Pepco nixes proposed forecast-based rate hike after MD legislature passes energy bill

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The Potomac Electric Power Company will forgo a proposed, forecast-based rate increase following the passage of key energy legislation by the Maryland General Assembly.

The D.C. and Maryland utility informed the state’s Public Service Commission last week of the withdrawal of its request to raise prices that would have been based on projected revenues, expenses and capital expenditures. 

As passed by the legislature, the Utility Reducing Energy Load Inflation for Everyday Families, or RELIEF, Act is poised to reduce skyrocketing ratepayer bills — largely through rollbacks of the Maryland EmPOWER program. That initiative mandates that utility companies incentivize their consumers to save power and money through discounted energy audits, weatherization projects and efficient appliances. 

EmPOWER fees appear as a line-item on residents’ utility bills. With these cuts to the program, if signed by Democratic Gov. Wes Moore, utility customers are expected to save a minimum of $150 annually.

The Office of the People’s Counsel, a state government body that protects utility customers, released a report last week evaluating EmPOWER’s efficacy throughout 2025. It found that most utility companies that utilize the program overestimated the budgets they deemed necessary to reach its goals while still passing on energy cost-savings to customers.

“The report shows that in 2025, EmPOWER continued to generate low-cost energy-efficiency savings for customers,” Maryland People’s Counsel David S. Lapp said in a Friday statement. 

But some have lamented the reduction of EmPOWER. In a statement issued April 14, Emily Scarr, a senior adviser for the consumer advocacy organization Maryland PIRG, said energy efficiency “is the cheapest, cleanest, and fastest way to reduce energy waste and demand on the grid.”

“Therefore we’re disappointed that the legislature made shortsighted cuts to the EmPOWER Maryland program,” Scarr continued. “But we won’t stop pushing to reduce energy waste and help make our homes more comfortable in the peak of summer and depths of winter.”

Beyond the changes that the Utility RELIEF Act made to EmPOWER, the multifaceted legislation would suspend the Public Service Commission’s ability to approve utility companies’ requests for rate increases based on forecasts, also known as fully forecasted test years, until April 2027. 

During that pause, the Maryland Public Service Commission is to conduct proceedings to determine if approving rate increases based on forecasts is in the best interest of utility customers.

According to a news release from the Office of the People’s Council, the yearlong pause could result in $4.5 million in savings for residential utility customers.

The legislation would go into effect immediately upon being signed.

“The Utility RELIEF Act’s temporary pause resulted in Pepco withdrawing its current request, marking a win for Pepco’s customers,” Lapp stated Tuesday. “Although a permanent ban would have been better, the one-year moratorium is an important step forward for customers.” 

Scarr also heralded the measure as an integral step to “prevent wasteful spending and excessive rate hikes from BGE and PEPCO.”

“For ratepayers to get a fair deal we need a permanent end to ‘forecasted ratemaking’ and we need to take a hard look at utility profit rates to ensure they align with the public interest,” she said in a statement.

In a statement to The Daily Record on Wednesday, Chuck McDade, a senior communications specialist for Pepco, said that because of the yet-to-be-enacted legislation, the company is choosing to move forward with its traditional test-year filing to allow the rate-setting process “to move forward efficiently, supporting essential reliability and infrastructure investments for our customers and communities.”

“While we are advancing the traditional filing, Pepco continues to believe forecasted test years deliver long‑term value for customers and looks forward to engaging in the Commission’s upcoming study on future rate‑making methods that best serve Maryland’s evolving energy needs,” said McDade.

On April 13, Moore, Senate President Bill Ferguson and House Speaker Joseline Peña-Melnyk, both Democrats, held a news conference to announce the finalization of policies for the Utility RELIEF Act, which the three are expected to sign at a ceremony in the coming weeks.

The same day, Exelon companies Pepco, Baltimore Gas and Electric Co. and Delmarva Power issued a joint statement saying that they “appreciate” the General Assembly’s focus on addressing energy affordability for their constituents.

“At the same time, it is important to ensure that well-intended policies do not create unintended consequences for customers over the long term,” the three companies wrote. “Policies that limit how utilities plan, invest, and recover costs can make it more challenging to maintain the safe, reliable energy system that customers depend on every day and may ultimately increase costs or delay critical infrastructure investments.”

Pepco’s decision to withdraw its request for rate increases follows both the passage of the Utility RELIEF Act and a people’s counsel motion to dismiss the proposal on the basis that fully forecasted test years have “never been expressly authorized” and lack “the consumer-protection features” that the Public Service Commission “has required for other alternative mechanisms.” 

Pepco also submitted a rate increase request based on historic test-year data. In its motion to dismiss, the Office of the People’s Counsel requested that that be preserved as “a path to consider any warranted rate change.”

According to the office, under traditional rate-setting mechanisms, utility companies only recover costs from customers if they can show that the investments they made were prudent, reasonable and provide actual benefits to ratepayers. Setting rates based on forecasts allows companies to collect speculated capital investment and operational costs before they can demonstrate that they were necessary and can increase by two to three times over what standard rate-setting practices.

This story has been updated with a comment from Pepco.