Regulators grant OPC motion to remove Pepco ‘climate solutions’ electrification program from rate case
BALTIMORE – The Public Service Commission yesterday granted the Office of People’s Counsel’s request to strike Potomac Electric Power Company’s (Pepco) proposed “climate solutions” electrification programs from its pending multi-year rate case, agreeing with OPC that the proposals, with one exception, are not appropriate for consideration in a rate case.
“Electrification brings near- and long-term benefits for Maryland’s residential customers and is necessary to meet the State’s climate policy goals,” said People’s Counsel David S. Lapp. “But how we electrify involves critical policy issues about the role of the utilities—and their captive customers who pay for utility programs—which are inappropriate for a rate case. We applaud the Commission’s recognition that a utility’s rate case is not where sweeping policy decisions should be made.”
Pepco proposed to spend nearly $151 million on the programs over the next three and one-half years as part of its multi-year rate proposal, more than $100 million of which was for rebates related to electrification measures, including around $77 million for the purchasing of electric appliances that would be owned, maintained, and operated by customers.
Pepco proposed to treat customer rebates similar to capital investments on which it earns profit. OPC’s motion explained that Pepco’s proposal is contrary to established ratemaking principles, would cause significant long-term rate increases, and alter Pepco’s utility-service role into “the role of a bank, rather than a utility.”
The Maryland Energy Administration and the Commission’s technical staff filed letters in support of OPC’s motion to remove the programs from the rate case.
The Commission’s order (Order No. 91048) agreed with many of the points OPC raised in its motion. For transportation electrification, the Commission agreed that Pepco’s proposal “raises several important questions about the role utilities should play in the deployment and use of EV charging infrastructure.” On treating rebates for customer appliances as if they were utility capital investments, the Commission agreed that Pepco’s proposal “raises significant public policy questions about the role of the utility and whether such a utility program would constitute unfair competition among non-utility market actors in electrification markets.”
The Commission denied the proposed programs “without prejudice,” meaning Pepco may propose them again in Commission dockets outside of the pending rate case. The Commission did not remove from the rate case Pepco’s proposed programs for “smart inverters,” which could mitigate costly distribution upgrades to accommodate more solar panels. OPC agreed that the smart inverter program could benefit customers but argued it should be considered in a different setting, not the rate case.
The evidentiary hearings for Pepco’s rate base begin this week. In the rate case, Pepco is proposing to gradually increase winter distribution rates by 77 percent in 2027 (the last year of the rate case) over 2023 rates and summer rates by 38 percent in 2027 over 2023 levels. OPC’s consumer guide to the rate case is available here.
The Maryland Office of People’s Counsel is an independent state agency that represents Maryland’s residential consumers of electric, natural gas, telecommunications, private water and certain transportation matters before the Public Service Commission, federal regulatory agencies and the courts.
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