Maryland House Speaker Joseline Peña-Melnyk said Friday that Pepco’s decision to withdraw its proposed rate increase highlights the need to permanently ban the use of projected costs in setting utility rates.
After the Utility Relief Act was passed by the Maryland General Assembly in mid-April, Pepco withdrew a request to raise rates that was based on one-year projected costs.
The new law was created to address rising energy bills. It includes a temporary pause on using “forecasted test years,” which allow utility companies to set rates based on expected future expenses instead of actual past costs.
Peña-Melnyk and other lawmakers argue that using real, historical data is more reliable and can better protect customers from unnecessary increases. They say this situation highlights the need for long-term changes to how utility rates are set.
Pepco, however, has said that using forecasts can help plan future investments and provide more predictability. The company also argues that relying only on past data can sometimes lead to higher costs over time.
“Forecasted test years remain a strong regulatory tool, providing transparency into planned investments without inflated costs for customers,” said Chuck McDade, senior communications specialist at Pepco in a statement to MCM News. “This reflects the benefit of reviewing and moderating spending levels in advance of costs being incurred and included in rates,” he added.
Meanwhile, the Maryland Public Service Commission will study different rate-setting methods to decide what works best for Maryland’s energy system and its customers.
Some Montgomery County residents have reported higher than usual utility bills. Utilities and Maryland lawmakers have pointed to rising demand and limited power supply in the state as possible reasons for the increases.
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