Pepco is seeking a $37 million rate increase, but Montgomery County says the power company’s rates should actually be cut by $1.5 million.
The county this week filed its official opposition to Pepco’s latest rate increase request, this time for $37.4 million that would mean an almost 3 percent increase for the typical residential customer.
Assistant County Attorney Lisa Brennan concluded that Pepco has a revenue surplus and isn’t in need of a rate increase to pay off expenses for improving the system. Rate increase requests are common for natural monopoly utilities seeking to recover large costs. It’s Pepco’s third rate increase request in two years.
“Pepco has failed to meet its burden of proof to support its request for a $37.4 million increase in rates,” Brennan wrote in the memo to the Public Service Commission.
Pepco’s original request, filed in December, was for a $43 million rate increase. The county has also said the PSC should set Pepco’s Rate of Return to 7.31 percent. Pepco has asked for an increase in that number to 7.92 percent.
“While I believe that Pepco has improved its reliability since the Derecho of 2012, largely in keeping with recommendations made in a 192-page report by my Pepco Reliability Work Group earlier, I believe that Pepco’s latest rate request is still too high,” County Executive Isiah Leggett said in a press release.
During the recent hearings on the request in front of the PSC, Montgomery County initially recommended a $14.3 million rate increase for Pepco. That changed in May.
The county memo describes a complicated legal process in which county attorneys claim Pepco misrepresented certain expenses. The county also claims it wasn’t allowed to cross examine Pepco officials after the company provided updated information on expenses.
The memo goes on to say that part of the $1.9 million Pepco spent in 2012 to hire consultants from Accenture shouldn’t be included in recoverable expenses in this rate case. Pepco claimed those consultants helped Pepco Holdings Inc. (which includes electric utilities in New Jersey and Delaware) save more than $7 million.
First, it was not necessary for Pepco to pay Accenture close to $2.0 million to produce these claimed savings, because most of the savings are common sense and typical prudent decisions that most companies make on a day-to-day basis, some of the cost savings are merely a recommendation to defer spending another year, and Pepco should have had the in-house expertise to make these sorts of routine decisions without the need to hire an outside consulting firm.
The Public Service Commission is expected to make its ruling later this year.
In its press release, Montgomery County said its opposition last year helped stave off $50 million in two Pepco increase requests.
The county also opposes Pepco’s proposed “true-up mechanism,” which would send money back to the ratepayers if the actual costs of certain improvements end up being less than the estimates.
Photo via Abigail Reid
