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Docket UE20942
Order UE16-04

IN THE MATTER of an application by Maritime Electric Company, Limited to approve the rates, tolls and charges for electric service for the period beginning March 1, 2016 and for certain approvals incidental thereto;

AND IN THE MATTER of the Electric Power Act, R.S.P.E.I. 1988, Cap. E-4 and pursuant to the Island Regulatory and Appeals Commission Act, R.S.P.E.I. 1988, Cap. 1-11;

BEFORE THE COMMISSION

on Monday, the 29th day of February, 2016.

J. Scott MacKenzie, Q.C., Chair
Douglas Clow, CPA, CA, Vice-Chair
John Broderick, Commissioner
Mike D. Campbell, Commissioner

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Order

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WHEREAS on July 23, 2015, Maritime Electric Company, Limited ("Maritime Electric") filed an application with the Island Regulatory and Appeals Commission (the "Commission") seeking to amend rates of depreciation with respect to Maritime Electric's several classes of property for the period beginning January 1, 2016 (Commission Docket UE#21603) ("Depreciation Rate Application"); 

AND WHEREAS on October 28, 2015, Maritime Electric filed an application with the Commission seeking to approve proposed amendments to the rates, tolls and charges for electric service for the period beginning March 1, 2016 (Commission Docket UE#20942) ("General Rate Application"); 

AND WHEREAS notices of the Depreciation Rate Application and the General Rate Application were published by the Commission on August 7, 2015 and October 28, 2015, respectively; 

AND WHEREAS on January 29, 2016, Maritime Electric filed with the Commission an agreement between Maritime Electric and the Government of Prince Edward Island ("Agreement"), which Agreement addresses or agrees to amend certain matters raised in the General Rate Application and the Depreciation Rate Application, as well as other matters relating to electric service in the Province of Prince Edward Island; 

AND WHEREAS on January 29, 2016, the Commission issued a procedural order directing that the General Rate Application and the Depreciation Rate Application be consolidated and heard together in Commission Docket UE#20942 (the "Amended Application"); 

AND WHEREAS a Notice of Public Hearing with respect to the Amended Application was published by the Commission on January 29, 2016; 

AND WHEREAS the Notice of Public Hearing outlined certain details of the Agreement and invited members of the public to comment on the Amended Application and to participate in a public hearing; 

AND WHEREAS Maritime Electric filed an updated application record with the Commission on February 5, 2016; 

AND WHEREAS interrogatories were exchanged and public comments were received with respect to the Depreciation Rate Application, the General Rate Application, and the Amended Application; 

AND WHEREAS a public hearing was held with respect to the Amended Application on February 25, 2016; 

AND WHEREAS the Government of Prince Edward Island was granted formal intervener status in the Amended Application and permitted to call evidence and cross-examine witnesses at the public hearing; 

AND WHEREAS the Environmental Coalition of Prince Edward Island Ltd. was permitted to ask questions of witnesses and make an oral submission at the public hearing; 

AND WHEREAS the Leader of the Official Opposition was permitted to make an oral submission at the public hearing; 

AND WHEREAS no other individuals requested intervener status or the opportunity to make an oral submission at the public hearing; 

AND UPON considering the written and oral submissions received from the parties and from members of the public;  

NOW THEREFORE pursuant to the Electric Power Act, R.S.P.E.I. 1988, Cap. E-4 and pursuant to the Island Regulatory and Appeals Commission Act, R.S.P.E.I. 1988, Cap. 1-11;

IT IS ORDERED THAT

Rates, Tolls & Charges

1.  Maritime Electric shall charge the rates, tolls and charges for electric service as set out in Appendix 1 hereto for the period from March 1, 2016 to February 28, 2019, which rates, tolls and charges are based upon the forecast values and input values set forth in Appendix 2 hereto.

Return on Average Common Equity

2.  Maritime Electric shall be entitled to earn a maximum return on average common equity of 9.35 per cent for each of the calendar years 2016, 2017 and 2018, and thereafter until varied by the Commission.

Energy Cost Adjustment Mechanism

3.  The Energy Cost Adjustment Mechanism ("ECAM") set forth in Appendix 3 hereto shall apply to the approved basic rates for meter readings taken on or after March 1, 2016.  

4.  The base rate per kWh for use in the ECAM shall be as set forth in Appendix 2 hereto for each of the years March 1, 2016 to February 28, 2017; March 1, 2017 to February 28, 2018; March 1, 2018 to February 28, 2019, and thereafter until varied by the Commission.

Rate of Return Adjustment

5.  During the period from March 1, 2016 to February 28, 2019, Maritime Electric shall refund to ratepayers the balance of the Rate of Return Adjustment ("RORA") account accumulated to December 31, 2015, being $15,156,765.  The balance of the RORA account shall be refunded at the rates as set out in Appendix 2 hereto for each of the years March 1, 2016 to February 28, 2017; March 1, 2017 to February 28, 2018; March 1, 2018 to February 28, 2019, and thereafter until varied by the Commission. 

