluefield Water Works Company vs. Public Service Commission, in 1923, and Federal Power Commission  vs. Hope Natural Gas Company, in 1944, seem to require utility commissions to grant rate increases to uphold shareholder profit. In both cases, according to the court decisions, the Supreme Court held that public utility commissions had the right to set “just and reasonable rates” for the utilities, but could not fail to provide any rate increase, because in the end, they reasoned, it would not be in the public interest. For example, a rate on equity that is too low would mean the utility would have difficulty obtaining credit to do necessary work, or finance a merger, or other things. In Bluefield, the company argued the rate offered by its regulatory commission amounted to a confiscation of its property without due process. Lower courts had dismissed the case, but the Supreme Court said that because the utility was acting in the public interest, and the investment of its property was at stake, the company was entitled to a return on its investments that was generally equal to the investments made by the company. In Hope, the Court examined factors that should be taken into account in setting a “just and reasonable rate.” Those were that rates should be high enough to assure confidence in the company’s financial security; be sufficient to maintain credit and attract capital; and be sufficient to grant corporate equity holders a reasonable rate of return on their investment. However, in the same decision, the Court also held that the original utility commission’s use of “actual legitimate cost” – the original cost less depletion and depreciation – in determining a company’s fair value was reasonable.

These two decisions have guided public utility regulators ever since. “Our discretion is not unlimited,” he said.

MPUC did take adverse action against CMP, however. MPUC is requiring a third party audit of CMP’s SmartCare billing system, and will approve the vendor and the contract before it is signed; MPUC ordered CMP to remediate all defects; to provide a comprehensive maintenance plan for the SmartCare system and required stringent reporting; and complete the patching or replacing of defective meters by March 31. These issues, and a full management audit, will cost CMP shareholders millions of dollars. MPUC is also taking over working with customers still not satisfied with CMP’s handling of their accounts. Bartlett said MPUC recovered $350,000 for customers, and that CMP issued more than $5 million in credits, but also stressed that the investigation did not find any single defect leading to the errors. “That’s not to say they didn’t exist,” Bartlett said. “We have to investigate them case by case.”

In addition, CMP received a much lower rate increase than it had asked for, which will cost shareholders $10 million over 18 months. If CMP does not improve, that period could be extended, Bartlett said.

According to Bartlett, CMP is being watched carefully, but in his opinion, the company’s poor showing in the last couple of years does not rise to the level of declaring CMP unfit to serve as one of Maine’s transmission and delivery utilities. “We believe we have to give the utility a chance to improve, but you have a bill pending to make the T&D network a consumer-owned utility, and the last thing we want to do is jump in front of that process,” he told committee members. “We could decide to vote for divestiture, but that’s the beginning of a years-long process. We have two major T&D utilities who have had pretty major service problems. We need firmer guardrails in place.”

Committee members were not pleased that some of the issues CMP is dealing with were not disclosed earlier, nor have they been completely resolved. Rep. Tina Riley, D-Jay, was surprised that two problems with the meters, which CMP had long denied, were still ongoing. “These meters are still in service,” she asked. “I find that disconcerting.”

Chair Seth Berry, D-Bowdoinham, said in response to Bartlett’s assertion that the only meter problem was the fast clock issue, which needs a patch or to have the meter replaced, that the Liberty audit identified two meter problems. “The fast clock problem was one, but the other is just a meter anomaly,” he said. “This is a defect in over half of CMP’s meters that, when the meter goes down, causes an increase in  meter speed. That continues until the meter is reset by CMP or reset when there is another outage,” he said. “These issues should have been addressed four to six years ago, when they were informed of the problem by the manufacturers. They were aware of it but did nothing. The Liberty report said that no reliable means exist to determine the number of customers affected. How can we say they have been compensated?”

In response to a question from Rep. Jeff Hanley, R-Pittston, Bartlett said there are still 1,250 customers reporting high usage. CMP has about 600,000 customers.

Rep. Christopher Kessler, D-South Portland, said he was concerned that CMP will attempt to make its profits on efficiencies, as it has done in the past. “They cut back on customer service, linemen, and CMP management, so by not spending it they can send it to Spain,” he said.  Bartlett said that this is what the management audit MPUC has ordered will determine.

Rep. Deane Rykerson, D-Kittery, asked how much authority MPUC has to tell CMP it needs to make better management decisions. Bartlett said MPUC does not micromanage, but that the commission has a lot of room to act through investigative and ratemaking power. “We are obviously seriously concerned, which  is why we ordered a management audit,” he said.

Berry wondered if CMP were a free market entity, would it still be in business. “CMP would clearly have suffered tremendously,” Bartlett said. “They have 600,000 accounts and over 100,000 were affected by service problems and billing errors.” Berry also wanted to know if the customers are receiving interest on their “two-year loans” to the company. Bartlett said no interest payments to customers have been ordered. Berry said the industry standard for high bills is fairly low. “CMP could have 2,400 bills monthly that have an error in them and be within the standard,” he said. “That’s 28,000 bills per year that could be wrong.” He also objected to the notion that one in 15 calls could be dropped, and still be within industry standards.

Berry said to Bartlett: “A regulatory expert said that if you regulate without an alternative, you are regulating from weakness,” he told Bartlett. “MPUC is supposed to provide the discipline that a free market would impose. Don’t you need to have a Plan B?”

Bartlett said regulators need to have these tools, but they need to be used with extreme care. “Bankruptcy is not good for ratepayers,” he said. “It’s a big risk.”

The bill that would remove transmission and delivery from CMP and other for-profit T&D utilities and give it to a consumer-owned nonprofit entity called Maine Power Delivery Authority, LD 1646, had a work session after Bartlett’s appearance.