Burdensome energy bill jumps during the winter months in Delaware have prompted swift action from both state legislators and Gov. Matt Meyer.
Now, lawmakers are being vocal about opposing Delmarva Power's $44.9 million gas rate increase request — a change that is expected to up ratepayers' bills by 23%
Three energy bills head to Floor for full Senate approval
State Sen. Stephanie Hansen (D-Middletown), chair of the Senate Environment, Energy and Transportation Committee, has largely been spearheading legislative relief efforts and introduced a three-bill package to bring more transparency to the utility rate-setting process and cap annual capital expenses recoverable by Delmarva Power.
Delmarva Power opposes all three bills either in their entirety or are requesting that changes be made.
Her first bill, Senate Bill 59, would change the standards by which the Public Service Commission (PSC) — the body in charge of approving rate increases for Delaware utility companies — is able to determine which costs can be included in a utility's rate base.
Delaware's PSC currently uses the “business judgement rule" when determining whether or not to approve rate cases.
"That's unusual in that 48 other states use what's called the 'prudence' standard, where a spending might be appropriate under the 'business judgement rule,' which is very differential to the utility, but it may not be something that you as a utility should reasonably expect to be able to recover from your ratepayers — maybe it wasn't a 'prudent' spend on your part," Hansen explained during Tuesday's Senate Environment, Energy and Transportation Committee meeting.
Hansen believes amending the Public Utility Code so the “prudence” standard applies would give the PSC the ability to deny, in whole or in part, certain expenses and costs, which can lead to less frequent and less impactful rate increases.
But Director of External Affairs and Regional Vice President for Delmarva Power Marcus Beal believes the change is not necessary.
"The Public Service Commission has the authority to ask for all financial information and any documentation that they require to help make their decision on whether or not they grant our rate increases. So again, the investments that we make are prudent, and we do not feel that Senate Bill 59 is necessary," Beal said.
PSC Executive Director Matt Hartigan disagrees, explaining adopting the "prudence" standard was something the commission unsuccessfully attempted a decade ago and that there are several examples of increases approved under the current "business judgment rule" that may not have been approved under the "prudence" standard.
Companion Senate Bill 60 would place a $125 million cap on annual capital expenses recoverable by Delmarva Power and it would not allow recovery for activities such as lobbying, political contributions, charitable contributions and certain advertising and public relations activities.
Hansen explains the bill does provide exceptions for emergency or extraordinary circumstance that require greater capital expenditures to maintain system reliability.
Regardless, Beal feels the proposed cap prevents the flexibility necessary to ensure energy reliability.
"An investment cap would actually jeopardize our performance. We feel that that will restrict our ability to replace aging infrastructure. With all the goals that we have in this state regarding climate change, our state energy goals, we really do need that flexibility to be able to ensure that we can continue to partner with our state elected officials and make sure that we're meeting our state goals," Beal said.
Former Public Advocate Drew Slater — who represented consumers before the PSC to ensure reasonable rates — argues previous imposed caps prompted some of the best reliability improvements within the state.
He says while bill increases can be attributed in part to increase in usage, as Delmarva Power is arguing, he also says utility spend and the frequency of rate cases, which generally lead to rate increases, are also to blame.
During public comment on the bill, Beal requested Hansen consider adding amendments that would include adjustments for inflation, removal of the PSC expenditure approval requirement for timely power restoration and clarify allowable expenditures under the cap.
Hansen's final piece of legislation, Senate Bill 61, would require more transparency on votes involving PJM Interconnection — the regional electric grid operator for the Mid-Atlantic region.
"What this bill says is that our utilities that vote at PJM — those votes should be public so that we have some sense as to what our utilities, who are acting on behalf of the ratepayers — we want to know what their votes are on these particular issues in front of PJM that affect the generation, the speed, all the issues that PJM is involved with," Hansen explained.
Once a year, utilities would be required to report their votes out and explain how each vote cast is in the public interest.
Delaware Municipal Electric Corporation (DEMEC) and Delaware Electric Cooperative (DEC) — not-for-profit utilities — both raised concerns over the administrative workload this requirement would add and asked for exemptions.
Beal, on behalf of investor-owned Delmarva Power, made the same argument that adding this new requirement would ultimately be a burden to the utility.
"All of the results of those meetings are actually already public. So we do feel like additional legislation at this point for our utility really subverts that collaborative process that we have with PJM," Beal argued. "It can also stifle participation and innovation in those meetings, and really it just creates an administrative burden over everyone when already the voting results are something that PJM actually publicly makes available, in addition to having a large number of their meetings actually available for the public to attend, either virtually or in person."
Sierra Club Delaware Chapter Director Dustyn Thompson spoke during public comment and attested he has tried to attend several PJM public meetings only to be met with hurdles.
