I totally agree with MC – there is some recent talk that Maryland or Montgomery County should look to have a public-government run power company.  Does anyone else see the disaster in this?  

 

Look, Pepco has to shoulder a lot of the blame in this.  As pointed out previously, the problems with their infrastructure have been known for well over a decade, but little improvement has been noted.  At the same time, Pepco’s profits are substantial.  I don’t begrudge a company from making profits and paying their executives whatever their board of directors or shareholders feel is appropriate.  Furthermore, I don’t advocate government involvement in a private business but things are differnet with public utility companies that essentially enjoy the benefits of a monopoly.  For years and years, Pepco was the sole provider of electric power and its transmission.  Since then, some deregulation has taken place and one can purchase the power from an alternate provider but Pepco remains the transmission provider and infrastructure manager.  

In a recent segment with spokespeople from local power companies on a local talk radio station, Pepco’s spokesperson was asked about a pending rate increase request.  His response was that the request is to cover expenditures the company has already made in order to improve the system’s reliability.  Huh?  Really?  It would be challenging at a minimum, and possibly impossible for someone to demonstrate significant improvement in the reliability of Pepco’s service in the last 5-10 years.  That’s a difficult position to take, especially after a situation like we just had.  

But it seemingly gets worse when the “Bill Stabilization Adjustment” (BSA) kicks in.  The perception by customers is that Pepco gets to charge for 24 hours of service when customers didn’t really have service.  Well, perception can be reality but there is a reasoning behind the BSA and guess what – it leads us back to the PSC and those pushing energy efficiencies.

With a distribution utility like Pepco, they only make more money if they send more electrons through the wires.  One of the impacts of this is that they have absolutely no incentive to promote any kind of energy efficiency efforts on the part of customers. Regulators have recognized this and dealt with the issue in various ways and the BSA is one such mechanism.

Essentially they determine just how much money they’ll need from a particular group of customers (group in the sense of a rate class: residential, small commercial, large commercial, etc.) in order to hit their PSC-approved revenue targets. Then, on a month by month basis they look at the revenue from each group. If its short of the revenue requirements – because less energy was consumed – then they true it up via the BSA rider. If they exceed revenue – because more energy was consumed than predicted – then it becomes a credit to consumers within that rate class.

Typically the effects of outages from storms are excluded from the BSA calculations – its intended to deal with regular efficiency/conservation measures, not extraordinary events like storms but clearly, with a significant number of customers out of power for four or more days, it is likely that Pepco will not hit their PSC-approved revenue targets this month.  A month where energy usage is usually high due to the summer heat.

So while we’re all throwing Pepco under the bus – rightfully so given what I’ve read and heard – the PSC should be holding hands in its complicit partnership with Pepco.  The PSC should be protecting the customers from the dangers of a monopolistic service.  Something that the past decade has shown they haven’t done.