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Page 1 of 3 THE POTOMAC EDISION CO. d/b/a Allegheny Power Maryland Bill Components DISTRIBUTION Facilities that connect to the transmission grid to provide the customer with access to electrical power that has been generated and transmitted, and other customer services that facilitate and support that access. Distribution can be broken down into a number of sub-classifications that include distribution facilities (i.e. substations, conductors, poles, transformers, voltage regulators and other associated facilities); metering (i.e. ownership and maintenance of the requisite metering); meter reading; billing & collections; load estimation & settlement (i.e. the preparation of load profiles for customer load forecasts); customer service; and various administrative functions. Customer Distribution Charge: This fixed fee per month partially covers meter-related (including meter reading) and bill preparation costs. This charge is regulated by the Maryland Public Service Commission Energy kilowatt-hour (kWh) Charge and Demand kilowatt (kW) Charge: The cost per kWh and, for non-residential customers greater than 7.5 kilowatts, the cost per kW of delivering electricity to the home or business. This item covers the above distribution functions and other charges, such as materials, taxes, depreciation, dividends, wages, benefits, etc. This charge is regulated by the Maryland Public Service Commission. Kilovolt-ampere reactive (kVAR) Charge: The cost per kVAR to recover the cost of larger transformers, wiring, etc., due to certain types of electric devices (such as some electric motors) that result in a demand on the electric system of a greater amount than is actually put to any useful purpose. This charge is applied only to mid-to-large sized non-residential customers and is regulated by the Maryland Public Service Commission. Voltage Discount: A credit per kW generally applied to mid-to-large sized non-residential customers that receive a metered voltage level that is higher than the standard voltage level. This charge is regulated by the Maryland Public Service Commission. Surcharges (authorized by the Maryland Public Service Commission) Franchise Tax: A tax per kWh that applies to each public service company engaged in transmission and distribution of power in the state. This tax replaces the gross receipts tax of electric generation services utilized by customers in the State of Maryland. Electric Universal Service Fee: A fixed charge per month (based upon customer class and/or historical customer distribution billing amounts) that recovers costs of Universal Service Programs required by the Maryland Electric Customer Choice and Competition Act of 1999. These funds are used to assist low income electric customers through bill payment assistance, retirement of electric bill arrearages, and weatherization. MD Environmental Surcharge: A surcharge per kWh to support the Environmental Trust Fund. The money collected through the MD Environmental Surcharge is used to support the Power Plant Research Program (PPRP) of the Department of Natural Resources (DNR) which evaluates sites for electric power plants. The Commission is obligated to ensure that sufficient revenue is collected through the surcharge to meet DNR’s budget for the PPRP. Page 2 of 3 Cogeneration PURPA Surcharge: A charge per kWh and, for larger customers, a charge per kW to recover federally-mandated uneconomic purchases from the AES Warrior Run cogeneration facility near Cumberland, MD. Montgomery County Surcharge: A fuel energy tax per kWh imposed by Montgomery County, MD and applied to residential and commercial customer bills as specified by the Montgomery County Council. RGGI Rate Credit: A fixed credit per month provided to residential customers to offset the costs of programs designed to decrease energy demand and promote affordable, reliable, and clean energy. Administrative Credit: A credit per kWh to return to customers receiving distribution service a portion of the Standard Offer Service (SOS) Administrative Charge revenues received from customers on SOS. The Administrative Credit does not apply to large customers eligible to receive Hourly-Priced Large Customer Service (LCS). Rate Transition Charge/Credit: During 2007-2008 a charge per kWh and during 2009-2010 a credit per kWh for residential customers to stabilize the transition from capped generation rates to market-based generation rates. In April 2007, existing residential customers were provided 2billing periods to opt-out of the Rate Transition Charge/Credit. New customers connected between April 2007 and October 2008 were also provided 2-billing periods to opt-out of the Rate Transition Charge/Credit. All new residential customers connected on or after November 1, 2008 are not eligible to receive the Rate Transition Charge/Credit. Future Surcharge – EmPower MD Surcharge: A surcharge per kWh to recover the costs associated with utility-sponsored programs which promote energy efficiency and conservation and such other programs as approved by the Commission. MARYLAND BILL COMPONENTS – GENERATION The actual production of electricity at power plants, including ancillary services. Customers may elect to purchase generation from utility-provided SOS or LCS, or receive generation from a retail supplier in the competitive retail generation market. Energy kilowatt-hour (kWh) Charge and Demand kilowatt (kW) Charge: The cost of fuel and other related expenses needed to generate electricity. Energy Cost Adjustment: A charge or credit per kWh to true-up the difference between money collected from SOS/LCS customers and money paid to procure electricity from wholesale electric suppliers. MARYLAND BILL COMPONENTS – TRANSMISSION Generally consists of high voltage power lines and associated facilities that transport power from generation resources to distribution load centers. The transmission function is generally concluded at the high voltage side of a distribution substation. Transmission refers to the flow of real power in terms of Page 3 of 3 demand and energy on the transmission system subject to all appropriate criteria with respect to reliability and proper voltage level. Energy kilowatt-hour (kWh) Charge and Demand kilowatt (kW) Charge: The cost for sending electricity over long distances.