Customers will have to pay average of $2.02 more on bills

Maryland utility regulators rejected nearly 75 percent of Pepco's requested $68 million rate increase, but Maryland residents still will pay an average $2.02 more on their monthly bills immediately.

The $18.1 million increase covers the money Pepco has spent and the "known and measurable" amounts it will spend to provide reliable electric service, which is required by law; the costs of improvements Pepco has made to its power lines and other equipment; and the costs Pepco will incur to comply with a new set of regulations. The rest of the $68 million request was denied.

"We never grant any increase lightly, especially an increase coming against the backdrop of the justifiably intense public dissatisfaction with Pepco's reliability performance over the past several years," the Maryland Public Service Commission wrote. The decision in December to fine Pepco $1 million was the result of the commission's dissatisfaction with Pepco, and Pepco's decision to try to recover the costs of making up for years of neglect "makes us wonder if the company heard us," the commission wrote.

The commission said the company will not be allowed to implement a surcharge to collect the costs of projects aimed at improving reliability before Pepco starts them, to collect $6.4 million in operating and maintenance costs -- the money Pepco spent "to catch up for its years of system neglect" -- or to recover $1.5 million Pepco spent defending itself in the commission's investigation into the company's reliability.

The commission also reduced the allowed investment return to Pepco's shareholders from 9.83 percent to 9.31 percent, despite Pepco's request to increase it to 10.75 percent.

The commission is "sending a clear message to Pepco and to our residents that they are going to hold Pepco accountable, and it's not OK to provide substandard service year after year and expect residents to foot the bill," said Montgomery County Council President Roger Berliner, a lawyer specializing in energy issues.

Pepco spokeswoman Myra Oppel said the company will need to review the order before issuing a comment.

The commission did not consider the outages after the June 29 derecho that cut power to millions because the storm occurred after the official record was closed, but the timing was "unfortunate," the commission said in its order.

Still, after the company took eight days to restore power after the June 29 storm, some are not satisfied with the decision to raise Maryland customers' rates 1.67 percent.

"There should be no rate increases for Pepco until everyone's convinced that the changes that they're making are undeniably the most that they can do," said Montgomery County Councilman Hans Riemer, D-at large. Riemer's online petition seeking the commission's removal has more than 3,800 signatures.