Pepco Denied Full Rate Increase

Elton Hayes | 7/25/2012, 11:33 a.m.

When a powerful storm slashed through Cindy Vaughn's Hyattsville, Md. neighborhood on June 29, it left behind breathtaking devastation. The heat inside her home became so unbearable the second day without power, that the three-story brick dwelling felt much like an incinerator.

The generator her husband purchased struggled to power a lone air conditioning unit and a refrigerator. The Vaughns were forced to retreat to the basement. That routine for Vaughn, however, is all too familiar.

"Every time that there's a storm, there's an outage," she said.

Vaughn is one of 443,000 Pepco customers who lost power as a result of last month's now-historic derecho - a series of rapid wind storms that severely damaged homes and contributed to the deaths of more than 20 people.

To make matters worse, customers had to also deal with triple-digit heat for nine days. Pepco's inability to bring customers online promptly fueled aggravated customers' discontent.

Pepco came under renewed scrutiny and during the height of its troubles, members of the D.C. Council met to discuss the problem and several Maryland lawmakers also criticized the company.

D.C. Council member Mary Cheh (D-Ward 3) recalls being in the dark for four days and was forced to spend time at a Starbucks in her neighborhood to charge her electronics and escape the sweltering heat. While Cheh decided to ride out the outage at home, the heat became so unbearable the last evening that she sought refuge at a friend's home. For Cheh, Pepco's requests for rate increases are as frequent as customers' myriad complaints.

"It's unfortunate but it's part of a pattern that we've seen. We have problems with service and reliability and outages. It's a constant, cyclical thing where they ask for rate increases," Cheh said. "The most reliable thing is that they will be asking for rate increases all along the way. It's not a scenario that we haven't seen before."

Cheh knows of what she speaks.

Pepco officials submitted a proposal to Maryland lawmakers last year seeking a four percent rate hike. In recent public hearings, public disapproval was steady and relentless.

Customers received positive news on July 20.

The Maryland Public Service Commission [MPSC] dealt Pepco a blow as it rejected most of the power company's proposed four percent rate increase. The company stood to make $68 million in new revenue. However, citing substandard performance history as one of its deciding factors, MPSC granted the electric company a 1.7 percent increase or $18 million in new revenue.

MPSC officials said that Pepco's application lacked the evidence required to substantiate its request.

"The Commission considered [Pepco's] longer history of substandard performance, and, balancing that with the Company's responsibility to invest in improving its infrastructure, made a number of key decisions."

Last December, MPSC fined Pepco $1 million, the largest fine ever levied by the commission, for not properly maintaining power lines. The commission's action makes it clear to Pepco and its customers that the beleaguered electric company must do more to improve its infrastructure and services before it will be granted a significant rate increases.

While many of Pepco's customers view the company's service and response to outages as subpar and hardly worthy of a rate increase, others are more receptive and accepted the 1.7 percent increase.

Michael Boozer, his family and two dogs suffered without power for five days. He improvised with ice in the refrigerator to keep food cool, and a gas grill as a substitute for the microwave and oven. While the Silver Spring., Md., resident admits that the time without power was far from pleasant, he wasn't too upset with Pepco's rate increase which amounts to a $2.02 increase in a regular monthly bill.

"I think it's fair at around one percent," said Boozer, 50. "I know they have to [pay] to get trees trimmed and bring in outside contractors. As long as they can continue to improve the service that they provide, they can start with one percent and go from there. If they don't do any better, then don't give them anything else."