Important Information for Maryland Residential Customers

Residential Rate Stabilization Plan Approved

Read Allegheny Power's News Release

The Maryland Public Service Commission has authorized us to implement a Rate Stabilization and Transition Plan for all residential customers in the state. The plan was developed to gradually transition residential customers from capped generation rates to market-based generation rates. 

Although generation rate caps don’t expire until December 31, 2008, you have an important decision to make now. You can choose not to participate in the Rate Stabilization and Transition Plan, but you only have two billing periods to make your decision. 

If you wish to participate in the plan, you do not need to do anything – you will be automatically enrolled. If you choose not to participate you will not be able to reenroll.  Please read the following information carefully before making your decision. 

Here are the facts ... 

In Maryland’s restructured electricity market, Allegheny Power no longer owns generation and must buy electricity on the wholesale market to serve its customers.  The generation portion of the bill represents the price the company pays for electricity, which is passed through to customers. Currently, Allegheny obtains this electricity under a long-term contract that will expire when the rate caps end on December 31, 2008. 

Your rates have increased only one percent since January 2001. While residential generation rates have been capped, the cost of producing power has gone up dramatically – especially the cost of the fossil fuels burned to generate electricity. Coal costs have jumped 43 percent and natural gas costs have skyrocketed 71 percent since January 2002. 

These increased costs are now reflected in the wholesale market price of generation but not in Allegheny Power’s generation rates. When rate caps – and the current supply contract – expire on December 31, 2008, we anticipate that your monthly electric bill will increase significantly.  The Rate Stabilization and Transition Plan will act as a surge protector for your electric bill and will protect you from experiencing higher electric rates all at once.   

Here’s how the plan works …

1. In June, the Temporary Customer Choice Credit expires and a distribution surcharge will be added to your bill – combined, these changes will result in an overall rate increase of approximately 15 percent. 
   
2. On January 1, 2008, the distribution surcharge will increase, resulting in an additional overall rate increase of approximately 15 percent. 
   
3. When rate caps expire on December 31, 2008, and the transition is made to rates that reflect the wholesale market price of electric generation on January 1, 2009, the surcharge becomes a credit. Funds collected through the surcharge during 2007 and 2008, plus interest, will be returned to customers as a credit on your electric bill, thereby reducing the effect of rates based on higher wholesale market prices and eliminating the effect of a potentially large one-time rate increase. 
   
4. The distribution credit will continue, with adjustments, to maintain price stability until December 31, 2010, or until all funds have been returned to customers. 

All monies collected under the Rate Stabilization and Transition Plan – including interest earned – will be fully returned to customers. Allegheny Power will make no profit from this plan. 

Opt-out Procedure

Unless we hear from you within the next two billing periods you will automatically be enrolled in the Rate Stabilization and Transition plan. If you would like to opt-out of the plan, call 1-800-Allegheny (1-800-255-3443), press *66, and use our automated telephone system to enter your decision. 

If you choose not to participate you will not be able to re-enroll in the program, and the amount you pay for electricity beginning on January 1, 2009, will be based on rates that reflect the wholesale market price of electricity.  We anticipate that this will result in a significant increase in your electric bill. 

Even if you choose to opt-out, the Temporary Customer  Choice Credit will expire for all residential customers in  June, which will result in rates increasing by $4.44 per  month for a typical residential customer using 1,000  kilowatt-hours of electricity. 

Refund Policy

Refunds will be available to customers who move outside of Allegheny Power’s Maryland service territory and to the estate of deceased customers. Customers who relocate will have to provide Allegheny with a copy of an electric bill from their new utility company. The money refunded will be an averaged amount based on the number of months the customer participated in the transition plan and whether or not they use electric heat. 

Customers have the option to calculate the amount of their refund and submit it to Allegheny Power for verification. Customers who choose this option will no longer be eligible to receive an average refund based on the number of months they participated in the plan. 

To ensure that Allegheny Power properly accounts for the money customers pay into – and interest accrued from – the Rate Stabilization and Transition Plan, we will submit a quarterly report to the Maryland Public Service Commission for auditing purposes. 

Low-Income Customers

Use Energy Wisely

The rate stabilization and transition plan is only one way Allegheny Power is trying to help customers manage their electric bill when rate caps expire. For more information on how you can use energy more efficiently, click here.

Questions

If you have any questions about the rate stabilization and transition plan, or if you would like to request energy conservation information, please contact our Customer Service Center at 1-800-Allegheny (1-800-255-3443) from 6 a.m. to 8 p.m. weekdays and from 8 a.m. to 4:30 p.m. on weekends.

The graph below shows the effect on residential rates with and without the surcharge and credit.

Background on Rates & Customer Choice

Allegheny Power understands customers are concerned about rates and so are we – we have listened to customers and have created a plan that will soften the transition to market-based generation rates. Moving to market-based generation rates is part of the Maryland Choice program, which created a competitive market for Maryland electric generation service. 

Prices for other energy products have increased significantly since 2001—coal and natural gas prices have increased 43 percent and 71 percent, respectively.

Allegheny is committed to providing quality service at reasonable rates in a competitive environment.

Maryland Electric Choice opened the electric market in Maryland to competition on July 1, 2000, allowing consumers to choose the company that supplies the transmission and generation component of their electric service. 

With the restructuring of the electric industry in Maryland, Allegheny Power no longer owns and operates electric generating stations to serve its Maryland customers.  Currently, Allegheny provides the electric supply portion of customers’ electric service through what is known as Standard Offer Service (SOS).  SOS provides the transmission and generation portion of electric service to customers who do not select an alternate supplier.

More information on Allegheny's Residential Rates in Maryland

What Options Do Customers Have?

Now is a good time for residential customers to learn more about the shopping process so they can take advantage of new shopping options as they become available. 

All electricity suppliers must be licensed by the PSC. For a list of licensed electricity suppliers, visit the Maryland Electric Choice Web site at  www.md-electric-info.com.

For information about offers that are currently available from licensed suppliers, contact the Attorney General’s Office  (410) 576-6550 – www.oag.state.md.us/energy

Customers may also get additional information on choosing an electricity supplier from:

• Public Service Commission's Answer Center  (800) 800-4491
• Office of People's Counsel  (800) 207-4055 – www.opc.state.md.us