PRECEDING THE INITIAL IMPLEMENTATION OF CUSTOMER CHOICE IN THE
ELECTRIC COMPANY'S DISTRIBUTION TERRITORY.

(2) (I) EXCEPT AS PROVIDED IN SUBPARAGRAPH (II) OF THIS
PARAGRAPH, THE CAP REQUIRED UNDER PARAGRAPH (1) OF THIS SUBSECTION DOES
NOT APPLY TO THE RECOVERY OF COSTS ADDED AFTER JANUARY 1, 2000, IN
ACCORDANCE WITH § 7-512(C) OF THIS SUBTITLE.

(II) THE CAP REQUIRED UNDER PARAGRAPH (1) OF THIS
SUBSECTION APPLIES TO THE RECOVERY OF:

1. ANY TRANSITION COSTS UNDER § 7-513 OF THIS

SUBTITLE;,

2. ANY COSTS INCLUDED IN RATES ON JANUARY 1, 2000, IN
ACCORDANCE WITH § 7-512(C) OF THIS SUBTITLE; AND

3. COSTS FOR THE UNIVERSAL SERVICE PROGRAM
ESTABLISHED UNDER § 7-512.1 OF THIS SUBTITLE.

(3) AS PART OF A SETTLEMENT, THE COMMISSION MAY APPROVE A CAP
FOR A DIFFERENT TIME PERIOD OR AN ALTERNATIVE PRICE PROTECTION PLAN
THAT THE COMMISSION DETERMINES IS EQUALLY PROTECTIVE OF RATEPAYERS.

(4) (I) 1. SUBJECT TO THE PROVISIONS OF PARAGRAPH (5) OF THIS
SUBSECTION, THE COMMISSION SHALL REDUCE RESIDENTIAL RATES FOR EACH
INVESTOR-OWNED ELECTRIC COMPANY BY AN AMOUNT BETWEEN 3% AND 7.5% OF
BASE RATES, AS MEASURED ON JUNE 30, 1999.

2. THE REDUCTION REQUIRED UNDER SUB-SUBPARAGRAPH
1 OF THIS SUBPARAGRAPH SHALL BEGIN ON THE INITIAL IMPLEMENTATION DATE
AND REMAIN IN EFFECT FOR 4 YEARS.

3. THE COMMISSION SHALL DETERMINE THE ALLOCATION
OF THE RATE REDUCTION AMONG THE GENERATION, TRANSMISSION, AND
DISTRIBUTION RESIDENTIAL RATE COMPONENTS.

(II) IN ACHIEVING THE RATE REDUCTION REQUIRED UNDER
SUBPARAGRAPH (I) OF THIS PARAGRAPH, THE COMMISSION SHALL CONSIDER:

1. THE EXPIRATION OF ANY SURCHARGE;

2. CHANGES IN THE ELECTRIC COMPANY'S TAX LIABILITY;

3. COST OF SERVICE DETERMINATIONS ORDERED BY THE

COMMISSION;

4. NET TRANSITION COSTS OR BENEFITS;

5. THE EFFECT ON THE COMPETITIVE ELECTRICITY SUPPLY

MARKET;

6. WHETHER THE RATE REDUCTION AND RATE CAP WILL
UNDULY IMPAIR THE ELECTRIC COMPANY'S FINANCIAL CONDITION;