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Pepco Petitions To Boost Md. Rates

By Steven Mufson
Washington Post Staff Writer
Saturday, November 18, 2006

Pepco yesterday asked Maryland regulators for a sharp increase in its electricity distribution fees, which would lead to a 3.9 percent increase in residential consumers' overall electric bills.

If approved, the higher fees would go into effect in mid-June 2007, and the typical bill for a residential customer using 1,000 kilowatt-hours a month would increase $5.33 from $135.94 to $141.27.

The proposed increase, which would be the first in distribution fees in a decade for Pepco's more than half-million Maryland customers, was a result of higher labor costs and prices for transformers and copper wire, the company said.

On June 1, a 39 percent boost in the total bill for typical Pepco customers went into effect to cover higher fuel costs, the biggest component of electricity bills.

If granted by the Maryland Public Service Commission, the new increase would equal $55.7 million, 17.5 percent more than the $317.8 million now being collected by Pepco for distribution, according to Thomas H. Graham, president of Pepco Region, a unit of Pepco Holdings Inc. He said that while steep, that figure was less than the 24 percent hike in consumer prices since the last distribution rate increase.

"Though cost is an important factor," Graham said in an interview, "a reliable system is even more important."

After this year's political storm over sharp rate increases requested by Constellation Energy Group Inc.'s Baltimore Gas and Electric unit, Pepco is sensitive about the potential political fallout from the rate request. Pepco's bond ratings were cut twice this year because of concerns about the state's political and regulatory environment, Graham said. He said the company briefed aides to Maryland's governor-elect, Martin O'Malley, on Thursday.

"They need to go through the process and justify what they're asking for," said O'Malley aide Steve Kearney, who said that he and a lawyer for O'Malley were briefed for about five minutes on Thursday about Pepco's plans.

O'Malley has vowed to replace the members of the Public Service Commission shortly after taking office on Jan. 17. Because the members' terms will not have ended, O'Malley will have to provide cause for their termination, which could lead to a court fight, or he and state lawmakers will have to pass new legislation reconstituting the commission. Kearney said he expects new regulators to be on board before Pepco's request is implemented.

Pepco serves most of the close-in Washington suburbs in Montgomery and Prince George's counties. The utility also serves Washington and is expected to file next month for distribution-rate increases in the city, where those rates have been fixed since 2000.

Because distribution makes up only 21 percent of the typical household electric bill, the impact on overall rates is much smaller than the proposed increase in distribution fees alone. Graham said that in the last three years the cost of transformers had doubled and the cost of electric cable had jumped 85 percent.

"Distribution rates haven't been raised in a really long time," acknowledged Johanna Neumann, policy advocate for Maryland Public Interest Research Group. "To some extent this doesn't come as a surprise."

Staff writer John Wagner contributed to this report.

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