Allegheny Power's plan seeks to ease impact of rate boost

Aim of proposed surcharges is to keep annual increases at 15%

January 14, 2007|By Larry Carson | Larry Carson,sun reporter

Seeking to avoid the turmoil BGE underwent over plans to sharply raise electricity rates last year, the utility serving thousands of homes in parts of Howard and Carroll counties and Western Maryland has asked regulators for permission to increase rates this spring --well before price caps expire.

The idea, Allegheny Power says, is to impose two 15 percent surcharges and use the money plus interest to soften the blow for consumers when the company's price caps expire in 2009.

Those affected will get a chance, starting this week, to offer their opinions on the plan to the state's Public Service Commission.

Allegheny Power, a Pennsylvania-based utility that serves about 215,000 residential customers in Maryland as far east as Carroll, Howard and northeastern Montgomery counties, wants to avoid a BGE-style controversy with its plan, which would impose the first rate increase on all residential customers March 31, if the Maryland Public Service Commission approves.

Instead of slapping a big one-time increase on residential bills, the company hopes to collect a smaller fee March 31, and again Jan. 1, 2008 -- in advance of the increase date of Jan. 1, 2009 -- and use that money to make the eventual rate increase more gradual.

"What we'll do is collect and add a surcharge in 2007 and 2008 and put that into a dedicated fund that earns interest," said Allen Staggers, the company's spokesman. "When we go to market-based rates [in 2009], we'll take that money we've collected and put that on the bill as a credit, with the goal of trying to keep the annual rate increase to 15 percent."

A series of four public hearings is to begin at 7 p.m. Tuesday at South Hagerstown High School. The others are scheduled for Thursday at 12 E. Church St., Frederick; Jan. 22 at Garrett College in McHenry, Garrett County; and Jan. 23 at the South George Street Holiday Inn in Cumberland. Residents also may submit written testimony through Feb. 5.

Staggers said Allegheny, a unit of Allegheny Energy Inc., serves about 25,000 customers in northeastern Montgomery County, 12,000 in northern Carroll, and 2,000 in western Howard County. The rest are in Frederick, Washington, Allegany and Garrett counties.

Howard County Executive Ken Ulman, a Democrat, said the increase heightens his interest in trying to form an electricity-buying cooperative of residential customers in his county.

"It will force us to look into the aggregation solution on an accelerated basis to see if that can be a solution to try to soften the blow," he said.

Del. Warren E. Miller, a Western Howard Republican who is an Allegheny customer, said he would like the company to hold an information meeting closer to his constituents -- perhaps in Mount Airy.

"You're never happy about a rate increase, but I realize the company has to pay higher prices to buy energy. I think that's a lot better than an immediate 50 [percent] to 70 percent increase in electricity rates. I'm happy the company went to the trouble to do this," Miller said of the four-year plan.

Del. Donald B. Elliott, a Carroll Republican who is also an Allegheny customer, praised the company's intentions.

"I think Allegheny Power has made an effort to try to soften or cushion the hit we're going to get. I think I would be in support of this because you're not going to get away from market rates," he said.

"At least they're trying to work with their customers," said Del. Gail H. Bates, a Republican from western Howard.

Taneytown Mayor W. Robert Flickinger is not happy about the increase but seemed resigned to it despite the opportunity for people to speak out in public hearings.

"What are you going to do about it?" he said. "You're wasting your time. They're bigger than we are."

Allegheny is the last of Maryland's four investor-owned utilities still operating under artificially low rates. Staggers said the company developed its plan to comply with a law enacted last year by the General Assembly requiring utility companies to find a way to ease the transition from artificially capped rates to market prices.

"I think we have proposed a plan that's in keeping with the goal of Senate Bill 1 and what the legislature has directed the Public Service Commission to do. I think the PSC supports this plan in concept," Staggers said.

Last year, BGE proposed a 72 percent rate increase that threw the General Assembly into an election-year frenzy of finger-pointing and competing rate-stabilization plans.

All the changes stem from Maryland's 1999 deregulation of electric rates, combined with a seven-year cap on increases that expired for BGE last year.

Theresa Czarski, deputy people's counsel, said her agency, whose charge is to protect the public interest, will have representatives at the hearings to listen to utility customers.

Later, when the commission has an evidentiary hearing, "we will have testimony from an expert witness who is an economist" who may have suggestions for changes to the plan.

Rate caps expired June 1, 2006, on two other Maryland utility companies, Pepco and Delmarva Power. Both are subsidiaries of Washington-based Pepco Holdings Inc. Customers of those utilities were given the option of accepting increases of up to 39 percent June 1 or taking more gradual increases in three steps.

BGE was forced by the General Assembly to limit the first increase to 15 percent July 1. This year, residential customers can either take the remainder of the increase or part of it, deferring the rest until Jan. 1, 2008.

larry.carson@baltsun.com

The Associated Press contributed to this article.

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