D.C. Commission Lowers Pepco’s Rate Increase Request by 35 Percent in Multi-Year Rate Plan

The District of Columbia Public Service Commission on Nov. 26 approved the final version of Potomac Electric Power Company‘s (Pepco) second Multiyear Rate Plan which sets electric distribution rates for 2025 and 2026. The plan, approved as an extended pilot, permits Pepco to raise electric distribution rates by $123.4 million over the two-year period, which is a 35 percent reduction from Pepco’s initial request of $190.7 million. The rate plan sets a 9.5 percent return on equity.

The commission reduced the company’s recovery of requested capital expenditures by $211 million, lowering the costs by 19 percent for 2025 and 40 percent for 2026. Furthermore, the final plan also elaborates on changes to the allocation of revenue, with residential customers receiving around 41 percent of the approved $123.4 million increase in revenue. This allocation means that the average residential customer will see a $7.54 increase in the monthly electric bill in 2025 and $3.80 in 2026. However, low-income customers who are a part of the Residential Aid Discount, or RAD, program will not be affected by the rate increase.

The commission also included consumer protection measures in the approved rate plan, setting a $15.3 million penalty for errors in demand billing determinants. Other approved modifications include a two-phase independent management audit to gauge the performance of the rate plan and a requirement to file quarterly rate of return earning reports along with reconciliation reports detailing expenditures.

In 2021, the commission approved Pepco’s pilot multi-year rate plan with a revenue increase of $108.6 million spread over three years through 2023. The pilot served as a valuable learning opportunity for evaluating future alternative ratemaking proposals and providing insights into the economic benefits for the district, including efforts that foster grid modernization, reliability, resiliency, and energy infrastructure development.