Regulators Find Overcharging in '06

The Maryland Public Service Commission won a victory yesterday from federal energy regulators, who ruled that power companies overcharged electricity customers by $87.5 million two years ago.

The Federal Energy Regulatory Commission declined to order refunds for customers. But the ruling means that customers will save hundreds of millions of dollars on future electric bills, state officials said.

The ruling addresses a complaint the PSC filed in January alleging that federal regulators let power companies serving Maryland charge unfairly high prices during peak-demand periods in 2006. The complaint grew out of an investigation by an independent monitor for PJM Interconnection, the Pennsylvania-based operator of the mid-Atlantic power grid, which includes Virginia and the District.

The monitor, Joseph Bowring, concluded that a lack of competition in the wholesale electricity market regulated by FERC pushed up prices. The federal commission requires some power companies to cap prices when just a few of them sell power on hot days to utilities. But in 2006, seventeen plants in Maryland reaped what the state called excess profits. FERC had exempted them from the price caps because they were built after 1996.

The rule was designed to encourage the industry to invest in additional generation capacity. But yesterday, FERC agreed with the Maryland commission, calling the lack of caps "unjust and unreasonable."

"If this went on year after year, between now and 2012, ratepayers would be paying hundreds of millions of dollars," PSC Chairman Steven B. Larsen said. "It's a significant victory for ratepayers."

FERC spokeswoman Mary O'Driscoll said the agency is not authorized to force power companies to refund the $87.5 million to customers.

The complaint was part of an aggressive effort by the Maryland commission to address record rate increases for residential customers after caps began to come off electricity rates four years ago. Competition has not materialized in the deregulated market, allowing power companies to charge high prices during peak-demand periods.