Allegheny proposal a shock to customers

January 17, 2007|by KAREN HANNA

HAGERSTOWN - Customers upset with a proposal that calls for electricity rate hikes over four years told officials at a public hearing Tuesday they oppose Allegheny Energy's answer to an anticipated surge in prices.

"Even the Internal Revenue Service does not tax us on revenue we have not yet received," said Barbara Stansberry, who lives near Chewsville. She said she believes customers should not be required to pay into a proposed account that would help cover cost increases anticipated when caps on residential charges end at the end of 2008.

Allegheny Energy proposes compounding annual increases of 15 percent between March 31 and 2010 to prepare customers for higher costs when the residential energy-generation market is deregulated.

Company attorney Phil Bray said the annual increases will fund an interest-bearing account that will offset customers' "rate shock" when market pricing starts in 2009.


The Maryland Public Service Commission, which will conduct three more public hearings between now and next week, has not set a date to decide whether to accept Allegheny Energy's plan, chief hearing examiner Bryan Moorhouse said.

When one participant at Tuesday's public hearing asked how many people opposed the energy company's plan, most raised their hands. About 40 people attended the hearing.

Stansberry characterized the proposal as a "gross abuse of our intelligence."

Other participants wondered what will happen to the money consumers will pay ahead of the deregulation schedule.

"I don't want AP taking my money and saving it for me. AP is not in the savings and loan business," said Daniel Moeller, who was the first of about a dozen people who addressed the public service commission and energy company officials.

Bray, who explained the proposal before the commission turned over the meeting to public comments, said the money would soften the blow for customers, who otherwise could face a huge one-time increase. He said the rate hikes could total 60 percent. When compounded, the four proposed increases of 15 percent would lead to an overall increase of almost 75 percent between 2006 and 2010, figures provided by the company show.

The average residential customer uses 1,000 kilowatt hours of energy a month, Allegheny Energy manager Allen T. Staggers said. In 2006, that cost $69.80; under the company's plan, the average rates in 2010 and 2011 would be more than $122.

Charles Kruft, the company's director of state regulatory affairs, said by paying into the increases now, customers can expect rate credits in 2009 and 2010. Neither he nor Bray said they knew how much money increases in 2007 and 2008 would raise. Those increases are considered "ramp-up surcharges" because price caps officially do not end until the end of 2008.

Kruft and Bray also said after the meeting they do not know what would happen to the "ramp-up" account, if Allegheny Energy went bankrupt, a concern several participants at the hearing expressed.

"I think the consumer is paying for poor management," Dave Moses said.

The public service commission would be in a position to oversee the account, Staggers said after the hearing.

Know more

The issue: Allegheny Energy is preparing to switch to market-based pricing when its rate caps for residential customers expire in 2009.

What's new: Representatives from Allegheny Energy and the Maryland Public Service Commission met with customers Tuesday to discuss the rate increases.

What's next: Allegheny Energy officials said they would like to start the increases at the end of March. The Maryland Public Service Commission has not set a date to decide the matter.

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