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Panel cuts back on utility wish list

- The Washington Times - Saturday, July 21, 2007

ANNAPOLIS — Maryland utility regulators yesterday approved rate request increases for two power companies that were significantly less than the utilities wanted.

Pepco had requested permission from the state Public Service Commission to raise $55.7 million in what would have amounted to a 3.9 percent increase in the typical monthly bill for what customers pay in standard offer of service costs. The commission approved $10.7 million in new revenue, or a .56 percent increase.

For Delmarva Power, the request was for $20.3 million in new revenue, a 3.4 percent increase. However, the commission approved $14.9 million, a 2.1 percent increase.

"The commission took a long hard look at the rate requests by Pepco and Delmarva and determined that a reduction of the initial rate requests was best for consumers while making revenue adjustments for the company that will still allow continued reliable service," commission Chairman Steven Larsen said.

Joseph Rigby, a senior vice president and chief financial officer of Pepco Holdings Inc. (PHI), said an adjustment for depreciation, which is the method used by companies to recover the original cost of investments, will help the companies.

"We're going to be able to live with the outcome here," he said.

In another decision, the commission approved a conservation tool that is designed to encourage energy companies not to worry about losing money on fixed costs if customers conserve energy

Under the concept known as "decoupling," energy companies can change distribution rates to make up for lost money to cover fixed costs if customers conserve more and demand for electricity drops. It's designed to address concerns by utility companies that successful conservation methods will cause their revenues from distribution charges to drop, putting them at risk of not covering their fixed distribution costs.

The commission approved decoupling with the idea that it would lift a barrier to large-scale energy conservation initiatives.

Mr. Larsen said the decision "removed the financial disincentives companies face if aggressive conservation efforts are successful and sales of electricity are reduced."

Mr. Rigby said the company supports decoupling.

"Having this kind of mechanism being approved directly allies the interests of the utility to the customers," Mr. Rigby said.

Maryland officials have been taking a closer look at conservation recently, in the wake of a 50 percent increase in electricity rates for 1.1 million customers of Baltimore Gas and Electric Co., a rate rise that went into effect last month.

Gov. Martin O'Malley, a Democrat, has been pushing energy initiatives in response. He is trying to steer the state on the ambitious conservation goal of cutting electricity usage by 15 percent by 2015.