Just weeks after rejecting the bulk of Pepco's requested rate increase, Maryland utility regulators may reduce the amount the electric company got even further after an appeal by the Office of People's Counsel.

Pepco should not be entitled to recover the costs of installing smart meters as part of a pilot program, the OPC argued in its filing to the Maryland Public Service Commission, because Pepco has not provided evidence showing that the meters are cost-effective for customers.

As of the PSC's July 20 ruling, Pepco had only installed a small number of the meters, and before the rate decision the company offered no evidence to show the costs of installing the meters were offset by added customer benefits, the consumer advocate said. The meters can be monitored remotely, unlike older meters.

"In fact, the cost-effectiveness of the meters themselves can only be determined as part of a full consideration of the cost-effectiveness of the full [smart meter] system as proposed by Pepco," the OPC wrote. "Pepco did not even attempt to argue that it had demonstrated that the [smart meter] system is cost-effective for its customers."

The OPC is not contesting other parts of the decision, so the effect on customers' bills will likely be slight. The current rate increase added $2.02 to the average residential customer's monthly bill.

Pepco spokeswoman Courtney Nogas declined to comment on the OPC's challenge, except to say that the company will submit comments to the PSC by the Sept. 28 deadline.

People's Counsel Paula Carmody could not be reached for comment.

Under the PSC's decision, Pepco can recover the costs of meters that were installed during the pilot program only. Whether the company can recover the costs of future meters will be determined in a future decision.

The OPC pointed out that although the PSC has previously recognized the meters' potential for substantial customer benefits, the regulators have also said that technological limitations "raise concerns about whether the companies' proposed investment in [smart meters] ultimately will prove cost-effective."

But the PSC should be careful about doing anything that would cause Pepco to halt its use of the smart meters, warned Montgomery County Council President Roger Berliner, who has been active in the fight to make Pepco's service more reliable and opposed Pepco's initial rate hike request.

"Smart meters will reduce the time of outages, which is a very significant issue in our community, and the smart meters will allow consumers the ability to reduce their consumption," said Berliner, D-Bethesda. "Either they get to recover their dollars, or this program's not going forward."