Pepco, Delmarva Plan to Raise SOS Rates to Reflect Higher Working Capital Costs Effective February 1

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January 19, 2011

Pepco and Delmarva Power plan to increase Maryland SOS rates effective February 1, 2011 under their proposed rates for higher cash working capital cost recovery as originally filed in March 2010, arguing that the tariffs may take effect by operation of law (Cases 9226 & 9232).

The PSC set the cash working capital issues, as well as broader issues regarding the components of the SOS administrative charge, for hearing.  The hearing was held in September, and post-hearing briefing was completed in November.

The utilities argued that the tariffs and applicable rates were not properly suspended by the Commission when originally filed on March 9, 2010.  However, even if they had been, the utilities said that the suspension period would likely have been 150 days, the maximum time initially permitted by law, from June 1, 2010 (the original effective date).  A 150-day suspension would have expired in October, and the utilities noted that 231 days have elapsed since June 1, 2010.  

Statute provides that the Commission may suspend filed tariffs for a period beyond 150 days if it concludes it cannot complete the proceedings in that timeframe; however, the utilities noted that no such additional suspension notice has been issued.

However, in July 9 letter orders to each company, the Commission ruled that the tariffs, "were prematurely filed and, therefore, the Commission rejects them" (see 7/12).  Although Pepco and Delmarva cite the July 9 letter orders in their statements of intent to implement the higher rates, they do not clearly address why the issue of suspension, and automatic operation of law, come into play if the July letter orders rejected the tariffs outright.  

Rather than acknowledging the outright rejection (rather than a suspension), the utilities summarize the July letter orders as orders in which, "[t]he Commission stated that it would not permit the Company to put the rates into effect because the Commission had previously determined that the scope of the proceeding should be expanded."  Furthermore, the utilities describe the July letter orders as "delegat[ing] the matter to the Hearing Examiner's division," although by this time, the tariffs had already been set for hearing, and the July letter orders only reference this prior delegation, and do not suspend and delegate the tariffs for further review and action as intimated by the utilities.

Pepco said that since March 9, 2010, it has not collected over $5 million in actual cash working capital costs associated with providing SOS.  Delmarva reported that it has not collected about $2 million in actual cash working capital costs since March 9, 2010.

Under updated tariffs filed by Pepco to reflect the inclusion of additional cash working capital costs to current SOS rates, each residential SOS rate, for both the October 2010 through May 2011 and the June 2011 through September 2011 periods, would increase by 0.094¢/kWh.

Each Pepco Type I SOS rate, for the periods through September 30, 2011, would increase by 0.112¢/kWh.  Each Pepco Type II SOS rate, for the period through February 28, 2011, would increase by 0.102¢/kWh.  

For Pepco hourly priced customers, a new cash working capital cost component of 0.072¢/kWh would be added to the pricing calculation.

At Delmarva, each residential SOS rate, for both the October 2010 through May 2011 and the June 2011 through September 2011 periods, would increase by 0.0595¢/kWh.

Each Delmarva Type I SOS rate, for the periods through September 30, 2011, would increase by 0.0862¢/kWh.  Each Delmarva Type II SOS rate, for the period through February 28, 2011, would increase by 0.0922¢/kWh.

For Delmarva hourly priced customers, a new working capital cost component of 0.0724¢/kWh would be added to the pricing calculation.

Clean and redlined versions of the new SOS rates which would result from these additions, barring an order from the PSC either directing the utilities to cease implementation of the new rates, or finding that the utilities' operation of law argument is in error, are available in the Pepco and Delmarva filings, linked below:

Pepco SOS Rates, Effective February 1 (All Classes Modified)

Delmarva SOS Rates, Effective February 1 (All Classes Modified)

As previously reported, Pepco and Delmarva (as well as Baltimore Gas & Electric in a separate case) are seeking higher cash working capital recovery through SOS rates due to the move to weekly settlements in PJM, as well as generally higher commodity rates versus when the level of cash working capital recovery was first established.  Other parties, such as the Office of People's Counsel, are seeking to remove the bypassable "return" component included in certain SOS rates, and are seeking to modify the Administrative Credit so that it is paid only to SOS customers, and not all distribution customers (see 8/10).


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