6.  Any over earnings accumulated during the period from January 1, 2016 to February 28, 2019 shall be deposited to a separate RORA account, the balance of which shall be refunded to ratepayers commencing March 1, 2019, or as further directed by the Commission. 

7.  With the exception of any amounts over-refunded to ratepayers, Maritime Electric shall not be permitted to recover any amounts from the RORA account(s), and in particular, Maritime Electric shall not be permitted to recover from the RORA account(s) in the event it does not attain a return on average common equity of 9.35 per cent. In the event of an over-refund, Maritime Electric shall not be permitted to recover all or part of the over-refund from ratepayers without the approval of the Commission.

Weather Normalization Mechanism

8. The Weather Normalization Mechanism and Reserve Account set forth in Appendix 4 hereto is approved, on an interim basis, for the period January 1, 2016 to February 28, 2019.  The Commission shall determine the appropriateness of continuing a permanent Weather Normalization Mechanism and Reserve Account.

Depreciation Rates

9.  Maritime Electric shall adopt the depreciation rates set forth in Appendix 5 hereto, effective as of January 1, 2016 (the "Depreciation Rates").  The Depreciation Rates shall remain in effect until varied by the Commission. 

10.  Maritime Electric shall record and incorporate into the Depreciation Rates the recommended amortization of the accumulated reserve variance associated with the Charlottetown Thermal Generating Station commencing in 2016 and as outlined in Appendix 6 hereto.

Further Studies

11.  Maritime Electric shall undertake a rate design study to consider changes to the multi-block residential energy pricing structure, and related changes to Maritime Electric's other rate structures.  The rate design study and a proposed rate structure shall be filed with the Commission on or before April 30, 2018. 

12.  On or before April 30, 2017, Maritime Electric shall prepare and file with the Commission a Point Lepreau cost allocation classification study. 

13.  On or before June 30, 2018, Maritime Electric shall file with the Commission an updated cost allocation study based on financial results to December 31, 2017. 

14.  On or before June 30, 2018, Maritime Electric shall file with the Commission a decommissioning study with respect to the Charlottetown Thermal Generating Station. 

15.  On or before June 30, 2018, Maritime Electric shall file with the Commission an updated depreciation study based on financial results to December 31, 2017. 

Annual & Monthly Reporting

16.  In addition to all existing reporting requirements and the reporting requirements set out herein, Maritime Electric shall file with the Commission on or before February 28 in each of 2017, 2018 and 2019: 

1. the actual values associated with each of the inputs set forth in Appendix 2 hereto, based on Maritime Electric's actual financial results for the preceding year; 

2. the year-end balance of the RORA account(s); 

3. the year-end balance of the Weather Normalization Reserve Account; 

4. the audited rate of return on average rate base for the previous fiscal year; and 

5. the audited rate of return on average common equity for the previous fiscal year.

17.  In addition to Maritime Electric's current monthly reporting requirements, Maritime Electric shall file with the Commission as part of its monthly reports: 

1. the monthly balance of the RORA account(s); and 

2. the monthly balance of the Weather Normalization Reserve Account.

18.  Maritime Electric shall file with the Commission, within six (6) months from the date of this Order, confirmation of its rate base, including details of all accounts comprising its rate base.

Material Change

19.  as agreed to by the parties, Maritime Electric, as applicant, and the Government of Prince Edward Island, as intervener and a party to the Amended Application, shall notify the Commission of any material change to any of the inputs set forth in Appendix 2 hereto in a timely manner.

Reasons to Follow

20.  The Commission shall provide detailed reasons for the Order granted herein in due course.

DATED at Charlottetown, Prince Edward Island, this 29th day of February, 2016.

BY THE COMMISSION:

J. Scott MacKenzie, Q,C., Chair

M. Douglas Clow, CPA,CA, Vice-Chair

John Broderick, Commissioner

Michael Campbell, Commissioner

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APPENDIXES:
Appendix 1
Appendix 2
Appendix 3
Appendix 4
Appendix 5
Appendix 6

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Notice:

Section 12 of the Island Regulatory and Appeals Commission Act reads as follows:

12. The Commission may, in its absolute discretion, review, rescind or vary any order or decision made by it, or rehear any application before deciding it.

Parties to this proceeding seeking a review of the Commission's decision or order in this matter may do so by filing with the Commission, at the earliest date, a written Request for Review, which clearly states the reasons for the review and the nature of the relief sought.

Sections 13.(1), 13(2), 13(3), and 13(4) of the Act provide as follows:

13.(1)   An appeal lies from a decision or order of the Commission to the Court of Appeal upon a question of law or jurisdiction.

(2) The appeal shall be made by filing a notice of appeal in the Court of Appeal within twenty days after the decision or order appealed from and the rules of court respecting appeals apply with the necessary changes.

 (3) The Commission shall be deemed to be a party to the appeal.

(4) No costs shall be payable by any party to an appeal under this section unless the Court of Appeal, in its discretion, for special reasons, so orders.

NOTE:

In accordance with IRAC's Records Retention and Disposition Schedule, the material contained in the official file regarding this matter will be retained by the Commission for a period of 5 years.