Pepco Plan May Ease Bite, For Now

By Matthew Mosk and John Wagner
Washington Post Staff Writers
Thursday, April 20, 2006

A plan brokered between top Maryland officials and Pepco, the principal supplier of electricity to Montgomery and Prince George's counties, promises to temporarily shrink the hefty increases looming for residential ratepayers. But the pain is still coming.

Pepco officials said yesterday that the tentative agreement would let customers stretch out payments of the 38.5 percent increase that is set to take effect June 1. That, they said, would help customers acclimate to the almost inevitable reality that over the long term, it's going to cost a lot more to bring electricity into their homes.

If ratified by state regulators, the agreement would let customers, if they choose, stomach the full 38.5 percent increase starting in June, adding $468 a year to the average household bill. Or they can opt to have their rates rise gradually. Those on the deferred plan will have to pay back the difference down the road, meaning they'll be getting even higher bills than those who took their lumps up front.

"If people think they're going to get something for nothing, they're not," Pepco spokesman Bob Dobkin said. "If they opt to defer the increase, their bills will be significantly higher on the back end."

Still, Maryland officials, including Gov. Robert L. Ehrlich Jr. (R), touted the agreement yesterday as a major step forward for those in the Washington suburbs who are facing the largest single electricity rate increase in a decade. The increases are the product of a star-crossed deregulation plan that was supposed to open the state's electricity market to competition.

Under the 1999 deregulation agreement, Pepco and other companies froze prices at 1997 rates until this year.

In recent weeks, political leaders have scrambled to find a way to blunt the impact of Pepco's increase -- and an even greater one planned by Baltimore Gas and Electric Co. -- fearing an election year voter revolt if nothing was done. The Pepco plan would be the first relief proposal to reach state regulators, who will hold a public hearing on it today in Baltimore.

The Maryland People's Counsel, an advocate for residential ratepayers who helped broker the Pepco deal, released a statement saying it will mean "interest free loans for electric bills."

To some degree, that's true. The plan that will be taken to state regulators, possibly as soon as next week, would enable customers who opt in to pay an increase of 15 percent starting June 1, followed by increases of 15.7 percent March 1, 2007, and the rest starting June 1.

Those who elect to participate in the phase-in plan would have to repay the full amount over 18 months, starting in June 2007, said Therese Yewell, manager of Government Affairs and Public Policy for Pepco Holdings. But they would not be charged the interest payments the company is making to subsidize the phase-in.

"It demonstrates that we are sincere in our concern about the impact of the rate increase on our customers," Yewell said. "We want to give them time to adjust to the increase. We are confident that this phase-in will do that. And there is no penalty."

Pepco officials did not have an estimate yesterday for how much they would pay to forgive the interest on the deferment plan, saying that would depend on how many customers elect to spread out their increase.

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