On April 9, 2013, the Maryland Public Service Commission opened an official investigation into FirstEnergy subsidiary Potomac Edison's meter reading, usage estimation and billing practices.
The Commission hereby initiates an investigation into PE’s meter reading frequency, estimation of bills, and compliance with its Tariff, and delegates this matter to the Public Utility Law Judge Division (“PULJD”) for appropriate proceedings.
The investigation into PE’s meter reading frequency, estimation of bills, and compliance with its Tariff is not limited to the Tufts and Sugarloaf Conservancy Complaints; the PULJD shall determine the full scope of the investigation, and designate additional issues as appropriate. The PULJD shall notify the parties, including the Office of People’s Counsel, of the date and time of a scheduling conference at which deadlines are to be set for, inter alia, PE’s production of documents. The Commission hereby initiates an investigation into PE’s meter reading frequency, estimation of bills, and compliance with its Tariff, and delegates this matter to the Public Utility Law Judge Division (“PULJD”) for appropriate proceedings.
The investigation into PE’s meter reading frequency, estimation of bills, and compliance with its Tariff is not limited to the Tufts and Sugarloaf Conservancy Complaints; the PULJD shall determine the full scope of the investigation, and designate additional issues as appropriate. The PULJD shall notify the parties, including the Office of People’s Counsel, of the date and time of a scheduling conference at which deadlines are to be set for, inter alia, PE’s production of documents.
The MD-PSC is responding to the complaints of Mr. Richard Tufts and Sugarloaf Conservancy that were filed last year. It looks like the PSC has heard its consumers loud and clear and has had enough of Potomac Edison's comedy of errors excuses. Nobody is buying Potomac Edison's lies any more.
I've been circling round this issue in my spare time looking for the company's motivation for this continual incompetence, which coincided with the Allegheny Energy/FirstEnergy merger. What's in it for FirstEnergy?
Potomac Edison's response to Mr. Tufts' complaint finally explains the game.
I've been circling round this issue in my spare time looking for the company's motivation for this continual incompetence, which coincided with the Allegheny Energy/FirstEnergy merger. What's in it for FirstEnergy?
Potomac Edison's response to Mr. Tufts' complaint finally explains the game.
For more than thirty years, Potomac Edison's Maryland tariffs have provided that the
Company will read most meters every two months. This practice saves customers money, because fewer meter readers need to be used. For example, in Potomac Edison's last rate case in 1994, the expense filed for meter reading was just under $1.3 million for meter reading; if meters were going to be read every month, that requirement would have had to be significantly higher.
Footnote: In fact, even with reading every two months instead of monthly, the Company was spending $2.0 million on meter reading (even without taking into consideration the new hires and other recent measures discussed elsewhere in this response), substantially more than is collected in rates for this function.
Potomac Edison has been losing money on its meter reading function to the tune of $700,000 per year. This could be easily remedied by filing a new rate case with the Maryland PSC to collect this difference. However, the filing of a new rate case could also cause Potomac Edison to lose substantially more than $700,000 per year by setting a new rate of return for the company. The rate of return that the company is allowed to earn on fixed costs in Maryland is currently set at 11.9%, and is the second highest ROE in FirstEnergy's distribution affiliate stable. If Potomac Edison filed a new rate case, the ROE would be updated and adjusted to today's financial realities. It is in FirstEnergy's financial interest to continue to collect rates set in the 1993/1994 settlement. If it were not, the company would file a new rate case. It has not done so.
The annual loss on meter reading expense compared to the risk to ROE stemming from a new rate case was a loss Allegheny Energy was willing to accept. But when Allegheny Energy merged with FirstEnergy, apparently that was no longer true. FirstEnergy wanted the best of both worlds -- collection of the full amount of meter reading costs AND the 1993/94 rate case ROE. But because FirstEnergy couldn't collect more for meter reading AND maintain an 11.9% ROE, FirstEnergy opted to simply cut the cost of meter reading by slimming down their meter reading staff and not performing scheduled meter readings required by law. If Potomac Edison cut their meter reading expense to match the amount they were collecting, the loss would stop and the company could keep its 11.9% ROE, having its cake and eating it too!
But now it appears the game is up. If I were the Maryland PSC, I would require Potomac Edison to issue a refund to customers amounting to the difference between what Potomac Edison spent and what it would have cost to perform meter readings as required by law (around $700K per year, according to Potomac Edison.) And then, as a punitive measure, I would make them file a new rate case. :-) How about it, FirstEnergy?
FirstEnergy has also been pulling the same stunt in other states in which it operates. West Virginia's ROE is 10.5% and was set in 2007. Pennsylvania's ROE is 11.5% set in 1994. These jurisdictions are where FirstEnergy affiliates have also been failing to read meters. Coincidence? I think not.
West Virginia legislators are not happy with Potomac Edison's excuses. Could an investigation by the West Virginia PSC also be on the horizon?
The annual loss on meter reading expense compared to the risk to ROE stemming from a new rate case was a loss Allegheny Energy was willing to accept. But when Allegheny Energy merged with FirstEnergy, apparently that was no longer true. FirstEnergy wanted the best of both worlds -- collection of the full amount of meter reading costs AND the 1993/94 rate case ROE. But because FirstEnergy couldn't collect more for meter reading AND maintain an 11.9% ROE, FirstEnergy opted to simply cut the cost of meter reading by slimming down their meter reading staff and not performing scheduled meter readings required by law. If Potomac Edison cut their meter reading expense to match the amount they were collecting, the loss would stop and the company could keep its 11.9% ROE, having its cake and eating it too!
But now it appears the game is up. If I were the Maryland PSC, I would require Potomac Edison to issue a refund to customers amounting to the difference between what Potomac Edison spent and what it would have cost to perform meter readings as required by law (around $700K per year, according to Potomac Edison.) And then, as a punitive measure, I would make them file a new rate case. :-) How about it, FirstEnergy?
FirstEnergy has also been pulling the same stunt in other states in which it operates. West Virginia's ROE is 10.5% and was set in 2007. Pennsylvania's ROE is 11.5% set in 1994. These jurisdictions are where FirstEnergy affiliates have also been failing to read meters. Coincidence? I think not.
West Virginia legislators are not happy with Potomac Edison's excuses. Could an investigation by the West Virginia PSC also be on the horizon?
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