By Matthew Mosk and John Wagner
Washington Post Staff Writers
Thursday, April 20, 2006; A01
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.
The plan is virtually identical to one the state legislature had been considering before it adjourned April 10 without an agreement -- though this time, Pepco included a provision that allows the company to back out if the Maryland General Assembly passes legislation that the company believes could impact its rates.
Del. Dereck E. Davis (D-Prince George's), a lead negotiator of a relief package that passed the House of Delegates, said the Pepco plan is "a good plan for consumers who really need relief now."
"But I would also caution ratepayers: Only enter into this mitigation plan if you really have to," Davis added, "because you're still going to pay for it on the back end. We're all going to feel the pinch."
The plan has one clear benefit for the governor: It defers much of the pain of utility bill increases until after November, when he will be up for reelection. And one of his potential opponents, Montgomery County Executive Douglas M. Duncan (D), was quick to question the deal.
Duncan said it "falls way short and still leaves consumers left holding the bag."
Ehrlich said he expects the Public Service Commission to approve the agreement, possibly as soon as next week. If the plan is approved, Dobkin said the company will reach out to customers to let them know the option is available to them, either on Pepco's Web site, by letter, or both.
Tom Hucker, executive director of Progressive Maryland, a consumer advocacy group, said he is concerned that the opt-in provision could wind up hurting some of those who could most benefit from what amounts to a no-interest loan from Pepco.
"Opt-in provisions are always the hardest on low-income families, on those without Internet access, on non-English speakers, the elderly, the disabled, because they are more likely to be left out of a public information campaign," Hucker said.
Meanwhile, Ehrlich said talks with the state's other large power company, Baltimore Gas and Electric, were continuing "almost around the clock." The governor has pledged to reduce a planned 72 percent increase facing the company's 1 million residential customers in Maryland.
"We're continuing to make a lot of progress," Ehrlich said.
Rob Gould, a spokesman for BGE's parent company, said Pepco's agreement puts no additional pressure on those talks.
"We've been committed to get an agreement and have the same desire today," Gould said. "This doesn't change that."
The electricity rate surges have become lively fodder on the campaign trail for governor.
This week, Duncan called for new rate caps, saying a 1999 law intended to foster competition in the industry had proved a failure. His opponent in the Democratic primary, Baltimore Mayor Martin O'Malley, is slated to announce what aides describe as a comprehensive energy package tomorrow.
The mayor has urged the Public Service Commission to review the legality of rate increases already being absorbed by BGE "budget-billing customers."
Some of those customers, whose monthly bills are adjusted to avoid spikes during periods of high consumption, have already had higher rates, even though other customers are not slated to pay them until July.
