Delmarva Power to return millions to customers after GOP tax cuts, reduced costs

Karl Baker | The News Journal

Show Caption Hide Caption How utility regulators determine your rates Delaware Public Service Commission Executive Director Bob Howatt explains how public utility rates are determined in the state.

In the coming months, Delmarva Power will lay out a plan to refund millions of dollars to Delaware ratepayers after a settlement with regulators, first proposed in June, was finalized on Tuesday.

The refunds have yet to be calculated but will combine $2.8 million the utility saved when it was acquired by Exelon Corp., as well as roughly $2.5 million that households overpaid after Congress passed and President Donald Trump signed into law a bill that lowered corporate taxes, state officials said.

“We don’t know that (exact) number right now, because Delmarva will have to file a refund plan and they’ll file that with the commission in 50 days,” said Josh Bowman, a utilities analyst for the Delaware Public Service Commission. “The customers will get those as one-time bill credits."

In addition to the refunds, after Tuesday's settlement electricity customers will see a decrease, on average, to their electricity bills of about $1.40 each month over the next five years. That also is due to the company's reduced costs after the federal government implemented the corporate tax cuts.

The deal ended Delmarva Power's quest to adjust electricity rates, which began last August when the utility asked for approval from state regulators to bring in an extra $24 million from electricity bills.

Company officials said they needed the revenue to upgrade and maintain power lines, substations and other infrastructure in Delmarva's service area.

Because the utility maintains a monopoly, its prices are determined by negotiations and rulings from the Delaware Public Service Commission — a board of five governor-appointed commissioners.

In October, when Delmarva amended upward its request for new dollars to $31 million, some residents responded with forceful opposition, saying it was unneeded and would place a heavy burden on financially-strained Delawareans.

"This rate request strikes me as a bunch of people sitting around a table saying, 'We'd like to raise rates. Let's come up with some things to justify it,'" Charlie Fallette, a Newport business owner, said during a public hearing.

Delmarva spokesman Nicholas Morici told the News Journal at the time that the money would be used to offset more than $50 million the company spent on infrastructure maintenance in 2016.

"Some parts of the system are about 50 years old," he said.

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Yet, then came the Trump tax cuts. After corporate rates were slashed from 35 percent to 21 percent, regulators in January directed all public utility companies, including Delmarva, to calculate their total amount of savings "to ensure that consumers will receive the benefits."

The move came at the behest of Delaware Public Advocate Drew Slater and state legislators who argued that the entirety of the tax savings should bypass companies' coffers and instead flow to ratepayers.

“We have a responsibility to the customers of each regulated utility to safeguard against unjust and unreasonable rates," Slater said in a statement last week.

While Delmarva lowered its request to $12 million shortly thereafter, Tuesday's settlement actually turned the increase into a decrease.

"Settling parties agree to a net decrease of $6.85 million to base revenues," the settlement document stated.

For the Public Service Commission's Matt Hartigan, it is the first time he ever has seen negotiations over rates turn into a decrease.

"We're just pleased that it's a negative number' he said.

New rates will go into effect 30 days after Tuesday's settlement.

Contact Karl Baker at kbaker@delawareonline.com or (302) 324-2329. Follow him on Twitter @kbaker6.