Editor’s note: This story has been updated with comments from Pepco.
The Maryland Public Service Commission rejected a proposal by Exelon subsidiary Potomac Electric Power Co. for a $213.6 million revenue increase over close to four years.
Instead of approving the multi-year rate plan, the PSC on Monday said Pepco could have a $44.6 million rate hike for a year, down from the $117.2 million the utility was seeking in the first year of its proposal. The PSC expects the decision will increase Pepco’s electric rates for the average residential customer in Maryland by $5.72 a month, or 3.5%.
Pepco asked for a 10.5% return on equity, up from its current 9.55% ROE. The PSC approved a 9.5% ROE.
The PSC had approved four previous multi-year rate plans for Exelon utilities in the state, including one for Pepco. Even so, the agency said it wanted to assess the results of Baltimore Gas & Electric’s “pilot” multi-year plan in a “lessons-learned” proceeding before making any final determinations on the appropriate approach to ratemaking.
Pepco is evaluating the PSC’s decision, according to Addie Kauzlarich, a utility spokesperson. “As we continue to assess this order, we will engage with the Commission, stakeholders, and our customers to provide continued transparency and clarity in implementing the plan as approved and working through the Commission’s ‘lessons learned’ process for the multi-year plan framework,” she said in an email.
Three Exelon utilities operate in Maryland: Pepco, BG&E and Delmarva Power.
“As part of these lessons learned, consideration should be given to the appropriateness of permitting projected rates given the uncertainty in investment created by changing technology that enables decarbonization and more efficient operations of the grid that could make obsolete previously reviewed investment decisions,” the PSC said.
In support of its rate proposal, Pepco said the multi-year plan would give the utility predictable revenue to make needed reliability and safety-related investments. Also, customers would know what their rates would be for several years instead of facing annual changes, according to Pepco.
Pepco’s plan, however, was opposed by the Maryland Office of People’s Counsel, which argued that multi-year rate plans benefit utilities but hurt customers.
“Multi-year plans mean advance approval of utility capital spending, which undermines regulatory review, and shifts risks to customers,” David Lapp, Maryland’s ratepayer advocate, said in a press release Tuesday. “They lead to excessive spending on capital investments, which inflate utility profits at customer expense.”
Pepco’s multi-year plan was also opposed by the U.S. General Services Administration and the Apartment and Office Building Association.
Pepco is also facing opposition to its proposed $186.5 million multi-year rate increase for Washington, D.C. Pepco expects the Public Service Commission of the District of Columbia will make a decision on the proposal in the third quarter this year, according to an Exelon presentation.
Pepco has about 900,000 customers in Maryland and Washington, D.C.
