The Maryland Public Service Commission has authorized Potomac Edison Company to increase electric distribution rates by $6.2 million, but at the same time, it also directed PE to provide an additional bill credit to customers as a result of the federal Tax Cuts and Jobs Act of 2017.The utility’s last rate case was decided in 1994.

The commission denied the company’s request for a return on equity (ROE) of 10.8%, instead approving a rate of 9.65%, pointing out that the company is considered a stable distribution utility that does not own generation in its Maryland rate base and that operates in a low-risk environment. In addressing the ROE issue, the commission ruled that even with the ending of the Federal Reserve’s Quantitative Easing program, interest rates have remained low, with government and utility long-term lending rates remaining near historically low levels. It also observed that the 9.65% return lies within the range of ROEs recommended by the parties (9.20% to 10.80%). Additionally, the 9.65% award fits within the range of mean average and median ROEs approved by public utility commissions in the last few years.

The commission rejected adjustments to ROE estimates proposed by Potomac Edison for business risk, credit risk, and flotation costs. Regarding business risk, the commission found that the utility’s size as a relatively small electric distribution utility does not justify an upward adjustment in ROE. According to the commission, the company had submitted evidence that small, unregulated companies may face greater risk than medium to large companies, but it nevertheless ruled that elevated risk does not extend to regulated utilities, which have the benefit of a monopoly service territory and a captive customer base. Re The Potomac Edison Co., Case No. 9490, Order No. 89072, Mar. 22, 2019 (Md.P.S.C.).

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