Maryland PSC Denies Majority of Pepco Rate Increase Request

Commission considered utility's substandard performance

By Matthew Stabley
|  Friday, Jul 20, 2012  |  Updated 6:30 PM EDT
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Montgomery County Council Grills Pepco

Montgomery County Council President Roger Berliner calls power outages the No. 1 quality-of-life issue in the county.

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The Maryland Public Service Commission rejected most of Pepco's rate increase request at Friday's deadline.

Pepco requested a $68 million hike. The PSC rejected $50 million of that. The approved portion of the request amounts to a 1.69 percent increase for customers -- or $2.02 more per typical residential monthly bill. That increase meets requirements set by law to deliver safe and reliable service.

The PSC found that Pepco failed to justify an inreased return to shareholders, reducing the return from 9.83 percent to 9.31 percent. Pepco had requested an increased return of 10.75 percent.

The PSC cited Pepco's history of substandard performance, calling it backwards to increase return to its shareholders before improving its performance.

Pepco filed the request Dec. 16. The record in the case included 31 witnesses' testimony, 11 days of evidentiary hearings, two public hearings and post-hearing briefs and officially closed June 25, four days before the derecho storms that left hundreds of thousands of Pepco customers without power.

"Although the outages resulting from the June 29 'derecho' storm and Pepco’s response to them are not, and cannot be, part of the record or our decision-making process in this case, we recognize that the statutory deadline for this decision comes at an unfortunate time," the PSC order read.

In addition to rejecting increased returns to shareholders, the commission rejected the following:

  • $7.9 million in expenses caused by past failures to maintain a reliable system ($6.4 million in tree trimming and $1.5 million in expenses incurred to defend the utility against the commission’s reliability investigation)
  • New pre-payment surcharges
  • Recovery of other projected expenses

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