STATE OF MAINE
PUBLIC UTILITIES COMMISSION

CENTRAL MAINE POWER CO.
Docket No. 2018-00194
Re: Commission Initiated Investigation
Into Rates and Revenue Requirements and
Customer Service and Communication
Issues Pertaining to Central Maine
Power Company

EXCEPTIONS OF THE OFFICE
OF THE
PUBLIC ADVOCATE

January 23, 2020

Office of the Public Advocate
112 State House Station
Augusta, Me 04333-0112

 TABLE OF CONTENTS
I.

INTRODUCTION .................................................................................................................. 1

II. INDIVIDUAL ADJUSTMENTS ......................................................................................... 3
A. The Examiners’ Report Fails to Correctly Reduce the CAGR Resulting in an
Incorrect Annual Distribution Revenue Requirement. ..................................................... 3
B. The Examiners’ Report Recommends a Base Cost of Equity that is Too
High. ................................................................................................................................................ 7
C. Because of the Significant Issues Identified in Docket No. 2019-00015, the
Downward Adjustment to CMP’s Allowed Return on Equity Should Be Increased
to at least 100 Basis Points. ........................................................................................................ 8
III. CONCLUSION .......................................................................................................................11

 I.

INTRODUCTION
The Office of the Public Advocate (OPA) offers these Exceptions to the Examiners’

Report issued on January 9, 2020, in this docket.
The OPA hereby urges the Commission to limit any rate increase granted to Central
Maine Power Company (CMP) to the lowest level permitted by law. Over the past three
years, CMP has utterly failed to meet its obligation to provide its customers with safe and
adequate service. Indeed, the Examiners’ Report in this proceeding finds:
… substantial evidence of failures by CMP’s management to provide
reasonable and adequate customer service over recent years, and especially
following the transition to its new billing system, which lead us to find that
this service has been imprudent.1
Due to the flaws in the implementation, after CMP went live with SmartCare, defects
or exceptions affected tens of thousands of customers who experienced delayed bills or bill
errors.2 As further described in the Examiners’ Report in this proceeding:
As far back as the spring and summer of 2016, the CASD notified CMP of
errors in CMP’s call center, with representatives providing customers flatly
incorrect information, and of CMP’s failure to correctly handle the arrearage
management program. The Commission’s General Counsel sent a letter to the
Company in 2017 describing worsening call-center performance, erroneous
disconnection notices being issues [sic], and a growing number of customers
reporting that they were unable to reach anyone at CMP to discuss credit and
collections.
Yet the Commission’s efforts seem to have fallen on deaf ears. After
SmartCare—when customers were most likely to raise questions given the
transition to a new billing system after decades with the old one—customers
had to deal with long hold times, dropped or abandoned calls, an inability to
obtain helpful and correct information from customer-service representatives,
and bills delayed without adequate explanation. Customers’ negative
experiences with the call center and customer-service representatives only

Examiners’ Report (E.R.) at 1.
Public Utilities Commission, Investigation into Central Maine Power Company’s Metering and Billing Issues, Docket No.
2019-00015, Examiners’ Report at 2 (January 9, 2020).
1
2

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 grew. For many customers, this frustration has persisted for months or even
years since the problem first arose.
At the public-witness hearings, customers gave impassioned testimony about
their frustrations with CMP. Customers’ anger and frustration with CMP’s
customer service in recent years is not isolated to a few individuals, nor to one
kind of problem. Instead, across customer situations, across towns, and across
demographics, these customers largely had a similar assessment: due in large
part to their dealings with the Company’s customer service, they could not
trust CMP.
Customers should be able to trust their utility bill, and when questions arise
about that bill, but clear, correct, and timely answers are not forthcoming, the
Company fails to earn that trust or, if it had any trust with the customer, loses
it completely.
From the above, the Commission concludes that CMP’s customer service has
reached unreasonable and inadequate levels, which are evidence of
management inefficiency and imprudence.3
Similarly, CMP’s response to the October, 2017 windstorm,4 which left over 400,000
customers without power, was plagued by a lack of actual AMI data from an AMI system
that did not work well.5 Most recently, CMP has issued notices to some customers stating
that their service can be disconnected in the winter period without Commission approval in
violation of the Commission’s winter disconnect rule.6
The repeated nature of these failures suggests not only that CMP’s management has
been imprudent, but it is recalcitrant in any efforts to restore service levels to adequate levels.

