Pepco Granted Partial Rate Increase Again; Residential Power Bills To Increase

Average customer’s bill will rise about $4 per month immediately


Pepco logo

For the second straight year, Maryland’s Public Service Commission has granted a partial rate increase to the power utility Pepco.

The commission agreed to allow Pepco to increase its electric distribution rates by $33.9 million—about half of the $68.6 million increase Pepco requested.

The increase means the average residential power bill will increase about $4 per month, according to the commission.  The increase went into effect immediately on Friday.

The increase was approved to help pay off Pepco’s spending on reliability improvements, the commission said. It noted that the utility has spent about $900 million improving its power distribution system.

“We are required to balance the company’s recovery of its expenses and capital investments with the requirement that its rates are ‘just and reasonable,” the commission said in a statement. “To this end, we will continue to hold Pepco accountable for meeting its reliability commitments while providing service that is affordable to customers.”

The commission added in its statement that Pepco has delivered a 22 percent improvement in the frequency of outages and a 35 percent improvement in the duration of outages from 2012 to 2016.

Last year, the Public Service Commission approved a $52.5 million rate increase for Pepco—less thanhalf of the $126.8 million the utility initially requested. The average customer’s monthly bill rose about $7 per month after that increase. The commission also said that the 2016 increase was granted due to the cost of reliability improvements undertaken by the utility.

This year, the commission denied the utility’s attempts to recover costs for an employee incentive program to reward staff for achieving service reliability goals. The commission determined that Pepco did not meet the reliability benchmark to which it committed after it was acquired in 2015 by Chicago-based Exelon Corp..

Montgomery County Council members Marc Elrich and Roger Berliner both opposed the utility’s efforts to raise rates while the commission was taking public comment over the summer.

Elrich said at the time that the company should not be rewarded for improving reliability because it is playing catch-up on improvements and has had a record of poor service for years.

Berliner also said at the time that the company should not be rewarded for making long-needed improvements.

On Friday, Berliner said he was pleased and disappointed by the commission’s decision.

“I’m pleased they cut [Pepco’s request] in half and disappointed they didn’t cut it more,” Berliner said. “I think it underscores how Pepco in case after case asks for more than it deserves and should receive.”

Berliner added that he believes the process for compensating utilities should be reformed. He suggested that a performance-based ratemaking system be used.

“That’s how utilities should be compensated—as to how well they meet the needs of their customers,” Berliner said.

 Exelon’s acquisition of Pepco’s made the combined company the largest publicly held utility in the country.

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