- The Washington Times - Wednesday, May 24, 2006

Payment plans that would phase in Maryland’s electricity rate increases give lower-income customers a chance to avoid a case of rate shock, financial advisers say.

Following the announcement in March that electricity rates will climb between 35 percent and 72 percent for residential electricity customers starting this summer, both Potomac Electric Power Co. (Pepco) and Baltimore Gas & Electric Co. (BGE) are giving customers the choice of paying the full increase up front or spreading it out over the next two or three years.

Pepco customers have until tomorrow to enroll in the utility’s plan, which gives residents the option to defer a one-time, 39 percent rate spike starting next Thursday by paying an initial increase of 15 percent, followed by a 15.7 percent increase in March 2007 and a final transition to market rates in June 2007. Customers then would have 18 months to pay back the deferred amount.

As of Tuesday, 6,994 households — representing 1.49 percent of the utility’s eligible residential customers — had enrolled in the plan, according to Pepco spokeswoman Mary-Beth Hutchinson.

BGE brokered a similar plan with Republican Gov. Robert L. Ehrlich Jr. that would limit a planned 72 percent increase to 19.4 percent on July 1. Under the deal, customers would pay an additional 25 percent in June 2007 followed by the market price in January 2008. They would have until May 2009 to pay back the deferred amount.

The fate of BGE’s plan is not known, however, because it has become entangled in a lawsuit challenging the utility’s price increases, which BGE, like Pepco, blames on skyfuel costs and the expiration of rate caps that froze prices at below-market levels since 1999. A court ruling has barred the utility from advertising its phase-in plan pending the outcome of the suit.

There’s “no real downside” to deferred payment plans, financial adviser Ric Edelman said.

“This is designed for lower-income families who are really pressed monthly,” said Mr. Edelman, president and chief executive officer of Edelman Financial Services in Fairfax. “They’re just phasing in those increases so that people can become acclimated to the higher costs.”

Both deferment plans require customers to enroll or pay the full amount of the rate increase.

“The only thing you have to watch out for is whether you’re going to be incurring any fees to participate in a program like this,” Mr. Edelman said.

The plans are interest free, the utilities say.

Terri Czarski, deputy People’s Counsel with the Maryland Office of the People’s Counsel, said consumers should consider that the price of electricity could climb in the next few years, meaning that those who choose the phase-in plan would be paying the deferred amount on top of even higher monthly charges.

“This is the rule of thumb I’d ask people to keep in mind. From all indications, once prices go up, it takes a long time for them to ever come down,” Ms. Czarski said. “We hope they don’t go up as dramatically as this past year, but more than likely they’re going to go up somewhat.”

Those who defer “could really get far behind” if prices go up substantially.

Ms. Czarski also said lower-income consumers should check to see if they qualify for state or federal financial assistance in paying their utility bills.

Qualifying households can receive financial assistance with their electricity bills under Maryland’s Electric Universal Service Program. Mr. Ehrlich last month called for an 85 percent increase in state and federal assistance in fiscal 2006.

Mr. Edelman said the phase-in plans are of “questionable value” to upper-income families.

“The increase isn’t going to be material on their monthly spending,” he said. “But for lower-income families or middle-income families, this could help them avoid a significant increase at a time when, perhaps, they’re incurring other increased expenses.”

Giancarlo D’Alimonte, a Pepco customer and Ameriprise Financial adviser in Vienna, Va., said he plans to pay the increase in full.

“In life, it’s pay now, or pay later,” Mr. D’Alimonte said. “They’re going to pay it eventually.”

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