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April 5, 2006


Legislation providing some 'relief' for Delmarva Power customers from the impending 59% rate increase and requiring the utility company to plan long-term for acquiring sufficient electricity to "meet its customers needs at a minimal cost" was approved by a wide margin in the state House of Representatives although supporters agreed it was not all they would like to have been able to do to address the crisis.

"No one holds this out to be a panacea," said William Oberle. "It's imperfect, but the best we can do today."

Dennis Williams, however, said the payment-deferral plan the measure provides "will come back and slap us in the face again" when residents have to settle up with the company beginning in 2008. James Johnson described the plan as "something like a pay-day loan."

Williams, Johnson, Helene Keeley and Hazel Plant, who have Wilmington constituencies, were the only ones to vote against the measure. Joseph DiPinto, who also represents a city district, and 33 other representatives voted in favor. There was one abstention and two members were absent.

Robert Valihura, primary sponsor of the measure and chairman of the House energy committee, acknowledged that there will be an end-of-the-term balloon payment for customers who do not elect to 'opt-out' of the deferral plan by Apr. 28. "Make no mistake about it -- there is a cost to this plan," he said.

The company will be permitted to charge 5% annual-rate interest on deferred amounts, which Valihura said will amount to $25.20 for a 'typical' customer. Oberle pointed out that the eventual rate increase for customers not 'opting out' will most likely exceed 59%.

Here's how deferral plan will work: Beginning May 1, customers will pay at 15% higher than the present rate. Starting Jan. 1, 2007, they will pay 25% higher. From Jun. 1, 2007, their rate will be 19% higher. Between Jan. 1, 2008, and Jun. 1, 2009, they will pay all deferred amounts plus the interest, in equal monthly installments, as well as having to pay full rate for electricity being used at that time. The legislation refers to that as having to "true-up" to the rate  level those who do not defer as paying.

Delmarva will be allowed to calculate the amount of deferrals as the average of all customers in a rate category rather than by individual customers.

"If you can afford it, you're better off taking [the full rate increase] up front," Oberle said.

A last-minute amendment drafted just before the House took up the legislation may have paved the way for bringing direct competition into Delaware's residential electricity market.

During a committee hearing earlier in the day, Harry Warren, president of Washington Gas Energy Services, a natural gas and electricity supplier in the Washington, D.C., metropolitan area, said his company would be interested in selling at retail in Delaware if it were able to bid on a long-term contract to be a wholesale supplier to Delmarva Power.

He asked that measure's requirement that Delmarva Power enter into long-term contracts to meet 30% of its customers' electricity needs specify that the contracts have to run for at least 10 years. That, Warren said, would justify his company's rebuilding the electricity generation plant at Indian River in Sussex County, which has severe environmental problems, to employ up-to-date coal-gasification technology. He referred to that as a $2.4 billion investment.

When Valihura asked him if complying with his request would assure his company's presence, Warren replied, "If the legislation is enacted, you will see us [here] very shortly."

Washington Gas Energy Services bought the Indian River plant from Delmarva Power when it got out of the generating business. The companies are not affiliated.

House passage of the deferral and planning legislation along with companion measures authorizing state agencies, including public school districts, to aggregate their energy purchases in the hope of making their business more attractive to alternate supplies that would then charge more favorable rates, and convening an 'energy summit' in June to deal with energy-saving technology virtually assures quick enactment of key components of a proposal by Governor Ruth Ann Minner's energy taskforce.

The Senate is expected to concur with the House-passed measures and the House is poised to agree to three pieces of legislation previously passed by the Senate dealing with financing energy assistance for low-income households and providing incentives for selected energy conservation steps.

During more than an hour of discussion in the House on Apr. 4, there was a consensus that the General Assembly may not have completed its work on the issue for this session and beyond. "This is a good start," said speaker of the House Terry Spence. "It is a good way to lay out a path forward."

"I do believe this is just a starting point," Oberle said.

Keeley said the Assembly is going to have to come to grips in its present session -- which ends Jun. 30 -- with the problem of how low- and moderate-income households and persons on fixed incomes are going to bear the cost of heat, cooling and light along with other necessities. "They're going to need help," she said. "We're going to have to work with Delmarva [Power] not to turn their electricity off."

Without going into any detail, Joseph Miro said he would like to see establishment of "energy districts" as a mechanism for residents of given areas to aggregate their purchases to obtain lower rates.

During the committee hearing, Valihura got Thomas Shaw, executive vice president of Pepco Holdings, Delmarva Power's parent company, to disclose that Delmarva Power has contracted to purchase 38% of its electricity supply from Conectiv Energy, which also is a wholly owned subsidiary of Pepso Holdings. Since 1999, he said, Conectiv Energy had all of that business.

Delmarva Power has refused to publicly identify its other suppliers and their respective shares of the business on the grounds that is proprietary information. Shaw did say that none of the others are affiliated companies and that all the contracts were awarded on the basis of competitive bidding. Bruce Burcat, executive director of the Public Service Commission, which observed the opening of bids, corroborated that.

Donna Stone said during the House session that legislators and the public should not loose sight  of the fact that during seven years of Delmarva Power's charging fixed rates, its Delaware customers "saved in excess of $1 billion" and the company is not seeking to recover that money. "After the [May 1] increase, Delmarva [Power] will be right in the middle of the pack" of regional and municipal utilities as regards electricity rates, she said.

Wayne Smith, leader of the Republican majority in the House, praised Valihura and members of the energy committee for a bipartisan effort to craft complex legislation which apparently won support from both sides of the rate-increase controversy. He said Delmarva Power and Delaware Electric Cooperative made "good faith efforts" to cooperate with the committee and officials of the Minner administration.

"You have only to look at our neighbor to the west (Maryland) and the process they're going through. It isn't pretty," Smith said. "We did it the Delaware way."

© 2006. All rights reserved.

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Delmarva Power rate increase ‘relief’ legislation heads to quick passage

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