Pepco to hold off on more requests

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Once the Potomac Electric Power Co.’s pending rate-hike case wraps up in Maryland, the company will have to go through its potential acquirer for any future rate changes.

Exelon Corp. last week announced its planned acquisition of Pepco Holdings Inc., Potomac Electric’s parent company.

Potomac Electric, which serves Washington and some of its surrounding Maryland regions, is trying to raise its rate base by $37.4 million. The last hearing on the case took place April 29, and the Maryland Public Service Commission plans to issue a decision in July.

After that, the company will not pursue any future rate hikes without Exelon’s consent.

One of Potomac Electric’s witnesses during hearings on the pending rate case mentioned that the company planned to file another rate case during the fourth quarter of 2014, said Paula Carmody, the Maryland People’s Counsel. But Pepco made clear last week that the plan had changed.

“At this time we do not plan to file any new cases,” said Frederick Boyle, senior vice president and chief financial officer for Pepco Holdings, on a conference call with investors Wednesday. “We plan to continue to pursue the pending cases that are currently filed.”

The merger is expected to close in the second or third quarter of 2015. It will require state and federal regulatory approval. The companies have not yet filed for approval, but plan to do so within 60 days of the announcement.

Pepco has requested rate hikes frequently, said Carmody, who represented the interests of Maryland consumers in these utilities cases. The company has filed five rate cases since 2007, the last four of which came no more than a year apart from each other. The pending case was filed in December.

In Potomac Electric’s most recently completed rate increase case, the PSC granted it about half of what it had sought.

Delmarva Power & Light, also owned by Pepco Holdings, has filed four since 2007.

Exelon-owned Baltimore Gas & Electric Co. has not been quite so frequent with rate increases. It has filed two cases since 2007, the most recent of which was decided in 2013.

The power companies need the rate increases in order to fund their improvement projects, said Charles Fishman, analyst for Morningstar who follows Pepco Holdings.

“The regulatory framework is such that it’s not forward-looking,” said Fishman, so energy companies plan their rate requests far in advance.

Some states have rate tracker systems that allow energy companies to increase their rates as needed for certain projects, with a regulatory review after the fact, he said. But since Maryland does not, some companies have to mitigate the effects of regulatory lag by reapplying for rate hikes frequently.

Carmody said that tracker systems have been continuously discussed in Maryland, but she’s not a fan.

“We understand that the rate cases being filed are frequent,” she said, but “it’s the only place that we, representing residential consumers, have the opportunity to open the books, so to speak.”