Pepco seeks approval for approximate $68.6m distribution rate increase in Maryland

Potomac Electric Power Company (Pepco), a subsidiary of Pepco Holdings LLC, on March 24 submitted to the Maryland Public Service Commission an application requesting an approximate $68.6m increase in its Maryland distribution rates, as well as an authorized rate of return on equity (ROE) of 10.10%.

The impact of the requested rate increase on the typical residential standard offer service customer using 872 kWh per month is $7.37 per month, or 5.52%, the company said in its application.

Pepco also said that its revised rate schedules are submitted with a proposed effective date of April 23.

“Our focus is to provide the best possible value to our customers and to make the region a better place to live and work,” Pepco Region President Donna Cooper said in a March 24 statement. “We continue to make improvements on behalf of our customers, and continue to see a steady uptick in the reliability of our system and the responsiveness of our customer service teams.”

In its application, the company said that at current rates, its adjusted ROE for the test year – which is May 1, 2016 through April 30, 2017 – is 5.44%, a level below its authorized rate of ROE as set by the PSC. Pepco said that it is seeking the increase because its revenue growth has not kept pace with the growth in operating costs and rate base. That disparity will only increase as Pepco continues its investments to enhance the reliability of the distribution system, the company said.

The costs in this case cover investments since the last base rate case, and planned spending on reliability in 2017, Pepco said, adding that new technology has been installed that enables it to provide more reliable service in a cost-effective manner. In order to maintain and enhance its infrastructure and implement those cost-effective distribution technologies, Pepco said that it must continue to make substantial investments in infrastructure and must have a reasonable opportunity to recover its costs.

Pepco noted that in 2016, it spent $138.3m on reliability improvements to its distribution infrastructure, and that it plans to spend an additional $150.6m in 2017.

The continued investment in the distribution system is in response to the demands of stakeholders; the passage of the Maryland Service Quality and Reliability Act; the implementation of the PSC’s Service Quality and Reliability Standards; and the conditions imposed by the PSC in its order that approved the Pepco Holdings Inc., and Exelon (NYSE:EXC) merger.

As TransmissionHub reported, following the approval of their proposed merger by District of Columbia regulators earlier on March 23, 2016, Exelon and Pepco Holdings announced later the same day that they have completed their merger transaction.

The merger brought together Exelon’s three electric and gas utilities – Baltimore Gas and Electric (BGE), Commonwealth Edison (ComEd) and PECO – and Pepco Holdings’ three electric and gas utilities –Pepco, Delmarva Power and Atlantic City Electric.

As noted in the direct testimony of Kevin McGowan, vice president, Regulatory Policy & Strategy of Pepco Holdings LLC, that was included with the company’s application, over the 2013-2016 period, the company invested more than $673.4m in Maryland distribution reliability projects, including replacing aging infrastructure, targeting distribution system upgrades, storm hardening measures, as well as system capacity expansion. In addition, in the case involving the merger, the company committed to deliver reliability performance that surpasses the annual Code of Maryland Regulations (COMAR) standards for the years 2016-2020, McGowan said.

As a result of the company’s recent investments in its distribution system, customers have experienced fewer service disruptions and shorter outage durations, McGowan said.

Among other things, he noted that Pepco launched its advanced metering infrastructure (AMI) deployment and a suite of energy efficiency, conservation and demand response programs to achieve “EmPOWER Maryland’s” legislative mandates for specific reductions in electricity consumption and peak demand by the end of 2015. The EmPOWER program has provided energy efficiency and conservation incentives totaling more than $290m over the 2009-2015 period, McGowan said.

In its statement, Pepco said that customers with questions regarding billing or the base rate adjustment request can contact the company’s Customer Care Center at 202-833-7500. 

About Corina Rivera-Linares 3058 Articles
Corina Rivera-Linares, chief editor for TransmissionHub, has covered the U.S. power industry for the past 15 years. Before joining TransmissionHub, Corina covered renewable energy and environmental issues, as well as transmission, generation, regulation, legislation and ISO/RTO matters at SNL Financial. She has also covered such topics as health, politics, and education for weekly newspapers and national magazines. She can be reached at clinares@endeavorb2b.com.