Exelon’s (NYSE:EXC) Potomac Electric Power Company (Pepco) on Jan. 2 filed with the Maryland Public Service Commission an application for adjustments to its retail rates for the distribution of electric energy, noting that the impact of the requested rate increase on the typical residential Standard Offer Service customer using 812 kWh per month is $5.14 per month.
Based on the test year Jan. 1, 2017, through Dec. 31, 2017, Pepco is requesting an approximately $41.4m increase in its Maryland distribution rates, an authorized rate of return on equity (ROE) of 10.10%, as well as approval of a phase in of revenue associated with reliability plant not to exceed $15m.
Pepco added that at current rates, its adjusted ROE for the test year is 7.42%, which is below its authorized rate of ROE as set by the commission. Pepco said that it is seeking an increase in distribution rates because its revenue growth has not kept pace with the growth in operating costs and rate base.
In order to continue to meet its obligation to provide safe and adequate service, Pepco said that it must continuously replace and enhance the distribution system infrastructure. The costs in the case cover investments since the last base rate case, and planned spending on reliability this year, Pepco said, adding that new technology has been installed that enables the company to provide more reliable service in a cost-effective manner.
In a Jan. 2 statement, Pepco said that it spent about $222.9m in 2017, to maintain and improve the distribution system’s safety and reliability, as well as improve customer service through such projects as replacing and improving aging equipment and installing advanced equipment to automatically identify and isolate issues and automatically restore service to customers.
Pepco said that as a result of its work, over the period of Jan. 1, 2012, through Dec. 31, 2017, its Maryland customers have experienced a 46% reduction in average outage frequency and a 61% reduction in average outage duration.
The company said that electric system projects in 2017 included:
- Upgrading 39 feeders
- Replacing or installing 89 miles of underground cable
- Installing advanced reclosers devices, most of which will eventually be included in automatic sectionalization and restoration schemes designed to further improve reliability to our customers
Delmarva Power settlement
Separately on Jan. 2, Exelon’s Delmarva Power filed with the commission testimony in support of a unanimous stipulation and settlement filed in December 2017 regarding the company’s rate case.
As noted in the testimony on behalf of Delmarva Power of Kevin McGowan, vice president, Regulatory Policy & Strategy of Pepco Holdings LLC, the settlement – which was executed by the company, the Office of People’s Counsel (OPC), and commission staff – calls for, among other things:
- Delmarva Power would be authorized to increase Maryland retail base rates by $13.4m
- New rates would become effective as soon as reasonably practicable thereafter following the entry by the commission of an order approving the settlement
- The rate increase would be spread to each customer class in accordance with a “two step method,” which was agreed to by the parties and is subject to verification by staff
- The cost of equity solely for purposes of calculating the Allowance for Funds Used During Construction (AFUDC) and regulatory asset carrying costs is to be 9.50%
- Staff will convene a work group with representatives from Delmarva Power and OPC to evaluate the company’s Maryland reliability spend and projected reliability performance from 2017 through 2020
Among other things, McGowan said that the $13.4m overall revenue requirement represents a reasonable compromise of the parties’ positions in the proceeding, in which the company requested a $27m increase in its application, while staff recommended an increase of about $11.1m, and OPC recommended an increase of about $7.2m.
For the average residential customer using 980 kWh per month, the monthly impact on the total bill is $2.71, or 1.9%, he said.