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Maryland cuts Pepco proposed rate increase to $10.3M

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Maryland cuts Pepco proposed rate increase to $10.3M

The Maryland Public Service Commission has approved a $10.3 million rate increase for Potomac Electric Power Co., cutting millions of dollars from the company's request.

The commission on Aug. 12 affirmed a proposed order (Md. PSC case 9602) from a public utility law judge authorizing the smaller rate increase, which is expected to add $1.76 to the monthly bill of an average standard offer service residential customer. The new rates took effect Aug. 13, a company, or Pepco, spokesperson said.

The timing of Pepco's next rate case in Maryland will depend on the findings of a working group charged by the PSC on Aug. 9 with filing a report on how best to implement multiyear rate plans, company spokesman Ben Armstrong said.

Establishing the working group "was an important step in helping modernize and advance multiyear rate planning in Maryland," Armstrong said. "We'll be looking to understand and determine how that process would impact when we would next be back in for a regulatory rate review."

The working group is to file its report by Dec. 20, and the commission expects to issue an order on that filing (Maryland PSC Public Conference 51) by Jan. 30, 2020.

Citing the need to recover expenses tied to reliability projects, the Exelon Corp. subsidiary in January asked regulators to approve a rate increase of nearly $30 million but later adjusted that request to $26.7 million.

But the public utility law judge in July issued a proposed order setting a rate increase of nearly $10.3 million and a return on equity of 9.6%. The ROE is less than the 10.3% Pepco requested but up slightly from the current ROE of 9.5%.

Commission staff filed an appeal of the proposed order, arguing in part that certain expenses from Pepco's 69-kV feeder rebuild program, a 12-year resiliency effort estimated to cost $428.8 million, should not have been included in rate base. In its Aug. 12 order, the commission noted the staff's concerns about costs associated with the program and the need to make sure that "ratepayers are not funding unnecessary gold-plating of the grid."

"Nonetheless, the staff's appeal in this case is not the forum for developing long-range plans on an issue, which also is certain to impact other utilities," the commission said.

The PSC also rejected arguments that the proposed order should have included a staff proposal to transfer from Pepco shareholders to ratepayers proceeds tied to a 2017 sale of land in Prince George's County, Md. Staff said it was not given a chance to act on the matter in a 2018 rate case that was resolved in a settlement.

The commission said "extraordinary circumstances" that would warrant transferring 2017 revenue to the current case did not exist. Regulators also pointed out that while staff said it was deprived of the opportunity to address the adjustment previously, "it is undisputed that staff was aware of the relevant facts prior to the settlement in that case. Staff was also a party to the settlement."