March 24, 2003
Honorable Christopher Hall, Senate Chair
Honorable Lawrence Bliss, House Chair
Joint Standing Committee on Utilities and Energy
100 State House Station
Augusta, ME 04333
Re: LD 479, An Act to Revise the Funding Formula for the Public Utilities Commission and the Public Advocate
Dear Senator Hall and Representative Bliss:
The Commission will testify neither for nor against LD 479, An Act to Revise the Funding Formula for the Public Utilities Commission and the Public Advocate, subject to our understanding of the intent of the bill. We will be present at the work session to work with the Committee as it considers this bill.
Our neutral position is based on the premise that the Committee will consider the total funding for the Commission when it considers LD 1042 (An Act to Ensure Proper Funding of the PUC). We oppose the total funding established in LD 479, which retains the funding level, currently established in law, for fiscal year 2002-2003.
The second portion of LD 479, beginning on line 23, would not change the method by which the Commission determines the assessment for each industry group. Transmission and distribution utilities in aggregate, telephone utilities in aggregate, gas utilities in aggregate, and ferries in aggregate, would pay the same assessment under the bill as under the current law.
However, LD 479 would change the
way the total assessment of the water utility industry is allocated among
water companies. Currently, the
total water industry assessment is allocated among water companies in
proportion to each company’s revenues.
Under the bill, the total water industry assessment would be
allocated among water companies in proportion to each company’s sales. The effect of the bill would be to decrease
the assessment of water companies whose rates are high, and increase the
assessment of water companies whose rates are low.
There is no compelling policy reason to choose between revenues and sales to allocate the Commission assessment. It is necessary to use revenues when allocating the assessment among utility groups, because sales are made in different units (e.g., kWhs, gallons, lines or minutes). An “apples-to-apples” comparison would be impossible to do using sales. However, as a practical matter, within an industry group, either sales or revenues may be used as a basis for allocation.
Ideally, the unit used for assessment would bear a reasonable relationship to the costs that the Commission incurs to regulate each company. We believe that neither revenues nor sales are clearly preferable under this criterion.
We note that a company’s revenues may be high relative to sales because it operates in a high-cost area – a circumstance that is no fault of the utility and that bears no relationship to the cost of regulation. For example, a utility serving a rural area with many miles of facilities per customer is likely to be a high-cost utility. On the other hand, a utility with a large industrial customer who uses large amounts of water but requires minimal infrastructure may have low revenues relative to sales. As in the first example, this circumstance is no “fault” of the utility and bears no relationship to the cost of regulation.
While we see no reason to treat the water industry differently from other industry groups, we note that in some industry groups – the telephone industry in particular - the logical sales unit would be difficult to identify.
For illustrative purposes, we have attached a list of water utilities and a hypothetical assessment using metered sales and using revenues.
In summary, we neither support nor oppose the portion of LD 479 that reallocates the total water industry assessment among water companies. If you have any questions, please call me.
Sincerely,
Marjorie R. McLaughlin
Legislative Liaison