Soaring energy prices in the wake of deregulation have increased bills for Pepco customers in Maryland by nearly 40 percent since June 1, or an average of $36 per month. In Potomac, where large homes and high energy bills were already the norm, residents say they have seen monthly bill increases in the hundreds of dollars.
“I wouldn’t say it was a shock —. I knew it was coming,” said Potomac resident Linda April of the 38 percent increase that took effect June 1.
“It’s definitely been a huge increase,” she continued. “We’re seeing it more in our business. … My husband is a physician and has an office in Rockville. We have a Pepco bill there as well and it’s huge.”
The office bill increased by “a few hundred” dollars a month, she said.
The 38 percent increase did not shock Potomac resident Stacy Gorin either. Her bill increased from about $300 to $500, or roughly 40 percent.
“You know what, honestly I was sort of prepared for it,” she said.
Gorin said that she turns her thermostat up when possible in order to minimize the electric bill increases, though she works from home and can’t keep it too hot during the day.
“My husband is incredibly conscientious about it,” she said. “I work out of the house so someone’s home all day. Two years ago I wasn’t working out of house as much so I wasn’t keeping the house as cool."
April said that cutting down on energy use has been difficult with the recent heat.
“It’s been so hot,” she said. “We’re running the air conditioning and fans even more than usual because it’s been such an incredibly hot summer.”
THE MARYLAND GENERAL Assembly deregulated energy companies in 1999 in hopes of increasing efficiency and decreasing cost through open competition on the market, said Bethany Gill, spokesperson for the Maryland Public Service Commission. Companies like Pepco were required to sell their power plants and serve only as conduits of energy.
“It used to be that it was a one-stop shop, where the utility would have its own generation plant and would deliver electricity on wires to houses,” said Gill. “What deregulation did was have them sell off their plants, so now all they are is a maintenance and delivery service. So what they do ideally is buy electricity from any generator within Maryland.... It's ideally supposed to help with competition."
Local Pepco customers were largely shielded from the impact of deregulation until 2004 when protective price caps came off.
“They assumed competition would come in and be underneath that price” by the time the cap was lifted, said Gill. “Unfortunately what happened was war in the Middle East and various natural disasters, and fuel prices continued to rise. Pepco had capped rates and kept them down superficially.”
State Senator Brian Frosh (D-16) said he led the opposition to deregulation and was one of only nine senators to vote against the measure. He said the General Assembly capitulated to deregulation after aggressive courting from powerful energy companies led by Enron.
"There were more lobbyists than I’d ever seen lobbying on that bill than at any other time I’ve been in the General Assembly," said Frosh, who has been a senator since 1995. "It was a sea of gray suits and cell phones.
"It became a conventional wisdom that this was the way to go," he added. "I suspect there were a lot of campaign contributions surrounding this. The business community, the Chamber of Commerce, the utilities and Enron were behind it."
Frosh said that after realizing that deregulation was imminent, he put together an ultimately unsuccessful proposal that would have retained more rights for consumers, such as collective bargaining power. His bill would have allowed the county to bargain on behalf of residents, but it was strongly opposed by energy companies.
"Right now if I say to Pepco, 'Look, I don’t think you’re giving me the best rate,' they’ll laugh at me," he said. "If a million people in Montgomery County aggregated and bargained as a unit with the utilities, they do have market power."
Frosh said that legislation passed in the recent special session may be able to partially reinstate an energy efficiency program, which was absent in the 1999 deregulation bill.
"I’ve been posing legislation to reinstitute the conservation programs that we had prior to electric utility deregulation — it's a way to save money and it's also extremely important from an environmental standpoint," he said. "It's not in the energy companies' interest to do that. They lobbied hard to keep [energy efficiency regulations] out of the law."
THE WHOPPING 38 percent increase that hit Pepco customers in Maryland beginning June 1 was not experienced by Pepco customers in DC. There, the increase was 12 percent.
Mary-Beth Hutchinson, media representative for Pepco, said that the hard hit to Marylanders boils down to legislative oversight.
“It comes down to how Maryland legislators designed the procurement process,” she said. “DC designed it the way we recommend and preferred, and Maryland did not.”
According to Hutchinson, Maryland legislation required that Pepco procure 85 percent of the energy load at once, whereas DC law allows the company to acquire that area’s energy load in thirds.