E.R. at 167-169.
It is somewhat ironic that this proceeding is an outgrowth of a complaint relating to CMP’s recovery of the
cost of responding to that windstorm, Herbert C. Adams et al., 10-person Complaint Requesting Investigation to
Determine if Central Maine Power Company and Its Parent Companies Are Making Excessive Returns on Investments,
Docket No. 2018-00123, Order Dismissing Complaint in Part and Granting Complaint in Part (July 24,
2018).
5 Public Utilities Commission, Investigation into the Response by Public Utilities to the October 2017 Storm, Docket No.
2017-00324, Order at 12 (October 4, 2019).
6 Public Utilities Commission, Investigation of Improper Notices by Central Maine Power Company (35-A M.R.S. § 1303),
Docket No. 2020-00017, Notice of Investigation and Order to Show Cause (January 22, 2020).
3
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 Given this behavior by management, the OPA strongly urges the Commission to limit any
rate increase granted in this proceeding to the absolute minimum permitted by law.
II.

INDIVIDUAL ADJUSTMENTS
A. The Examiners’ Report Fails to Correctly Reduce the CAGR Resulting in
an Incorrect Annual Distribution Revenue Requirement.
As the Commission itself has noted, “[b]ecause an attrition examination is based

largely on projections, greater caution must be applied when deciding whether or not to include
[this kind of] an adjustment in the Company’s revenue requirement calculation.” Bangor
Hydro-Elec. Co., Proposed Increase in Rates, Docket No. 97-116, Order at 22 (Feb. 9, 1998)
(emphasis added). The so-called “attrition technique” used by Commission Staff in Docket
No. 2013-00168, is a trend analysis that makes use of a compound average growth rate
(CAGR) based on historical plant balances, but with outlier additions removed. It is the
calculation of the CAGR in the Examiners’ Report with which the OPA disagrees. The
Examiners’ Report determined the CAGR to be 4.11 percent. CMP had initially proposed a
five-year CAGR of 4.54 percent, later modified to 4.26 percent. The OPA urges the
Commission to adopt the lower CAGR of 3.91 percent recommended by its expert witness,
Robert Rosenkoetter.
Specifically, Mr. Rosenkoetter recommends such a reduction based upon the failure
of CMP to justify its inclusion of certain distribution related capital expenses or to
appropriately document the need for the projects. The OPA had requested a significant
sample of the many projects contained in the year-by-year plant balance used by CMP. Mr.
Rosenkoetter sought to review these documents to present findings on which projects were

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 justified and to possibly recalculate the CAGR.7 For the 253 projects for which justification
was provided, CMP produced 124 documents, 83 of which were single-page documents that
“appeared to have been created in response to the OPA’s data request ODR 002-012 and
were not dated.”8
In his review of these documents, Mr. Rosenkoetter found that CMP had failed to
properly justify the investments for a “large majority” of the projects.9 He found that CMP
had not followed the requirements contained in Avangrid’s internal budget processes and that
it had not proved that CMP’s expenditures should be allowed for rate-setting purposes.10
CMP’s objections to Mr. Rosenkoetter’s testimony do not address the issue in a
substantive way. CMP’s response addressed his testimony in several ways, each of which
missed his point.
First, CMP objected that Mr. Rosenkoetter did not properly categorize some of the
projects pursuant to the budget authorization document.11 This is beside the point, as each
project must be justified.12 Further, only 9 percent of CMP’s own documentation even

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There were 562 projects whose cost exceeded $100,000. Mr. Rosenkoetter selected 253 of these projects to
review, the total value of which was approximately 65 percent of the total cost of all projects. He testified that
this percentage yields a statistical confidence level of 95 percent. Rosenkoetter Direct at 7. He created a
detailed summary of these selected projects and provided them as Exhibits 2-6 to his Direct Testimony.
8

Rosenkoetter Direct at 8.

9

Id. at 10; see also Rosenkoetter Surrebuttal at 1.

10

Id. “In other words, most of the documentation provided by CMP … do not contain adequate
justifications for capital expenditures dictated by CMP’s own requirements. Documentation provided also
fails to meet generally accepted industry standards and practices.”
11

CAP-ADD-REB-6. Mr. Rosenkoetter was required to sort through the “justification” documents produced
by CMP, many of which did not identify the category.
12

Mr. Rosenkoetter minimally revised his disallowances in the area of mandatory projects. Rosenkoetter
Surrebuttal at 7.

