2021 | News

Pepco to increase rates over next three years

Public Service Commission approved $52M increase in split vote

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Pepco, which has about 330,000 customers across Montgomery County, can increase its service rates over a three-year period, the state’s Public Service Commission has ruled.

The PSC — the state’s regulatory body overseeing public utility rates and projects — issued a nearly 300-page order last week that granted Pepco a $52.2 million rate increase statewide over three years.

At the end of that period, rates will have increased by about $5.20 a month.

Benjamin Armstrong, a spokesman for Pepco, said in an interview that there will be no rate increases for the rest of this year, then a planned average $3.66 monthly increase in 2022 and another $1.54 monthly increase in 2023, leading to a total final monthly increase of $5.20.

Pepco, which also serves Prince George’s County in Maryland, was asking for $110 million in rate increases. The utility said the increases at that level would help pay to improve service and for other capital projects, like substations and replacing lines and poles across Maryland.

More specifically, the money would have been used:

  • to repair and replace more than 60,000 streetlights to be LED lights
  • for critical infrastructure near and at substations to improve performance and backup power
  • for 69kV transmission systems, which distribute power to substations.

Pepco’s multiyear plan also included improvements to three substations, including one in North Bethesda and another in Silver Spring.

In a 3-2 vote, the PSC denied the $110 million request, but agreed to allow $52.2 million in increases.

According to the order, PSC Chairman Jason Stanek and Commissioner Michael T. Richard agreed that some increase should be permitted and voted yes to the lower amount.

But they said Pepco should have done a better job in forecasting its future costs associated with improvements to its service and other capital projects.

Commissioner Anthony J. O’Donnell was the third vote to approve the increase.

Commissioners Odogwu Obi Linton and Mindy L. Herman voted no. They said their concerns about Pepco’s forecasts and overall transparency during the process meant they couldn’t support a large increase in utility rates.

The Maryland Office of People’s Counsel, which represents residential customers in Public Service Commission cases, agreed with Linton and Herman.

Armstrong said Pepco officials are still reviewing the PSC’s order, but much of the rate increases “are going right back into the system,” which has improved in overall reliability over roughly the last decade. The utility is still determining which projects to consider since the full request wasn’t funded, he said.

The Office of People’s Counsel said in a press release that the PSC “denied accelerated recovery of several high-price distribution substation projects, totaling more than $56 million.”

The PSC also denied Pepco’s streetlight conversion project, according to the Office of People’s Counsel.

During the past 10 years, “ongoing investments in the local energy grid have driven a 68 percent decrease in the frequency of electric outages Pepco customers have experienced” across Maryland and Washington, D.C., Armstrong wrote in a follow-up email.

The Office of People’s Counsel contends that the PSC should have awarded no more than $32.7 million of a rate increase to Pepco.

David Lapp, the People’s Counsel of Maryland, said in an interview that the utility did not adequately look at lower-cost options for many capital projects and improvements in its proposal.

The public must keep an eye on utilities, especially as they start to decarbonize and update systems to meet the challenges of climate change, while maintaining affordability to customers, Lapp added.

“We want to make sure that’s done in a way that serves the public and residential customers, in particular both from a financial perspective and an environmental perspective,” Lapp said. “The reality is that without sort of keeping a close eye on it … the utility will make investments that are beneficial to shareholders and its bottom line as opposed to what is best for the consumers and environment.”

Steve Bohnel can be reached at steve.bohnel@bethesdamagazine.com