“The rules enacted to govern how power is procured for customers under deregulation in DC were done in way to minimize increases to our customers,” she said. “The way enacted in Maryland forced us to do it in way that exposes our customers to major increases.”
State Senator Rob Garagiola (D-15) said that the Ehrlich-appointed Public Service Commission was responsible for the procurement regulations, not the state legislature. He said he suspects that the Public Service Commission altered the procurement requirements in order to "artificially create competition" for Pepco.
"[The Commission] required Pepco to buy a significant portion of their load earlier this year at a time when energy costs were at their highest, whereas in the District of Columbia, the ... equivalent [of the Public Service Commission] only required Pepco to buy one-third of their energy needs at once," said Garagiola. "The peaks in values of energy costs over time would be mitigated in DC whereas our Public Service Commission required Pepco to purchase a greater portion of energy at a time when it was at the highest cost."
Bethany Gill, spokesperson for the Maryland Public Service Commission, said that the she was not aware of the 85 percent procurement figure but that the Public Service Commission does procure most of its load once a year. She said that the only guidance the legislature gave about procurement was "that the rate should be reflective of the market rate... [and] that can be interpreted in several different ways."
Gill said that the Commission is investigating the best way to set up the procurement process in the future.
"[The Commission] is looking to see ... if there's anything we can do that can work better for suppliers and utilities and residents here in Maryland.'
Garagiola said that legislation passed in the General Assembly's special session will require the Public Service Commission to give greater flexibility to utility companies like Pepco in future purchases.
DEREGULATION WAS NOT the sole cause of the skyrocketing energy costs. Intensely hot weather, growth and natural disasters have wreaked havoc on the market.
“It was the highest-priced energy market anyone has ever seen, so unfortunately customers ended up” footing the bill, said Hutchinson.
Consumers set new records for energy use each of the first three days of August. Temperatures were unusually high all three days, but growth is the main culprit for the record-setting energy demands.
“What we have on our system is an explosive growth of customers both commercial and residential,” said Hutchinson. “Those customers are living in bigger houses and everybody has more stuff. All the stuff has to be plugged in, and we’re also used to having very, very comfortable temperatures year round, so people tend to not pay attention to fact that they really could raise their thermostat two or three degrees and then augment with a fan.”
Hutchinson said she could not release statistics about the average Pepco bill for customers in the 20854 zip code because of confidentiality issues, but admitted that Potomac tends to have larger houses that use up more energy.
Potomac residents can make a dent in their hefty energy bills by following energy-saving techniques (see box). One of the biggest money savers is increasing the thermostat and relying more on fans to keep cool in the summer. Hutchinson said that every degree increase on the thermostat equates to a savings of 3 to 5 percent on the monthly electric bill. For a $100 bill, moving the thermostat from 70 to 75 degrees means a savings of $15 to $25 over the course of one month.
Hutchinson acknowledged, though, that “a $100 monthly bill… is probably rare in Potomac with all those nice houses.”
Pepco has published a brochure called “85 Ways to Save” to help customers cope with soaring increases in the cost of energy. Specific energy-saving techniques are provided in the categories of heaters, air conditioners, electric water heaters, refrigeration, dryers and lighting.
“They’re not the kind of changes that create an uncomfortable living situation that turns you into a martyr. They’re little changes,” said Mary-Beth Hutchinson, senior media representative for Pepco. “Most of the 85 ways are low cost or no cost and they can make such a big change in saving money.”
The full list is available at http://www.pepco.com/_res/documents/Pepco_85_ways_Br.pdf.
Some energy-efficient suggestions for staying cool in the summer months:
* Cook and use other heat-generating appliances in the early morning and late evening hours whenever possible.
* Keep lights low or off when not needed. Electric lights generate heat and add to the load on your air conditioner.
* Keep out the daytime sun with vertical louvers or awnings on the outside of your windows. Draw any draperies, blinds and shades.
* Use duct tape to seal the cracks between each section of an air duct on your central air conditioning system.
* Plant shade trees strategically around your home. Properly selected and planted shade trees can save up to $80 annually on the average electric utility bill.
* Clean or replace air conditioning filters. Dirty air filters should be cleaned or replaced every month. Foam filters can be rinsed with water and wrung dry.
* Don’t place lamps or television sets near your thermostat. Heat from these appliances is sensed by the thermostat and could cause your system to run longer than necessary.
More information on how to save energy is available at http://www.pepco.com/_res/documents/Energy_Know_How_broc_Pepco-0606.pdf.