The New Hampshire Public Utilities Commission has approved a settlement agreement authorizing Public Service Co. of New Hampshire to raise its distribution rates by an overall amount of $45.5 million over 3 years, reflecting an authorized ROE of 9.67%. The commission’s order also approves an earnings sharing mechanism for the utility, with the utility having the ability to earn and retain more than 9.67%, thus improving its attractiveness to investors. At the same time, customers are protected from overearnings, because the utility will be required to share any earnings over 10% on a disproportionate (75%) basis.
The commission also addressed concerns over evidence of earnings erosion raised by the company. In order to address the effects of attrition — i.e., documented effects on earnings associated with increasing investments in the face of falling sales — the approved settlement allows for a step increase and rate base adjustments (projected to cover approx. 80% of the expected rate base additions over the next 3 years). The commission noted that step adjustments have been used in the past as a means of ensuring that a regulated utility retains its ability to earn a reasonable rate of return after implementing large capital projects that increase the utility’s rate base after a test year. The commission relied on evidence demonstrating that the utility continues to make additions to its rate base, while overall kWh sales are declining. In Re Public Service Co. of New Hampshire, DE 09-035, Order No. 25,123, June 28, 2010 (N.H.P.U.C.).
The commission also addressed concerns over evidence of earnings erosion raised by the company. In order to address the effects of attrition — i.e., documented effects on earnings associated with increasing investments in the face of falling sales — the approved settlement allows for a step increase and rate base adjustments (projected to cover approx. 80% of the expected rate base additions over the next 3 years). The commission noted that step adjustments have been used in the past as a means of ensuring that a regulated utility retains its ability to earn a reasonable rate of return after implementing large capital projects that increase the utility’s rate base after a test year. The commission relied on evidence demonstrating that the utility continues to make additions to its rate base, while overall kWh sales are declining. In Re Public Service Co. of New Hampshire, DE 09-035, Order No. 25,123, June 28, 2010 (N.H.P.U.C.).
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