Prior to 2001, the Commission regulated electric generation and distribution services allowing Pepco to receive its costs plus a reasonable rate of return on such services, as determined by the Commission. On January 1, 2001 the District’s retail electric market was restructured resulting in the deregulation of electric generation service and the advent of retail consumer choice which was expected to provide consumers with competitive choices from suppliers. Deregulation means the Commission does not regulate the price of electric generation services.
To ensure that District consumers have electric generation service if they do not choose a competitive supplier, the Council of the District of Columbia provided for Standard Offer Service (“SOS”). Pepco was required to provide electric generation service under capped rates to District consumers until February 8, 2005. At the expiration of the capped period, a SOS supplier would offer electricity at market rates. The Commission subsequently decided Pepco would be the SOS provider charged with serving the District customers that were not being served by a competitive supplier. SOS procures generation services in a competitive auction and awards a contract to the winning bidder.
Since February 8, 2005, the generation service rate paid by District consumers is the average price of the awarded contract plus an administrative charge plus taxes. Due to an increase in price at the wholesale level, SOS consumers have seen an 85% increase in their generation rate since the caps were removed from the generation portion of consumer bills. Because this service is no longer regulated, the Commission has no control over the amount of the generation service rate.