New Jersey regulators approved a $25.5 million annual increase in Atlantic City Electric Co.’s base distribution rates and recovery of $70 million costs for recovery following the June 2012 Derecho and Hurricane Sandy in October 2012.

Capital costs of $44.2 million were included in the rate base while deferred operation and maintenance expenses of $25.8 million will be amortized over three years.

The New Jersey Board of Public Utilities announced its approval of a settlement signed by the utility, the Division of Rate Counsel and intervenors including Wal-Mart Stores, Inc. on June 21.

The company’s $25.5 million base rate increase, which excludes sales and use tax, is based on a return on equity of 9.75%. The new rates will cost residential customers using 1,000 KWh per month $4.44, a 2.8% increase. The changes took effect July 1.

The company, a subsidiary of Pepco Holdings, Inc. (PHI), had sought a base rate hike of almost $70 million. Because of the lower increase, the company said it will reduce its capital expenditures by about $150 million through 2015, a cut of 30%.