Power might be amenable to re-regulation, a company
official indicated as he began a round of
presentations before civic organizations in the wake
of strong adverse public reaction to plans to boost
electricity rates nearly 60% when deregulation takes
effect on May 1.
"We need to look at
re-regulation seriously for small businesses and residential
[customers]," Tim Brown, director of corporate
communication, told a meeting of the Greater Hockessin
Area Development Association.
He also disclosed that
Conectiv Energy is one of three unregulated suppliers of
electricity that were successful bidders to supply Delmarva
Power with electricity for distribution and resale. Delmarva
Power and Connectiv Energy are both wholly owned
subsidiaries of Washington, D.C.-based Pepco Holdings Inc.
agreements, Brown refused to divulge the identity of the
other two beyond saying that Delmarva Power "has no
ownership interest" in them. Nor would he comment on
the proportion of Delmarva Power's needs that each of the
three will supply.
He said 25 companies
responded to Delmarva Power's request for contract proposals
and that a representative of the Delaware Public Service
Commission was present to witness the bid opening.
Brown also said that there
are discussions underway with Governor Ruth Ann Minner,
legislators and other officials about the possibility of
phasing in the 59% rate increase instead of imposing it all
at once, as now planned. He did not indicate how long a
period for phasing is being contemplated.
But, he added, doing so
"would be like buying on a credit card -- there is a cost to
that." As a result, the total additional cost would be
As would be expected given
public reaction to the company's announcement about the
magnitude of the impending rate increase, much of the
question and discussion period following Brown's
presentation at the meeting on Feb. 20 took the form of
complaint. Among other things, it was pointed out that
businesses paying more for electricity will, in turn, pass
that cost on to their customers. Even government services
will take a similar hit. People are thus facing a
significant across-the-board rise in their individual costs
of living as the ripples from Delmarva Power's splash spread
through the local economy.
Brown said that the 'typical'
Delmarva Power residential customer is looking at paying an
additional $54 a month for electricity. Still, he
maintained, the resultant cost will be "somewhere in the
middle" of the range of what the seven municipal utilities
in Delaware and power companies in surrounding states
charge. Newark, Dover and other municipals, he said, are on
the verge of seeking rate increases that "will bring them
closer to where we are," he said.
He acknowledged that it would
be better to have allowed incremental increases during the
three-year moratoriums which followed in succession
deregulation in 1999 and Delmarva Power's being acquired by
Pepco in 2003. A relatively modest increase was allowed when
the acquisition occurred.
He said that customers
'saved' $1 billion during those six years, but stopped short
of acknowledging that the company expects to make up that
difference now. He did acknowledge that, because it had
long-term supply contracts in place, the company "did not
loose money during the period."
Pepco spokespersons in
Washington had not responded to a Delaforum request for
information about profitability as this article was being
Brown said the massive rate
increase is the result of great escalation of the cost of
fuel needed to generate electricity. Since 1999, he said,
natural gas has gone up 400%, oil 300% and coal 150%.
The cost of nuclear power has
not increased with the same order of magnitude, but
environmental and other concerns limit its availability, he
noted. About a fifth of the electricity Delmarva Power
distributes is generated by nuclear power. After being
acquired by Pepco, the company that is now Delmarva Power
sold its interests in nuclear plants in New Jersey and
Pennsylvania to the larger participating companies.
"If we hadn't been
deregulated, we still would have had to pass through [the
added costs] on a continuing basis," he said.
Under terms of deregulation,
Delmarva Power remains under Public Service Commission
jurisdiction relative to what it charges to transmit
electricity to customers, but is allowed to buy that
electricity in the free market and pass on that cost --
presumably with a markup -- in much the same way that any
business factors cost of supply into selling prices.
Brown said regulated
distribution charges have risen only minimally during the
Deregulation was justified,
he said, by an expectation that it would generate
competition resulting in lower costs for users. "That hasn't
happened. ... As of right now there doesn't seem to be any
competitions [to Delmarva Power] out there willing to come
in [to its market]," he said.
Delmarva Power's large
commercial customers, Brown said, are facing rate increases
which, in some cases, are more than double present rates.
However, they "have [potential] alternate suppliers anxious
to sell to them," he said.