Correction to This Article
A previous version of this article did not make clear that under a hybrid system of regulation in Virginia, Dominion Virginia Power retains ownership of its generation plants and distribution lines. Dominion says it has added 1,450 megawatts of capacity in Northern Virginia since 1999. The company's residential rates have increased 4.5 percent since 1993 and are now under caps that will be removed at the end of 2008. Also, the article inaccurately reported the date that a new regulatory law took effect in Virginia. It was July 1, 2007. Also, the article did not make it clear how a spike in electricity prices on Aug. 1, 2006, affected Pepco. Pepco did not buy electricity directly in the spot market; spikes in power prices are factored into what the utility pays for power in long-term contracts.
ENERGY Year of Decision

Decade of Deregulation Felt in Climbing Bills

Users paid millions to decommission Calvert Cliffs in 2034 before the owner was required to assume the costs.
Users paid millions to decommission Calvert Cliffs in 2034 before the owner was required to assume the costs. (1998 Photo By Mark Gail -- The Washington Post)
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By Lisa Rein
Washington Post Staff Writer
Friday, April 18, 2008

As they watch their bills climb, electricity customers in the Washington region might be surprised to know they are paying costs that have nothing to do with the rising price of fuel.

Virginians are paying Dominion Power tens of millions of dollars a year for a nuclear plant the company planned in the 1980s but never built.

More than 1 million residents of the Washington-Baltimore area paid $920 million to take the Calvert Cliffs nuclear plant -- now owned by shareholders of Constellation Energy Group -- off-line in 2034 before state lawmakers agreed to a deal this month requiring the company to take over the federally mandated decommissioning costs.

Maryland customers also paid almost $1 billion to reimburse power companies for constructing plants. Today, thousands of Virginians are still paying these charges, regulators say, although the plants' value has soared.

These costs were added to residential customers' bills under deals struck by lawmakers almost a decade ago when the region's electricity markets were opened to competition.

Federal rules that accompanied deregulation also increase costs to consumers. Because of them, customers pay a premium for living in a congested region thirsty for power. And although they began paying surcharges last year so power companies will invest in new plants, the charges have resulted in relatively few additional megawatts. These charges account for about 25 percent of the price of electricity in the District and Maryland and less in Virginia.

Outraged consumer advocates and politicians say they didn't expect the little-understood costs that came with deregulation and that are driving up bills to record levels.

"I have not a scintilla of regulatory control over two-thirds of the electricity bill," said Elizabeth Noel, the people's counsel and legal advocate for utility customers in the District.

The deal reached between Constellation and Maryland Gov. Martin O'Malley (D) this month blunted two years of recrimination over a 72 percent rate increase for 1.1 million Baltimore Gas and Electric customers. They will get a $170 one-time credit and relief from future decommissioning costs. But as lawmakers adjourned their session in Annapolis, many said their constituents will still pay prices they did not think would be possible in a competitive market.

The average home in Montgomery and Prince George's counties will pay Pepco $1,910 a year starting in June, almost 80 percent more than in 2004.

Power companies say they're operating under fair deals agreed to by regulators, lawmakers and advocates when Maryland, the District and, to a lesser extent, Virginia deregulated the industry. They also say it's only a matter of time before they add capacity.

"The markets are producing competitive results and improving the reliability of the system," said Glen Thomas, president of a group of mid-Atlantic power plant owners.

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