News Release: Cheh Questions Proposed Pepco Increase

Ward 3 Councilmember Mary M. Cheh today expressed strong reservations about Pepco’s latest proposed rate increase, which totals more than $42 million and would translate into a $5-per month increase for an average customer.

“Pepco keeps promising improved reliability, but the District continues to receive sub-par service,” said Cheh. “I have strong reservations about the size of the increase and the justification for it.”

If approved, the $42.1 million increase would represent the third rate hike for Pepco since 2008. The Public Service Commission granted Pepco rate increases of $28 million and $19 million in 2008 and 2010 respectively.

Cheh noted that the increased rates have not translated into improved reliability. Pepco continues to perform in the bottom quartile of reliability measures. In 2010, the DC Public Service Commission put Pepco on notice that past performance would be a significant factor in future rate cases. Councilmember Cheh encouraged the Commission to keep its word.

“This is an opportunity for the Commission to show commitment to holding Pepco accountable for its performance.  What we have seen over and over is that rates go up and performance worsens.”

In addition to the $42.1-million increase, Pepco is also proposing the use of a new Reliability Investment Recovery Mechanism (RIM). The RIM would allow Pepco to secure approval for reliability-related charges without going through a formal rate case. Any surcharges necessitated by a RIM would be in addition to the $42.1-million increase. The company cites “regulatory lag” as a primary reason for needing to circumvent the normal rate case structure.

“We’re going to need to determine precisely how this RIM will work, but I do question the wisdom of approving any new company-imposed charges to ratepayers outside of a formal rate case. The last thing Pepco needs is less scrutiny,” said Cheh.

Recently, the Council held a hearing on Cheh’s bill, the Reliable Electric Service Amendment Act of 2011, if the utility did not achieve a higher rating on reliability.  And the Public Service Commission just announced its proposal to establish enforceable performance standards for the reliability of the service provided by the electric company.