The 4.98 percent increase (based on a typical residential customer using 1,000 kilowatt hours per month) would happen only if the PSC approves Pepco's request—made on Friday—for a $60.8 million increase in base distribution rates, according to a Pepco statement.
The increase would pay for improvements that Pepco is in the process of making to its distribution system.
The improvements—which began in 2010—appear to be working: By 2011, Maryland customers receiving electricity from upgraded feeders experienced 58 percent fewer outages and a 69 percent decrease in the duration of those outages, Pepco President Thomas H. Graham said on Friday.
"We’re spending about $1 billion in Maryland over the next five years to improve reliability and modernize the grid that our customers use every day. ... Today’s filing is necessary to cover reliability enhancements to serve customers," Graham added.
Pepco also requested permission on Friday to begin a grid resiliency charge to cover additional, accelerated enhancements to the distribution system to meet the recommendations of the Maryland Grid Resiliency Task Force convened by Gov. Martin O'Malley last summer.
If approved by the PSC, the grid resiliency charge would start on Jan. 1, 2014, and would last for about three years. For a typical residential customer using 1,000 kilowatt hours of electricity a month, the charge would be $0.96 a month in the first year, $1.70 a month in 2015 and $1.93 a month in 2016, according to a Pepco statement.
In order to meet the task force's call to accelerate reliability standards and improve reliability sooner, Pepco (with the aid of this second requested charge) proposes to:
- Accelerate its next four-year tree-trimming cycle to complete the cycle in three years.
- Upgrade 12 additional feeders a year for two years.
- Put six distribution feeders underground (two in Kensington and one each in Silver Spring, Upper Marlboro, Langley Park and Greenbelt) to improve reliability on those lines, Graham said in a Friday afternoon media conference call.
The Grid Resiliency Task Force's September report acknowledged that such a charge could be necessary because accelerating improvements to the distribution system could impose "undue financial pressure on the utilities," according to the report.
The third element of Pepco's most recent rate increase request would provide Pepco with an incentive to do better: Pepco is proposing stricter reliability standards to be met in 2015, and if the standards are not met, the company proposes that it would credit Maryland customers up to $1 million.
But, "if [Pepco] achieves the accelerated standards," the company would earn an additional $1 million, the statement added.
A decision from the PSC is expected in July 2013. After the decision has been made, Pepco will determine its next steps, including if or when an additional rate increase request would need to be made, Graham said.
In July 2012, the PSC approved $18 million of a $60 million rate increase request made by Pepco earlier in the year, Patch reported.