DOVER, Del. (AP) -- Delaware's Public Service Commission on Thursday approved a $22 million annual rate hike on Delmarva Power customers.
Commission members voted unanimously to approve the rate increase, which Delmarva Power said it needed to help cover operational and capital expenses in providing electricity to its customers.
Delmarva said the average residential customer's bill will increase $4.49 per month, or 3.28 percent. Customers actually will see a very slight decrease in their future bills, because regulators gave interim approval last summer to a slightly higher rate increase.
Delmarva initially asked for a distribution rate increase of $33 million in a filing last December. But the PSC staff recommended that Delmarva be allowed an increase of about $16 million, less than half its request, while the Public Advocate, charged with representing the interests of consumers, recommended an increase of $17.5 million.
In August, the parties settled on an increase of $22 million, which a hearing examiner last month recommended for PSC approval.
"No one likes rate increases, the public advocate knows that ... but he also knows that people like electricity," said Regina Iorii, a deputy attorney general representing Public Advocate Michael Sheehy.
Todd Goodman, an attorney for Delmarva Power, told commission members that the utility made significant concessions in agreeing to the settlement.
Besides accepting an $11 million reduction in its proposed rate increase, Delmarva also accepted a revised return on equity of 9.75 percent, which Goodman said was a historical low and less than the national average of 10.25 percent. The company's current return on equity is 10 percent, and it had sought an increase to 10.75 percent.
"To argue that the $22 million number is not reasonable, is not a compromise, is just ignoring the facts," Goodman said. "Those are huge concessions, huge compromises."
But state Rep. John Kowalko, who has chaired the House Energy Committee, was not swayed. He urged regulators to reject the rate increase.
Kowalko, who was allowed to intervene in the case, was the only objector to the settlement. He was especially concerned about Delmarva imposing the costs of new "smart meters" on customers and seeking more than $25 million in depreciation allowances for discarded analog meters.
Kowalko said Delmarva has failed to explain how it came up with the $25 million depreciation figure, and that ratepayers should not be burdened with the cost of installing smart meters, which can be monitored remotely and obviate the need for meter readers going house to house.
Goodman argued that the $6.4 million in annual operational savings from smart meters, including $2.2 million in annual meter-reading savings, far outweigh the costs, and that the settlement ensures that the benefits of smart meters are being realized before the utility begins phasing in costs to customers.
James Geddes, an attorney for the Public Service Commission, said the settlement was fair to both Delmarva and ratepayers.
"People have to understand that Delmarva is making a big investment ... to try to improve the quality of their system," Geddes said.
PSC chairman Dallas Winslow said the fact that none of the parties was entirely happy suggests that the settlement was "a pretty good bargain for all concerned."