One thing is for sure. On May 1, Delmarva Power residential and commercial customers will face anywhere from 47 percent to 117 percent electric-rate hikes caused by rising fossil fuel prices.
But the company’s residential and small commercial customers will have an option. They can either accept a series of incremental hikes, lasting until 2009, or opt out by April 28, agreeing to pay the full rate increase on May 1. For small-business owners, that increase will be about 47 percent, as opposed to the residential increase of about 59 percent (for those with space-heating, as opposed to 57 percent for those without).
Delmarva Power Vice President John Allen talked about the situation in a Millsboro press conference on Tuesday.
“Although the (phase-in) plan helps to defer the increase,” Allen said, “it does not reduce the increase.” In fact, because Delmarva Power plans to borrow about $60 million to cover the deferred costs, and residential customers will face more than a 60 percent rate hike with the deferral because they will be paying interest on that loan.
“The majority of the customers I’ve spoken with are saying they are going to opt out,” Allen added, possibly because of the extra cost involved with the phase-in.
Gov. Ruth Ann Minner on April 6 signed House Bill 6 into law after it was passed by the House and the Senate, allowing customers to accept the phase-in or opt out into the full hike.
If residents stay with the phase-in plan, they will face a 15 percent rate increase on May 1, a 25 percent increase on Jan. 1, 2007, and an average 17 percent increase on June 1, 2007 (for non-space hearing — 19 percent for space-heating), assuming there are no further increases in wholesale energy prices, according to Delmarva Power.
On Jan. 1, 2008, residential customers would start to pay the balance of the deferral in equal monthly installments until June 1, 2009. The average customer would pay $446 in the installments of about $26 for the average customer (for non-space heating — $29 for space-heating), a number which includes $31 in interest.
“For those that can’t afford to pay, the phase-in is the best thing we can come up with at this point,” said state Rep. Gerald W. Hocker. “There are an awful lot of homeowners or business people that did not budget for anything like this.”
Anyone who wants to opt out of the phase-in plan must call Delmarva Power by April 28 at 1-877-285-9316 or visit the company’s Web site at www.delmarva.com. If customers don’t contact Delmarva Power by April 28, they will start the phase-in on May 1 and will not have an option to recant. On Tuesday, Allen urged residents to visit the Web site for additional information on the rate increases and information on specific bill increases based on electric usage.
“We want our customers to have the information they need to make the best decision for them,” Allen said. “We’re ready to go,” he added, saying the billing department has already been set up for the change in operations. “We’re not foreseeing that any problems will result (from the change).”
Allen said that company officials will continue to speak to media personnel and customers across the state to inform them of the impending hikes. Advertisements on the radio and in local newspapers set to run immediately will perform the same service, said Matt Likovich, a Delmarva Power spokesman.
“Once they start, they will run pretty regularly,” he said of the ads. “The window of getting info out is pretty narrow.”
Along with deregulation, the Delaware General Assembly capped Delmarva Power’s electric rates in 1999 after a 7.5 percent residential decrease.
Since 1999, the price to generate energy has increased dramatically. According to Delmarva Power, the price for coal has increased by 150 percent, oil prices have increased by 300 percent and the price of natural gas has increased by more than 400 percent.
After a competitive-bidding process, Delmarva Power awarded six one-to-three-year fixed-price supply contracts in February, based on December and January market values. Because of rising cost in fossil fuels, those contracts were high, causing this year’s raise in rates.
“We’re at the mercy of the market,” Likovich said in a recent interview. “Fossil fuel prices are the primary driver of electric rates.”