Pepco Rate Increase Approved


On November 15, 2016, the Maryland Public Service Commission approved an increase in the electric rates allowed to be charged by Potomac Electric Power Company (PEPCO). However, the amount of the increase is not as much as was initially requested by the power company.

PEPCO wanated to increase its electric distribution rates by $126.8 million, which would have resulted in the average residential monthly bill going up by $15.80. Instead, PEPCO was given a revenue increase of $52.5 million so each bill is expected to increase $6.96 (or 4.76%). The new rates went into effect on November 15, 2016.

PEPCO wanted to recover $97.2 million for six-year investment in Advanced Metering Infrastructure or “smart meters”. The
Commission indicated that PEPCO should continue to develop ways to increase the types and amounts of direct monetary benefits that customers can receive from its AMI program.

PEPCO now meets or exceeds its State reliability requirements so the Commission approved the recovery of PEPCO’s ongoing reliability investments made since the last increase in 2014. The Commission stated, “In 2015, Pepco customers experienced an improvement of 46% in the frequency of power outages and 43% in the duration of outages when compared to 2011 performance.”

The Commission denied PEPCO’s request for nearly $32 million over two years to extend its Grid Resiliency Program surcharge. The surcharge was implemented in 2014 as a temporary measure to recover costs related to urgently needed system improvements needed after the 2012 “Derecho” storm. The surcharge will be removed from customer bills.

The Commission also denied the Company’s request to increase its return on equity (ROE) from 9.62% to 10.60%. Instead, the Commission slightly reduced the Company’s ROE to 9.55%, reasoning that “economic conditions are now better than they
were in 2014, interest rates are lower, and the merger makes PEPCO a less risky company than it was before.”

In April 2017, residential customers will receive an additional $50 bill credit that PEPCO committed to as part of the merger of its parent company, Pepco Holdings, Inc., with Exelon Corporation. In addition, the Commission recently approved rates for Standard Offer Service, the electric supply portion of customers’ bills, that should reduce rates for residential customers by an average of $103 a year beginning in June 2017.

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