Maine’s High Court Upholds Bangor Gas Rate Plan Ruling

In an opinion issued this August, the Law Court upheld a Maine Public Utilities Commission order approving a new rate plan for Bangor Gas Company, LLC.

A principal issue before the Law Court was whether Bangor Gas should be entitled to recover in its natural gas delivery rates the unimpaired, “original cost” of Bangor Gas’s assets, or the impaired “acquisition cost” of those assets. In December 2006, Energy West, Inc. offered to purchase Bangor Gas from Sempra Energy, LLC in December 2006 for approximately $500,000, and it later purchased Bangor Gas for that amount. Bangor Gas considered the $500,000 purchase price to represent the fair value of its assets, and therefore wrote down the book value of its assets to zero for accounting purposes. This resulted in an impairment loss of approximately $38 million.

The Office of Public Advocate and Bucksport Mill, LLC appealed the PUC’s order. OPA and Bucksport Mill argued that Bangor Gas’s ratepayers should be responsible for paying only the impaired cost of Bangor Gas’s assets—$500,000, and not the $38 million that was written down for accounting purposes.

Applying its usual administrative deference, the Law Court agreed with the Commission that the impaired book value “would not accurately reflect the current use of the utility’s assets.” The justices found that the PUC’s ratemaking statute “plainly does not mandate one valuation methodology over another,” and gives the Commission broad discretion in setting a reasonable value for utility assets for ratemaking purposes.

The second issue on appeal was whether the Commission erred in permitting Bangor Gas to recover 50% of its regulatory proceeding expenses in rates. The Law Court did not reach the merits of this question because, it determined, the issue did not affect the PUC’s decision to adopt Bangor Gas’s rate plan.

The decision, Office of the Public Advocate et al. v. Public Utilities Commission et al., 2015 ME 113, — A.3d.