Agency demands power rate cut

March 18, 1998|By KERRY LYNN FRALEY

Agency demands power rate cut

Potomac Edison Company's profit is too high, and the utility should lower Maryland customers' rates and charges by at least $15 million a year, according to a petition for a rate reduction filed by the state's consumer watchdog agency for utilities.

The Maryland Public Service Commission, which approves utility rates in the state, agreed last week to look at the issues raised in the petition, filed Jan. 30 by the Maryland Office of People's Counsel, said Public Service Commission spokesman Robert Harris.

Officials at the regulated utility, a subsidiary of Hagerstown-based Allegheny Energy, which does business as Allegheny Power, say the People's Counsel is basing its case on misleading evidence.


If the Public Service Commission decides to embark on a complicated rate case, it should wait until September, when the regulatory agency will determine how much of a surcharge the company can impose for cost increases related to the AES Warrior Run power plant, company officials say.

"It makes sense. It's not that far off," said Steve Klick, director of regulation and rates for Allegheny Power, which provides power to about 203,000 homes and businesses in Maryland.

The People's Counsel filed its petition based on the company's earnings report for the 12-month period ending Sept. 30, 1997, Assistant People's Counsel John Sayles said.

The office believes Allegheny Power is getting a higher rate of return on its investments than the Public Service Commission has deemed reasonable, Sayles said.

Based on that quarterly report, the People's Counsel has alleged that the company is "overearning" by $15.6 million a year, he said.

It is asking that customers be reimbursed for that excess in the form of reduced rates, divided between residential and business customers, Sayles said.

He said he couldn't speculate on how much the average residential customer would save per month.

Allegheny Power officials contend that while the company has exceeded the set rate of return in some fiscal quarters, it has fallen short in other quarters, Klick said.

There should be a trend of overruns, which there hasn't been, before the Public Service Commission subjects the company to a rate case, he said.

It would be more efficient and better for customers if the Public Service Commission waits to consider the overearnings issue until it reviews the company's proposed surcharge rate for costs related to the AES Warrior Run power plant, Klick said.

Because of the way a rate case works, customers wouldn't see lower bills until at least April 1999, Klick said.

The company is projecting the increased cost of buying electricity from the new plant near Cumberland, Md., will translate into a 13 percent to 15 percent surcharge to residential customers starting in October 1999, he said.

That would increase the average customer's bill by $11.

If the Public Service Commission considered the two matters together, it could blend any reduction with the increase to give customers a single rate change, Klick said.

The People's Counsel asserts that the Public Service Commission should investigate the company's rates now to get a clear picture of its earnings before Warrior Run-related costs are a factor, according to its petition.

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