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.
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Decade of Deregulation Felt in Climbing Bills
Demand and Capacity
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Since deregulation, new residents and energy-consuming gadgets have pushed up the region's demand for power. A report by Maryland regulators last year predicted brownouts by 2011 if more plants aren't built.
But little capacity has been added. Environmental costs and public opposition have hindered the construction of plants, especially for companies trying to compete with the owners of plants whose value has skyrocketed.
So federal regulators agreed last year to allow the mid-Atlantic power industry to collect a surcharge to generate new supply.
Maryland regulators estimate that these "capacity" charges, passed on to customers, will add $300 million to bills this year.
"The only tool we have is to provide a financial incentive to build," PJM's Dotter said. "Older plants are shutting down, and there's nothing replacing them."
Critics say the supply has increased so little because the existing system not only benefits the companies in the region, it gives them an incentive to constrain the supply of electricity to keep prices high: Shareholders get the capacity payments even if they build nothing.
"It's money in the pocket of the generating companies without a guarantee that they are going to build," said Paula Carmody, director of the Maryland Office of the People's Counsel. "From a consumer perspective, it doesn't seem terribly beneficial."
