An information box with a Metro article in some May 2 editions incorrectly said that the deferred payment period for Pepco customers who choose to phase in a rate increase will end in December 2009. It will end in December 2008.
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Price Increases Leave Md. Officials and Utilities Tongue-Tied
But Ted Toal of Annapolis said he would tell clients to bite the bullet and start adjusting household budgets to accommodate higher prices. "You're going to feel the pinch whether or not you defer," said Toal, whose firm, Toal & Associates, offers accounting and planning services. "If you have to catch up with deferrals, even without the interest, it makes sense to take it all upfront."
The decision for customers is complicated by the unpredictable price of electricity. Rates could change next month depending on how much electric companies pay to buy power.
Pepco regional president Thomas Graham urged customers to factor in additional increases in their decision. He worries that ratepayers will look at the offer and say: "Oh, there's no interest. What a great idea," without realizing that in June 2007, if prices rise again, electricity bills would include a higher rate on top of the monthly repayment amount. "You have to understand the ramifications of your decision," he said. "The price of energy has gone up, and you have to pay for it at some time."
In response to concerns last week from Baltimore residents such as Latney-Lee and consumer advocates at the Office of the People's Counsel, the Public Service Commission approved a modified deferral plan for BGE's 1.1 million customers. In its decision Friday, the commission eliminated a 5 percent interest charge that was included in the initial deal Ehrlich negotiated with Constellation.
Customers who choose to ease into the 72 percent increase would pay 19.4 percent more in July, an additional 5 percent in January and an estimated 25 percent more in June 2007, when they also start paying back the loan. The commission also said BGE customers, like those served by Pepco, who move out of the area before repaying the company would be charged the full deferral in their final bill.
Questions remain, though, about whether BGE could recoup its borrowing costs and what affect that would have on rates. BGE's appeal yesterday seeks to reserve the company's ability to collect those costs later. "To force even more debt on BGE's shoulders will put an additional strain on the utility's finances, potentially raising costs for all customers," according to a statement released by the company.
Harold D. Williams, the lone Democrat on the commission and the only member not appointed by Ehrlich, declined to support the commission's decision because of such "confusion and lack of clarity."
Attorney General J. Joseph Curran Jr. (D) had similar concerns and took issue with how BGE represented its plan in newspaper ads, which were at odds with how it was portrayed by the Ehrlich administration.
"The consumer should know upfront that there are not going to be any real savings," Curran said.
In a letter to BGE's president, Curran said the company must make clear that the deferral plan does not reduce the cost of electricity. He compared the plan to using a credit card to pay for a big-ticket item. There might be smaller monthly payments, he said, "but in the long run, you pay."