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 referenced the proper category, leaving it to Mr. Rosenkoetter to identify the proper
category.13
Second, CMP attempted to confuse the required justification with the utility’s need
for the investment generally by saying, for example, “Mr. Rosenkoetter has disallowed
projects wholesale without any thought to the nature of the project and the relevance to the
business of providing electric service.”14 However, as Mr. Rosenkoetter testified:
This is not a question of whether CMP in fact uses the items in question. For
example, distribution utilities need transformers in order for the grid to function. But,
the purchase of new transformers must be a reflection of the state of the utility’s
existing transformers, or perhaps a system expansion, in order to be justified. 15
The Commission should ignore this attempt to confuse generic need with specific
justification.
Third, CMP claimed that the work orders in its SAP system provide the required
justification for recurring investments.16 This excuse is similar to the one discussed just
above but fails to meet the test of proof of prior authorization of the costs in the budget,
with the required demonstration that the items are needed when ordered.
Based upon Mr. Rosenkoetter’s disallowances, Mr. Morgan calculated a CAGR of
3.82 percent.17 This amount was ultimately adjusted to 3.91 percent in ODR-19-1. The OPA
urges the Commission to apply this factor to the test year adjusted plant balance presented in
this case.

13

Id. at 3.

14

Id.

15

Id. at 6.

16

CAP-ADD-REB at 10.

17

Morgan Supplemental at 2.

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 Finally, the OPA wishes to express two reservations with the overall CAGR approach
to rate-setting. First, using past years’ plant balances to determine the ongoing percentage
increase may provide an unintended incentive for the utility to spend more than it should in
future years in order to increase the CAGR to be used subsequently.18 Second, the time
necessary to review plant balances for reasonableness may not be present in a nine-month
rate case, particularly if the utility does not maintain easy access to the justification
documentation. In this case, the OPA’s work in obtaining and reviewing the historic plant
additions data added weeks to the schedule. We believe the time spent was necessary. As Mr.
Rosenkoetter testified, “[w]ithout knowing if the distribution plant additions in this five-year
period are justified, it is impossible to know if the CAGR is accurate and if the projected
plant additions for the interim and rate year are reasonable.”19
The Examiners’ Report attempts to discount Mr. Rosenkoetter’s analysis because it
suggested that certain of his recommended adjustments were inconsistent. E.R. at 54-56.
Critically, CMP bears the burden of proof on all issues in this proceeding. 35-A M.R.S.A.
§1314. Mr. Rosenkoetter’s willingness to accept certain adjustments requested by CMP does
not relieve it of its burden of proof with respect to other adjustments where, critically, he has
identified a lack of proper supporting documentation. This is particularly true with respect
to the granting of an attrition allowance, which necessarily involves a level of speculation.
Greater caution demands that when attrition adjustments requested are based on
future projects that those projects are feasible and likely to go forward, and such likelihood is

18

This problem was not present when the CAGR approach was first used in CMP’s last rate case because
CMP was presumably not aware that it would be used.
19

Rosenkoetter Direct at 2.

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 documented. Bangor Hydro-Elec. Co., Proposed Increase in Rates, Docket No. 97-116, Order at 22
(Feb. 9, 1998). Mr. Rosenkoetter testified, “[w]ithout knowing if the distribution plant
additions in this five-year period are justified, it is impossible to know if CAGR is accurate
and if the projected plant additions for the interim and rate year are reasonable.”20 Given
the appropriate need to be cautious, the OPA urges the Commission to adjust its estimate of
CAGR downward and to adopt the recommendation of its witness, Mr. Rosenkoetter, of a
3.91% increase.
B. The Examiners’ Report Recommends a Base Cost of Equity that is Too
High.
The Examiners’ Report recommends a finding that CMP’s cost of equity was within a
range of 6.46% to 12.37%, with a midpoint of ROE of 9.25%. The OPA disagrees with the
Examiners’ conclusions regarding the return on equity calculation. The OPA provided
ample evidence, through the testimony of its cost of capital witness, Dr. Marlon Griffing, in
support of a calculated midpoint of the range of CMP’s cost of equity being 9.18%. Dr.
Griffing used a multistage Discounted Cash Flow (DCF) methodology consistent with the
Commission’s past practice.
With respect to capital structure, the OPA accepts the recommendation in the
Examiners’ Report to establish rates based on an imputed common equity component of
50%.

20

Rosenkoetter Direct at 2.

