Rate Case Roundup: Maryland

While not addressing a specific rate plan from a natural gas local distribution company (LDC), the Maryland Public Service Commission touched on a couple of rate-related procedural issues in the course of reviewing the LDC's proposed manner of recouping costs associated with its STRIDE projects.

STRIDE stands for "strategic infrastructure development and enhancement." The legislatively enacted STRIDE program allows qualifying LDCs to recover via surcharge, on an expedited basis, the capital costs of eligible projects for which the LDC has accelerated its work.

The commission was faced with repeated claims by the LDC, Columbia Gas of Maryland, that it should be permitted to use a more streamlined "make-whole" process for including in base rates the investments the LDC has made through its STRIDE initiative. Other parties, however, have been adamant that the LDC is pursuing an inappropriate shortcut for its STRIDE costs. Instead, they have argued that such inclusion can occur only through a formal base rate case, an assessment with which the commission concurred.

The commission pointed out that the make-whole procedure was crafted to mitigate regulatory lag and offer a utility an opportunity to recover certain changes in expenses that occur between rate cases. But, the commission emphasized, a make-whole case is not synonymous with a base rate case and the two cannot be used interchangeably. In that respect, the commission rejected the company's assertions that the base rate and make-whole procedures could be "harmonized."

To the contrary, the commission drew a sharp distinction between base rate and make-whole rate proceedings. And it referenced explicit statutory language providing for STRIDE claims to be reviewed only through base rate cases. The commission expounded that a make-whole proceeding is generally limited in scope. That is, the commission said, such proceedings do not typically involve a broad range of expense items, but only a more narrow category of costs.

The commission stated further that makewhole filings are intended to be utilized only if the underlying cost claim already has been reviewed, at least preliminarily, in a prior base rate case. Citing the fact that the LDC's last base rate case had been decided before the STRIDE legislation was passed, the commission found that there clearly was no way for the company's STRIDE proposals to ever have been considered in a base rate proceeding.

Consequently, the commission ruled that Columbia Gas could not simply roll into its base rates its claimed STRIDE costs through the make-whole process. Despite its criticism of the company, the commission told the LDC that once its STRIDE cost claims have been evaluated within a formal base rate proceeding, Columbia Gas may thereafter propose additional STRIDE adjustments through the make-whole process. The commission reinforced that the STRIDE law is structured so as to require a base rate case the first time a company's STRIDE proposals are considered.

But, the commission said, subsequent to that initial review within the context of a formal rate case, an LDC may move on to the make-whole process. Re Columbia Gas of Maryland, Inc., Case No. 9417, Order No. 88259, June 16, 2017 (Md.P.S.C.).