"I can tell you that it is extremely difficult, and many times in the meetings — again, that were supposedly open to the public — I was not able to gain access," Thompson said. "We might be able to see a final vote, but the reasoning behind that vote is very seldomly able to come to the public."
All three bills received enough signatures from the committee to head to the Senate Floor for a full vote. They will still need to repeat the same process in the House and receive final approval from Gov. Matt Meyer — who has signaled support for all three — before becoming law.
Opposition to Delmarva Power's requested gas rate increase and alternative rate structure
Within the same day, Hansen along with State Rep. Frank Burns (D-Newark), State Rep. Madinah Wilson-Anton (Newark) and House Speaker Melissa Minor-Brown (D-New Castle) testified in front of the PSC against an additional requested rate increase from Delmarva Power.
Delmarva is requesting a gas rate increase of $44.9 million — the largest rate increase Delmarva Power has ever requested. Hansen and Burns argued this amount would increase money going directly to Delmarva's shareholders by 10% and noted in Delmarva's own filings, the utility company stated the change would lead to a 23% increase in ratepayers’ bills.
In February 2021, the PSC awarded Delmarva Power a $6.7 million natural gas rate increase and an additional increase of $13.4 million in November 2022.
During that same time period, Delmarva Power’s electric rates also increased by $17.7 million in 2021 and $42.25 million in 2024, totaling $125M in PSC approved rate increases.
Hansen and Burns also noted despite Delmarva blaming unseasonably cold temperatures and record-usage rates during the winter months as the reason for the energy bill hikes, DEMEC and DEC customers did not report the same spikes.
"It’s important to note that we have not heard this level of outcry from other ratepayers and our other Delaware electric utilities, despite the fact that all ratepayers in the state of Delaware were subject to similar winter temperatures. A look at recent Delmarva electric and gas rate increases paints a picture of utility spending that is out of control and oversight by the Public Service Commission that does not put enough emphasis on ratepayer impact," Hansen said to the PSC.
"We recognize that investor-owned utilities are limited in the ways they can generate profit for returns to their stockholders. One of these methods is through infrastructure investments. With the quick enactment of SB 59 and SB 60 we ask that you reject attempts by utility companies to pass investments to ratepayers that are above what is necessary for utility reliability," Burns added.
When asked if the requested increase is appropriate amid the current concerns of customers, Beal says the recent unseasonably cold winter was an anomaly.
“What we saw this winter, so really, January and February this year, is where we saw the increased level of complaints from customers about their bills. And it's important to note we're not receiving that level of contact from our customers year-round," he said.
But Delmarva Power Director of Energy Acquisition Mario Giovannini has previously publicly testified that ratepayers can expect to experience a "run-up in capacity prices" beginning June 1, 2025 to May 31, 2026.
This is due to a July 2024 energy capacity auction that saw a price increase of 568% — from $2.2 billion to $14.7 billion — compared to the price of the year prior.
"That is something that our company does not control. We're not involved in generation, so we procure energy from those markets. And yes, there is volatility in those marketplaces. And again, you've seen the national conversation on the need for additional generation that can help really keep those prices stable," Beal said.
Beal is referring to 488 generation projects in the queue that PJM is working to clear in order to bring more power onto the regional grid. PJM has raised concerns over states pushing existing generation resources off the system — generally coal plants — before an adequate quantity of replacement generation is online.
PJM also reports Delaware is only contributing 1 generation project to the queue and encourages the First State to look into ways to bring more new generation resources online as soon as possible.
In addition to the gas rate increase, Delmarva is requesting an alternative rate structure. Testimony by the PSC's staff argues this change is not in the public interest and would lead to increased costs on ratepayers.
Beal argues the proposed change would bring more stability to the process.
"The good news about alternative forms of rate making is that it really— it keeps the process a a lot more predictable. So you're working in three year increments. So the process really is, every project is scrutinized over a three-year interval, and you know, that lends to consistency and stability for our customers. Our investments are challenged in alternative forms of rate making, and again, they're in longer blocks, so you're not necessarily having to come in every year or two. Instead, you really stabilize that process," Beal said.
The PSC has yet to consider Delmarva's two requests.
Gov. Matt Meyer's demand for bill rate adjustments
Last week, Gov. Meyer announced he has been in talks with Delmarva Power around "demanding immediate bill rate adjustments for Delmarva Power customers affected by the sharp rate spikes this winter."
“We've made some progress. We're getting there and not ready for an announcement yet, but we think that individual ratepayers who've seen spikes in their bills, unexpected spikes — we're talking 50%, 60, 80% — that's not fair, and we’ve got to make sure everybody's being treated fairly," Meyer said last Wednesday.
While no further update has been provided yet, Beal said, "We're absolutely committed to working with Governor Meyer."
