Delaware energy regulators to consider lowering Delmarva Power’s profit

Why Should Delaware Care?
Delaware officials have scrambled to take action after high power bills sparked consumer outrage across much of the state. Reducing the allowable profit for utilities like Delmarva Power could lower those bills, but it could also destabilize the company financially.

Delaware energy regulators will hire a consultant to look into whether the state should lower the amount of profits that Delmarva Power, and other regulated private utilities, are allowed to earn.  

At a meeting Wednesday, the Delaware Public Service Commission voted unanimously to solicit requests for proposals to launch an investigation into the state’s limit on utility profits, which typically sits at about 10%. The vote came after the state’s Public Advocate Jameson Tweedie requested the inquiry last month – an action that Gov. Matt Meyer had previously called for.

Tweedie, the governor’s appointee charged with advocating for the public on proposed power bill increases, said new research suggests utilities across the country earn more profit than necessary.  

That means customers may be paying too much for electricity, water, sewer and gas, he said.

Delmarva Power officials have previously said they would welcome a review of the state-imposed limits on their returns, but also argued that the current regulated profit structure keeps the company financially healthy. 

The comments have come just as the company requests that the Public Service Commission allow it to increase revenues by $67.8 million. If approved, it would be the largest utility increase in Delaware history, and could raise an average homeowner’s utility bill by about 4%. 

It is unclear whether the investigation into the profit model of regulated utilities would affect Delmarva Power’s request to raise rates.

During the Wednesday meeting, Commission Chair Harold Gray said it was not appropriate to discuss the strategy for the ongoing rate cases without notifying the public of the discussion before the meeting. 

Tweedie originally requested for the Public Service Commission itself to conduct an investigation. But the commissioners agreed Wednesday that it would be too difficult for their staff to do so while also figuring out how to implement new state energy laws and considering Delmarva Power’s request to increase electric rates. 

“The staff is already quite busy,” Commissioner Robert Wheatley said.  

Tweedie also said Wednesday he would like the investigation to be complete by the end of next year’s legislative session in June. Commissioners said they would try to make that happen. 

Regulated utilities turn a profit in Delaware when regulators allow the companies to raise rates enough to recoup the costs of necessary infrastructure upgrades, plus more in profit. Typically, Delmarva Power earns about 10 cents on every dollar it invests from its bank account into infrastructure upgrades. 

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