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 C. Because of the Significant Issues Identified in Docket No. 2019-00015, the
Downward Adjustment to CMP’s Allowed Return on Equity Should Be
Increased to at least 100 Basis Points.
For the reasons described in more detail in the OPA’s Exceptions being filed today
in Docket No. 2019-00015, which are hereby incorporated by reference, the OPA urges the
Commission to increase the downward adjustment to CMP’s allowed return on equity from
75 basis points to 100 basis points.
As described in the Examiners’ Report, the range of reasonable allowed returns on
equity for CMP is in a range of 6.46% to 12.37%. E.R. at 178. It is well established under
Maine law that so long as the Commission’s determination of a utility’s cost of equity falls
within a range that is reasonable, adjusting it within that range is a proper exercise of
discretion. Central Maine Power Co. v. Public Utilities Commission, 455 A.2d 34, 39 (Me. 1983). In
this case, an adjustment of either 75 basis points or 100 basis points would be reasonable.
Further, it is appropriate given the substantial factual evidence of CMP’s imprudence and
mismanagement in the implementation of its SmartCare billing system.
The factual basis for a downward adjustment to CMP’s allowed return on equity were
initially outlined in the Staff’s Bench Analysis, filed on February 22, 2019. The Bench
Analysis itemized a history of CMP customer service problems at pages 64-91. It states, for
instance: “the Commission Staff’s concern about CMP’s customer service predates both the
issuance of the Liberty Report and the implementation of SmartCare and, in fact, go back as
far as 2016.” Bench Analysis at 66. Indeed, CMP’s customer service from 2016 through the
present time has substantially deviated from both the regular and accepted practices of the
Company as well as the practices of other capably managed utilities. Bench Analysis at 93.
In addition, the evidence indicates that the Company’s customer service practices over this
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 time period have resulted in CMP’s customers receiving inadequate service when considering
the number of customers affected, the duration of the impact, the reasons for the
Company’s action, and the departure from historic trends. Id. Thus, the Staff found that the
Company had failed to meet its statutory obligation to provide reasonable and adequate
service to its customers as required by 35-A M.R.S. § 301. Id. In coming to this conclusion,
the Staff pointed to the Company’s inability or unwillingness to address these customer
service issues despite numerous requests from the Commission as well as notification by the
Commission that in some cases the Company’s service was in apparent violation of the
Commission’s Rules. Id.
Neither the Bench Analysis nor the Examiners’ Report, however, reflect the adverse
findings recommended in the Examiners’ Report in Docket No. 2019-00015 issued January
9, 2019, nor do they reflect the additional information outlined in the Exceptions of the
OPA filed in that docket concurrently herewith. In sum, almost two years post go-live,
CMP’s SmartCare system continues to have significant problems with producing and
presenting invoices for customers. Keim Direct in Docket No. 2019-00015 at 51. The
nature and extent of the issues we identified call into question the overall integrity of the
system and its ability to provide accurate, timely and reliable invoices to CMP customers. Id.
Further, the underlying causes of why certain customers were overbilled has never
been adequately explained. However, the Liberty Report issued December 20, 2018 in
Docket No. 2019-00015 found that over 30,000 customer bills issued by SmartCare reflected
usage that differed from information generated by the customer’s meter. Liberty Report in
Docket No. 2019-00015 at 41. Further, some of the variances were quite large. At least one
residential customer received a bill that overstated monthly usage by 565 kwh and one small
9

 general service customer received a bill that overstate usage by 1,805 kWh. Liberty
Response to ODR-2-2 in Docket No. 2019-00015.
Finally, in addition to problems with the SmartCare, there were also problems with
some number of CMP’s smart meters. Liberty Report in Docket No. 2019-00015 at 26.
While uncommon, its impact on individual customers can be significant. Id. Perhaps more
critically, CMP was aware of this anomaly for several year prior to its occurence in the 201718 timeframe and failed to take adequate corrective action to prevent it from recurring. Id.
at 22-23.
In recognition of CMP’s failures in implementing the SmartCare system, the OPA
had recommended disallowing some of the $57 million cost of the system. In lieu of such an
adjustment, which would represent a permanent reduction in CMP’s rate base and revenue
requirement, the OPA now urges the Commission to increase the downward adjustment to
CMP’s allowed return on equity from 75 basis point to at least 100 basis points. A 100-basis
point downward adjustment would reduce CMP’s rates by approximately $1.6 million and
increase the penalty to approximately $6.5 million. Bench Analysis at 9. This reduction is
well within the amount of reduction permitted under Maine law.

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 III.

CONCLUSION
Wherefore, the OPA urges the Commission to reduce the overall allowed increase in

the revenue requirement of Central Maine Power Company (CMP) to limit the increase to
the absolute minimum permitted by law.

Respectfully submitted this 23rd day of January, 2020.

Barry J. Hobbins, Public Advocate
Andrew Landry, Deputy Public Advocate
Susan W. Chamberlin, Senior Counsel
Nanette M. Ardry, Senior Counsel
Office of the Public Advocate
State House Station 112
Augusta, ME 04333-0112
207-624-3687

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