The City purchases all of its electricity requirements on a monthly basis at wholesale prices from a wholesale energy supplier and passes the cost to City customers without any profit or mark-up. In this way, customers of the City enjoy the benefits of economies of scale and reliability as afforded by a large utility.
Of the total wholesale cost to the City, the majority is included in the City rates that are billed to its customers. However, it is not possible to predict what the entire costs will be, due to fluctuations caused by varying usage patterns and changing weather conditions.
The Maryland Public Service Commission (PSC) grants the City authority to recover the full amount of the cost variances from its customers, who are the ultimate consumer of electricity. This is done through the Purchased Power Adjustment (PPA) clause, itemized as a separate line item on each customer bill.
Calculations justifying the PPA are filed with the MD PSC. The PPA rate is adjusted monthly to reflect the current amount paid by the City for power supply. The City is physically audited each year by a representative of the MD PSC to verify the correctness of the PPA.