DELAWARE - Delmarva Power is responding to Gov. Matt Meyer’s support for an investigation into how utility companies’ profits are determined, disputing some of the characterizations in the governor’s announcement.
In a statement released to CoastTV on Oct. 21, Delmarva Power said several characterizations in the governor’s announcement were incorrect and risked giving customers a misleading understanding of the utility’s authorized return on equity.
Meyer announced Wednesday that the Delaware Division of the Public Advocate had filed a petition with the Delaware Public Service Commission asking regulators to investigate utility return on equity, or ROE, and consider changes to how utility returns are determined.
According to the governor’s announcement, the petition is part of an effort to address energy affordability and examine whether changes to the current approach are necessary.
The announcement describes ROE as the return a utility is authorized to earn on the equity portion of its infrastructure investments. It also states that ROE accounts for more than 10% of a typical customer’s electric bill.
Delmarva Power disputed the characterization that the current system allows the company to receive a guaranteed return of nearly 10%.
“Return on equity, or ROE, is one of the ways utilities fund the investments needed to operate, and maintain and improve critical infrastructure, including poles, wires, substations, and technology that support reliable electric and gas service,” the company said.
“It is not guaranteed profit, nor does Delmarva Power automatically ‘receive’ a set return of nearly 10 percent,” the statement continued.
Delmarva Power said the Public Service Commission authorizes the company an opportunity to earn a reasonable return on the shareholder-funded portion of commission-approved investments. The company added that it may earn less than its authorized return as investments continue and costs rise.
The utility also disputed the suggestion that the current regulatory model rewards it for spending more.
Proposed investments and their associated costs are reviewed through a public regulatory process, Delmarva Power said, adding that the commission determines what is just and reasonable.
The company said that since 2020, it and the Division of the Public Advocate have presented four joint settlement agreements to the commission proposing a 9.6% return on equity. According to Delmarva Power, the commission adopted those agreements after finding they were in the public interest.
Delmarva Power said a reasonable return helps attract the capital needed to maintain the regional energy grid. Setting the return too low, the company said, could increase financing costs and ultimately increase the cost of serving customers.
The company also said approximately 80% of its earnings have been reinvested in the grid since 2016 to support reliability, infrastructure replacement, outage reduction, modernization and customer service improvements.
In the governor’s announcement, Meyer called for greater scrutiny of utility returns to protect customers.
“Delaware families and small businesses are not ATMs for Delmarva’s out-of-state shareholders,” Meyer said.
“People deserve reliable power at a fair price, not a system that rewards Delmarva for spending more while Delawareans pay more,” he said.
Public Advocate Jameson Tweedie said in the announcement that the state must ensure utility customers are not paying excessive returns for the benefit of shareholders.
According to the governor’s announcement, the petition asks the Public Service Commission to examine current ROE practices and consider alternative approaches, including a competitive mechanism for determining utility returns.
Delmarva Power said it remains focused on improving affordability while continuing to advocate for what it described as an honest discussion about balancing customer costs with the safe and reliable service Delaware customers expect.
