Shore's interest in rates plan low

Delmarva's customers, plus PEPCO's in D.C. area, aren't signing up

May 23, 2006|By ANDREW A. GREEN | ANDREW A. GREEN,SUN REPORTER

Despite electric bills that are set to rise by 35 percent or more this summer, customers in suburban Washington and the Eastern Shore have shown virtually no interest in a rate deferral plan similar to the one that Gov. Robert L. Ehrlich Jr. negotiated for BGE customers.

After their June 1 rate increases, PEPCO and Delmarva Power customers will pay rates nearly as high as those that BGE customers will face when the 72 percent increase in their electric bills takes effect July 1.

But with three days left in the sign-up period, just 1.18 percent of PEPCO customers and 0.67 percent of Delmarva Power customers have enrolled in a plan that would phase in their latest rate increases over the next 12 months, said Mary-Beth Hutchinson, a spokeswoman for the utilities' parent company, Pepco Holdings Inc.

Thomas Graham, the PEPCO regional president, said he's not surprised that the rate deferral plan hasn't sparked much interest because it has a significant downside for consumers. The phase-in plans for PEPCO and Delmarva - as well as BGE - save customers money for a year but then saddle them with higher bills until they repay the amount they defer.

"I think a lot of consumers have taken a look at their options," Graham said. "They understand the price of energy has increased, and based on their financial conditions, they have opted to take the phase-in at one time because they realize that next year at this time they would be paying more than other customers."

But Delmarva's customers in Delaware have a different choice and are responding differently.

There, residential customers face a 59 percent increase this summer. But Delaware regulators negotiated an "opt-out" program, meaning customers would be automatically enrolled unless they ask to be removed. The company says about half of its Delaware customers are still signed up for the program.

Advocates and government and industry officials said it's hard to tell whether the enrollment in the PEPCO and Delmarva plans could be a predictor for how many BGE customers might choose to defer part of the coming rate increase.

BGE customers are facing a larger rate shock all at once, but many consumers say they don't see the rate deferral plan that was negotiated by Ehrlich and is now tied up in a lawsuit brought by the city of Baltimore as offering a significant benefit.

"The public is seeing through it and realizing that no matter what, they're still paying the increase," said Brad Heavner, executive director of the Maryland Public Interest Research Group, which has been lobbying for a better deal for consumers. "Nobody is talking about rate deferral. They see the rate isn't going down. They just want to see it fixed."

Graham said PEPCO and Delmarva have engaged in aggressive radio and direct-mail advertising and outreach campaigns to explain the deferral plans.

But most of the people who can't afford this summer's increase certainly can't afford an even greater jump in rates next summer when the monthly fees kick in, he said. Furthermore, Graham said, many of those people are eligible for energy assistance programs, which have been able to expand this year because of increased government funding.

"There are a lot of options out there for people," he said.

Electric rates in Maryland are going up because of the expiration of rate caps instituted as part of the state's 1999 electricity deregulation plan.

Rates caps were lifted in the PEPCO and Delmarva service areas two years ago, and customers there saw rate increases in 2004 and 2005 - with homeowners becoming more accustomed to market rates, company officials say.

BGE's rate caps expire this summer, at a time when instability in the world market, high demand and disruption caused by Hurricane Katrina are causing a spike in energy costs.

After the legislature failed to pass a rate relief plan at the end of the General Assembly session in April, Ehrlich stepped in to negotiate with BGE's parent company, Constellation Energy Group. Administration officials also struck deferral plans for PEPCO and Delmarva customers.

Ehrlich spokesman Henry Fawell said the governor wanted an opt-in program because of the public outcry after the PSC approved an initial version of the deferral plan that automatically enrolled customers unless they opted out.

That plan charged customers 5 percent interest and included a quicker phase-in of the rates than the current plan.

The legislature nearly passed an opt-out plan that would have spread out the rate increase over three years and the repayment period over 10. That plan charged customers no interest, but it failed in the state Senate amid concerns that it didn't do enough to protect consumers.

Fawell said it's difficult to tell whether the PEPCO and Delmarva figures are good predictors of interest in the BGE plan.

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