Pepco warns service will suffer under Md. rate ruling

By |
Photo - Della Stoloworth holds at sign that says "Numbers dont lie, Pepco does" at a meeting on the performance of Pepco's service following the storms that hit the Washington area on June 30th. Rockville Council office building. (Graeme Jennings/Examiner)
Della Stoloworth holds at sign that says "Numbers dont lie, Pepco does" at a meeting on the performance of Pepco's service following the storms that hit the Washington area on June 30th. Rockville Council office building. (Graeme Jennings/Examiner)
Local,Maryland,Rachel Baye

Lawmakers say company's reaction disappointing but not surprising

Pepco warned Tuesday that its reliability -- heavily criticized after a storm last month left thousands of customers without power for days in scorching heat -- will suffer without the higher rate increases that it requested from Maryland regulators.

The Maryland Public Service Commission, or PSC, approved $18 million of the company's requested $68 million rate hike, pointing to Pepco's poor performance over the last several years. Even so, residents will pay an average $2.02 more a month for their electricity.

Pepco in a statement questioned "the sustainability of the investments in reliability" under the PSC's approved rate hike.

"This decision is counterproductive to our goals to improve our customer experience," said Pepco Region President Thomas Graham. The company has not said if it will appeal.

Lawmakers said they were unhappy with -- but not surprised by -- Pepco's reaction to the rate decision.

"They do not get the message. They have neglected the infrastructure. They have disinvested in personnel, and it's been going on for years, and what they're saying is, 'OK, we took all that money and we paid it to our investors, we paid it to our shareholders, and you're just going to have to live with that,' " said Maryland Sen. Brian Frosh, D-Montgomery County. "This is no different from the attitude that we've seen for the past decade."

Graham said he was disappointed by the PSC's reduction in the amount the company can pay shareholders, to a 9.31 percent return on their investment from the current 9.83 percent -- and below Pepco's request to increase it to 10.75 percent. He noted the company's return on equity "is among the lowest in the country."

"It's disappointing, but not surprising that Pepco is more concerned about the size of their shareholders' dividends than the needs of their customers," said U.S. Rep. Chris Van Hollen, D-Maryland.

And residents are tired of coming second to shareholders.

"I'm disgusted with Pepco," said Bethesda resident Doris Slavin, pointing to the company's ranking as one of the country's worst-performing electric utilities. Pepco was rated the most hated company in America last year.

"They can cut [their budget], but not services, and what they need to be doing is taking a hit themselves because they have let the infrastructure go to such an extreme," said Potomac resident Sheila Ploger. "Their stockholders can take a hit and so can their executives."

Joseph Rigby, CEO of Pepco's parent company, received $7.2 million in salary and benefits last year as net income from continuing operations soared to $260 million from $139 million in 2010.

Pepco is legally required to improve its reliability after the PSC fined the company $1 million because it had been neglecting necessary maintenance.

If Pepco does not meet state reliability requirements, it will face "significant fines and penalties," said Raquel Guillory, spokeswoman for Maryland Gov. Martin O'Malley.

"Their core business is reliable service and customer service," said Montgomery County Council President Roger Berliner, D-Bethesda. "If they can't figure out how to do that, then they really need to think about getting into another line of business."

rbaye@washingtonexaminer.com

View article comments Leave a comment
Author:

Rachel Baye

Staff Writer - Education
The Washington Examiner