Allegheny plans ahead for rate hike

Residential power customers will see a significant spike in early 2009

‘‘Our goal is to help customers manage their bills when rate caps expire,” said Allegheny president David E. Flitman, in a press release.

Allegheny’s plan, which is subject to approval from the Maryland Public Service Commission, gives customers the option to pay an additional 15 percent on their electric bills in March and another 15 percent in January 2008.

The extra money collected, plus interest, will go into a special fund to be used as a credit on customer’s electric bills when the new rates take effect. The credit will continue to be used until Dec. 31, 2010.

Customers have the option not to participate in the transition plan and instead start paying the increase when it takes effect in 2009.

The plan results from a bill designed to help ease rate hikes and passed by the Maryland General Assembly last year. Lawmakers felt the legislation was needed after Baltimore Gas and Electric raised its rates 72 percent last year. The Maryland General Assembly held a special session to help the company’s Baltimore customers deal with the increase.

Allegheny’s rate hike stems from the deregulation of electricity rates by the state in 1998-1999. With deregulation, Allegheny reduced its residential rates by 7 percent and capped that reduction from January 2002 to Dec. 31, 2008.

When the rate cap expires in 2008, Allegheny will be forced to buy the power at market price.

While residential rates have been capped since 2002, the cost of producing electricity has gone up dramatically, said Allen T. Staggers, an Allegheny spokesmen. Coal prices have jumped 43 percent since 2002 and natural gas prices have increased 71 percent.

Del. Richard Weldon (R-Dist. 3B) of Brunswick believes deregulation is to blame. ‘‘The mistake here is deregulation,” he said. ‘‘The competition the legislature expected never came about. Now the rates are going up and we to pay the price.”

Meanwhile, Allegheny continues to wait for the Public Service Commission to approve its rate transition plan.

The commission and Allegheny held several public forums throughout the state, including in Frederick County, explaining the rate increase and gathering input from residents.

From those meetings, Allegheny determined that more help should be provided to fixed-income and low-income residents.

The company has agreed to increase contributions into its energy fund.

The state’s subsidized energy programs will also increase funds, Weldon said.

He said it is premature to address the issue in Annapolis, because the Public Service Commission has yet to approve the plan. ‘‘Allegheny has already had eight forums, and they were very informative,” Weldon said.

Frederick County Commission President Jan H. Gardner (D) said the county has no plans to hold forums or programs related to the rate hike because commissioners have no authority over electric rates.

‘‘I do believe this is an issue of importance and concern to our citizens,” she said in an e-mail.