Pepco wants to raise electric bills for its Maryland customers by about $7 a month, as well as tack on a surcharge to pay for improvements to its electric grid.
Pepco expects the $60.8 million rate increase to add $7.13 -- 4.98 percent -- to the typical resident's monthly bill beginning in July 2013. The surcharge, meanwhile, would be another 96 cents per month -- 0.64 percent -- starting in January 2014 and increasing for each of the next two years up to $1.93 per month in 2016. In total, the surcharge would raise roughly $45.9 million.
Pepco also has proposed an incentive system for the company to perform better.
If the utility's 531,354 Maryland customers experience an average 1.25 or fewer outages in 2015 -- not including any major storms like Hurricane Sandy or June's derecho -- the company gets to charge them another $500,000 total. The same goes if Maryland customers have an average 134 minutes or fewer without their power on. If Pepco meets both criteria, the typical resident can expect to pay an extra $1.07.
On the other hand, if Maryland customers experience an average 1.67 outages or more in 2015, and they experience 178 minutes or longer without power, Pepco has to pay each customer the $1.07.
Both the surcharge and the incentive were among recommendations made in September by a task force that Maryland Gov. Martin O'Malley appointed to study the state's electric grid.
Pepco's Washington region president, Thomas Graham, called the incentive "performance-based ratemaking," in that Pepco gets paid if it performs better.
But some officials who have been calling for Pepco -- perennially criticized for its frequent outages -- to charge customers based on its performance say Pepco's proposal doesn't make the cut.
The bulk of Pepco's request focuses on normal rates, guaranteeing that the company will recover its costs and have a comfortable return for investors, no matter how the company performs, said Montgomery County Council President Roger Berliner, D-Bethesda, who has a background in energy law.
The request to raise rates comes just five months after the Maryland Public Service Commission denied the bulk of Pepco's requested $68 million increase on the basis of the company's poor reliability, including rejecting a similar surcharge to the one Pepco is now asking for. When the PSC announced that decision, Pepco warned that customers' service would suffer as a result of not getting the rate increase and that it would be asking for another hike this fall.
Graham insisted that the rate increase is necessary to cover the $1 billion that Pepco is spending to improve its system and to make sure that investors get a "fair" return on their money.
But customers are already paying for subpar performance, said state Sen. Brian Frosh, D-Bethesda. "If they manage to provide adequate service for the future, they shouldn't be rewarded for that."