Senate panel debates cost cap on Delmarva Power nonmandatory spending amid split between regulators, industry and labor

Sen. Stephanie Hanson presented Senate Bill 326, a multi-part bill that would impose stronger oversight of utilities, require recurring management audits, mandate a standardized rate table and set the rate-base calculation to an average-year method. The most contentious provision would limit the portion of nonmandatory capital spending a commission-regulated electric distribution company may recover from customers to 5% of its approved rate base; spending above that threshold would be borne by shareholders.

Matt Hartigan, executive director of the Delaware Public Service Commission, defined nonmandatory spending as capital investments "that the company makes... not necessary to provide safe and reliable service on the system," citing examples such as replacing equipment while it still has useful life or adding excess capacity. He said the 5% figure was calibrated to recent company spending and corresponds roughly to the company's historic nonmandatory spending levels.

Public Advocate Jamieson Tweedy said drafters included specific exclusions for new business, emergency spending, vegetation management and other required items and added consumer protections and an escrow mechanism for nonpayments. He also said the bill contains mandatory-savings language for community-solar subscribers in a different bill discussed earlier.

Delmarva Power and industry witnesses strongly opposed the spending cap portion. Michael Norman of Delmarva Power called the proposed cap "arbitrary" and warned it "would restrict our ability to make timely necessary investments, delaying replacement of aging infrastructure" and could increase outage risk. Chesapeake Utilities and business groups argued the new cap duplicates recently enacted prudence standards and risks harming economic development. Labor witnesses from International Brotherhood of Electrical Workers and other unions said the cap threatens jobs and apprenticeship opportunities by cutting projects that sustain the workforce.

Committee members questioned PSC and Public Advocate staff about how reliability would be measured (outage frequency and duration), whether the PSC can already deny full recovery in a rate case, and whether the cap could trigger legal challenges. PSC staff said prudence review already exists for after-the-fact examinations, while the cap is intended to be prospective to reduce the number of costly rate cases by constraining future nonmandatory spending growth.

Public comment included business groups urging delay to let the PSC prudence rules take effect and labor groups urging opposition because the cap could force deferral of preventive work. The committee adjourned without recording any formal votes on SB326 during the session. Next steps were not recorded in the transcript.