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Maryland SOS

MD - SOS Bids & Rates Talking Points, FAQs
March 2007

Overview:

Maryland law requires Delmarva Power to use a competitive bidding process to buy electricity for customers who do not choose an alternative electricity supplier. Customers are charged for this service-called Standard Offer Service (SOS)-under rates approved by the Maryland Public Service Commission. Because the new electricity supply contracts replace lower-priced contracts from a few years ago, the residential SOS customers will see a slight increase in their electricity bills. It is estimated that residential customers will see an increase of 5.0 percent.

 

Key Messages:

  • For residential customers, the new supply rates will increase the total annual bill by about 5 percent. For a typical residential customer that uses about 1000 kWh of electricity a month, this will result in an increase of about $6.64, from $133.38 to $140.02, on the total bill.

    Special Note: The Maryland Public Service Commission has approved the use of laddered two-year contracts to provide electricity supply to residential customers. That means each season about 25 percent of the total residential supply is put out for bid. As a result, prices will change on June 1 st and again on October 1 st each year. This should provide greater price stability from year to year. The annual bill impact numbers above assume that the prices starting October 1 st will be the same as the most recent bids received.
  • Small commercial customers' supply rates are going down. The average small commercial customer's monthly bill will decrease by 4% starting June 1, 2007, about a $16.32 a month decrease.
  • The rate change for larger commercial and industrial customers is relatively flat. All rates will be available on our web site at www.delmarva.com under Choice&Rates/Maryland/Tariffs by March 15, 2007. All Key Account customer inquiries should be forwarded to the Key Account Support Team via Navigator or submitted directly to the KAST team at 1-800-819-8217.

  • About 2,000 of Delmarva Power's residential customers in Maryland are enrolled in the Rate Deferral Plan. For those customers, their rates will:
    • Increase about 20.7 percent on June 1, 2007 (5 percent is the 2007 supply rate increase; 15.7 percent is the result of deferring 2006's supply rate increase).
  • Delmarva Power does not generate electricity. It delivers the power but does not produce it. The power delivery company purchases the electricity it needs for its customers from unregulated wholesale suppliers, who own power plants and produce electricity or who buy and sell it on the wholesale market. This year's competitive bid process attracted bids from nine suppliers, five of whom won a piece of the SOS load.
  • The following is a breakdown of rate changes affecting Maryland residential customers in recent years:

    2004: Rates went up about 10 percent

    2005: Rates went up about 5.6 percent

    2006: Rates went up about 35 percent

    2007: Rates are going up about 5 percent

Frequently Asked Questions:

  1. Fuel prices have dropped a fair amount since last year. Yet, my electric rate is going up. Why is that?
    While fuel prices have dropped compared to what they were last year, they are still much higher than they were a few years back. Unfortunately, this year's supply auction replaced some older, lower-priced supply contracts, resulting in higher prices for customers.
  2. I read rates were going down in Delaware because supply contracts came in costing less than they did last year. If that is so, how come we'll be paying more in Maryland ?
    The competitive bid process for purchasing electricity supply in the wholesale market varies from state to state. For instance, Delaware began purchasing from the wholesale market last year while Maryland began in 2004. Residential rates in Delaware went down less than 1 percent and that is because their new supply contracts replaced some higher-priced contracts from last year's bid process. However, in Maryland , this year's new supply contracts replaced some lower-priced contracts from a few years ago.
  3. You've been buying power competitively in Maryland for four years now, and each time it's been an increase for the residential customer. When will these increases end?
    Unfortunately, the energy markets continue to be extremely volatile, meaning prices are quick to fluctuate either up and down depending on world events, weather and other factors. And, since 2004 when we began purchasing electricity in the wholesale market for Maryland customers, prices have been moving upward more often than downward. Delmarva Power believes, however, that the Maryland PSC could restructure its process for purchasing electricity so customers are somewhat shielded from price spikes. We would encourage customers to also lobby the Maryland PSC for changing its process to benefit the customer.
  4. What is Standard Offer Service?
    Delmarva Power customers who do not choose an electric supplier will receive Standard Offer Service (SOS), meaning electricity is both purchased for you and delivered to you by Delmarva Power. The SOS rates are reset twice a year, on June 1 st and October 1 st , and are determined through a competitive bid process in which Delmarva Power purchases electricity for its customers. The Maryland Public Service Commission has approved the use of laddered two-year contracts to provide supply for residential customers. Each season about 25 percent of the total residential supply is put out for bid. As a result, prices will change on June 1 and October 1 each year. This should provide greater price stability from year to year.
  5. What power plant is my electricity coming from?
    It's hard to say. This year's competitive bid process attracted bids from nine suppliers, five of whom won a piece of the SOS load. The suppliers buy and trade the energy so tracking its origin is difficult. The bid process simply ensures that we'll get the electricity supply we need to deliver the electricity to our customers.
  6. Are my delivery rates going up as well?
    Not at this time. However, Delmarva Power does have a request pending with the Maryland PSC to increase delivery rates. If approved, the change would increase the monthly residential bill by about $4.50 for the typical customer using 1,000 kilowatt hours of electricity.
  7. When will I know if my delivery rate is increasing?
    We are expecting a decision from the Maryland PSC around mid-June. The new rate would take effect around the same time.
  8. So, my electricity rate could increase twice in one month?
    That's correct. The supply rate, which is the cost you pay for the electricity, is reset annually on June 1, 2007. If the delivery rate also increases, it would be the first increase in more than a decade. Your delivery rate is the cost you pay to have the electricity delivered to you.
  9. How do I choose a supplier other than Delmarva Power?
    First, you need to find out if there is an alternative retail electric supplier available to you. You can do this by calling the Maryland Public Service Commission, 800-492-0474 or visit the Commission's web site, www.psc.state.md.us/psc/ . If you are approached by a competitive supplier, you should know that your Price to Compare, effective June 1, 2007, is 10.6¢ per kWh for residential service and residential heating. The Price to Compare will be updated again for rates effective Oct. 1, 2007.
  10. Will my bill be the same or will there be new information added?
    Your bill will essentially look the same. The new rates for Standard Offer Service will be reflected in the supply portion of your bill.
  11. When will the Delmarva Power rates be available?
    The new rates will be available on our web site at www.delmarva.com in the Tariff section on March 15, 2007. All customers will receive an insert with their May bill detailing the new Standard Offer Service rates and the total bill impact.
  12. What kWh consumption amount did you use to calculate the increase for the typical customer?
    The kWh consumption used to calculate the annual residential bill for the typical customer is approximately 1000 kWh per month.
  13. Why are your rates higher than X utility (Choptank Cooperative, etc.)?
    Utilities across Maryland structure their contracts for obtaining electricity supply in varying ways. Delmarva's Standard Offer Service (SOS) rates that will take effect on June 1, 2007 were determined by a competitive bid process, resulting in customers getting the lowest possible price.
  14. Will I still have a different rate in the summer than in the winter?
    Yes. The SOS rates that will take effect on June 1, 2007 will be your summer rate. The winter rate will take effect during the October billing month.
Frequently Asked Questions - Small General Service
  1. How do I compare Delmarva's rate to other suppliers?
    If you are able to choose another supplier, your Price to Compare for supply and transmission will be 10.79¢ per kWh, effective June 1, 2007. If you choose another electricity supplier, that supplier must notify Delmarva Power of your switch at least 17 days prior to your scheduled meter reading date for the change to become effective on that date. Otherwise, the change will occur on the next scheduled meter reading date. Delmarva Power will continue to provide you with reliable delivery service regardless of your choice.