Important Information for Maryland Residential Customers

Residential Rate Stabilization Plan

Read Allegheny Power's News Release

In March 2007, the Maryland Public Service Commission 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. 

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. 

Through early 2007, 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. 
The graph below shows the effect on residential rates with and without the surcharge and credit.

 

Here’s how the plan works …

  1. In June, 2007, the Temporary Customer Choice Credit expired and a distribution surcharge was added to your bill – combined, these changes resulted in an overall rate increase of approximately 15 percent. 
  2. On January 1, 2008, the distribution surcharge increased, 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. 

Low-Income Customers

We realize that any increase in energy costs poses special problems for our low-income customers. To meet that need, Allegheny Power is increasing its contribution to the Community Energy Fund by 15 percent each of the four years of the plan. 

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, visit our Watt Watchers section.

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.

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.

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