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Pepco, PSC Critics Air Grievances In Front Of Political Candidates

Flickr photo by Bill in DC

With Pepco officials barred from the event, power reliability advocates on Wednesday sharply criticized a regulatory climate they claim is heavily stacked in favor of the electric company and against customers.

And in a significant step for Pepco critics, the advocates aired out those grievances in front of a large group of county and state political candidates.

North Bethesda resident Abbe Milstein, through her Powerupmontco email list and funding from AARP, hosted the event in a conference room at the Bethesda North Marriott Hotel & Conference Center.

The forum was tightly controlled. Milstein said she rejected requests from Pepco officials, including Montgomery County lobbyist Jerry Pasternak, to attend. Milstein also said she faced political pressure in the form of harassing emails in the days leading up to the event, though she wouldn’t specify who sent the emails or what exactly was written because the communications were confidential.

Much of the background was provided by energy attorney Stanley Balis, who represented Montgomery County in a past rate case. The goal, according to Milstein, was to educate political candidates on the complex state system for regulating utilities such as Pepco.

Balis, along with Milstein and Town of Somerset Councilmember Cathy Pickar, depicted a feckless Public Service Commission and General Assembly swayed by Pepco campaign contributions. The presentation included a 50-page booklet to guide a detailed talk on state utility law and recent rate cases.

District 16 House of Delegates candidates Jordan Cooper, Hrant Jamgochian, Marc Korman, Gareth Murray and Kevin Walling were in attendance. So was current delegate and District 16 State Senate candidate Susan Lee.

County councilmember and county executive candidate Phil Andrews attended and was later joined by one of his opponents — County Executive Isiah Leggett.

Del. Heather Mizeur, running for the Democratic gubernatorial bid, attended briefly. Republican gubernatorial candidate Charles Lollar was there.

Also in the audience was District 18 Del. Al Carr, who has introduced legislation to improve the transparency of the PSC and provide reimbursement for individuals or nonprofits hoping to be part of the rate case process.

Balis argued that Pepco shrewdly got legislation passed that allows separate reliability standards “for each electric company,” to account for things such as “existing infrastructure.” Balis said that means Pepco has been rewarded for having a dilapidated infrastructure, because the PSC can take that infrastructure into account while determining standards for the duration of power outages and frequency of power outages.

The PSC’s standards for 2012-2015 give Pepco more leniency with regard to the frequency of power outages than the state’s other five major electric companies in each year. Pepco’s prescribed standards for the duration of power outages are generally stricter than the other five companies.

“To put this into school terms — because Joey, who did no homework or studying has only a 25 percent average in his reliability course, he does not need to do additional studying or remedial work to quickly improve to the highest grade or even to an average passing grade,” Balis said. “That might be very nice for Joey, but not for his customers.”

Balis also claimed the Grid Resiliency Task Force created via executive order by Gov. Martin O’Malley after last year’s derecho set up Pepco’s justification for a controversial “Grid Resiliency Charge” in its most recent rate increase request. (Pepco CEO Joseph Rigby on Wednesday said the company would file another rate hike request by the end of the year, according to The Gazette.)

The PSC approved the Grid Resiliency Charge in August, disappointing many and inviting an appeal from Montgomery County and others. Pepco will get $24 million for a “Priority Feeders” project, known as a “tracker,” to “accelerate the hardening of 24 feeders that are prone to outages during major storm events, 12 feeders each in 2014 and 2015.”

The tracker will mean an additional 6 cents on monthly bills in 2014 for average residential customers, an additional 19 cents per month in 2015 and an extra 27 cents per month in 2016.

Bolis pointed to testimony during the last rate case in which two Pepco executives, based on the recommendations of the Task Force, said the company would simply not accelerate improvement projects on its priority feeders without the grid resiliency charge paid out up front.

That caused Public Service Commissioner Lawrence Brenners, in his opinion on the rate case, to wonder, “who is regulating whom here.”

“In my view, Pepco’s attitude about its GRC projects shows regrettably that it still doesn’t get it. …Pepco’s position is that unless it receives its requested GRC cost recovery treatment, it will not undertake the projects, and the projects are not separable — all or nothing, take it or leave it,” Brenners wrote. “The specification and requirements of our reliability regulations and standards are the minimum of what should be done, not as Pepco seems to think the limit of its necessary efforts. Pepco should be the last company to think it is OK for it to remain among the laggards of the utilities, so long as it meets minimum specific work requirements.”

Despite this, Brenner agreed to allow the tracker.

“The Commission granted them the tracker and in such an embarrassing way,” Bolis said. “The PSC pathetically capitulated to this charade.”

Later, Pickar urged the candidates not to give in to the “political pressure,” she claimed Pepco exerts on state lawmakers. She even gave a standing offer to candidates to provide $250 in political contributions to replace the typical $250 contribution Pepco and other donors give.

Many of the candidates in attendance agreed aspects of the the regulatory system for utilities need to be fixed, though they differed when it came to Pickar and Milstein’s depiction of Pepco as a political bully.

D-16 Delegate Candidate Kevin Walling (D): “Looking at this stuff for a long time now, the key thing that also wasn’t talked about was the outrageous compensation package, upwards of $1 million for these senior Pepco shareholders. At a time when they’re saying they need more money to maintain the system, they’re making record profits and really hurting consumers as part of the process.

The most amazing thing is actually seeing these statements from commissioners about how bad the situation is and how they’re not in power. Even in a concurring opinion, where he went along with the Pepco order, he’s pointing out just how ridiculous the process is. So there needs to be greater accountability. The Maryland General Assembly has a role in all this, in working with the governor. They’ve got one final year of the O’Malley administration and I hope they right this wrong and take a serious look at the new commissioner who’s been appointed for some greater accountability in the system.”

D-16 Delegate Candidate Hrant Jamgochian (D): “I think I was the only candidate from my district to testify against the rate increase, so it’s nice to see so many of the other candidates now come out tonight to really get more informed and engaged on the issue. I think it’s a real positive sign.

Unfortunately, money often provides access. So, as I told Cathy [Pickar], I will not be accepting any contributions from utilities because of the monopoly of power and influence. And some of it is even perceived influence and the importance of people having confidence in their elected officials. So whether it’s perceived or actual, I think folks are supposed to represent our constituents. That’s a personal decision on my part. That’s one of the first decisions I made when I decided to run this time around.”

D-16 Delegate Candidate Marc Korman (D): “I don’t know about the political message, but I’m on board with the policy message that the PSC has to do a better job and amp up its work and its attention and the state legislature has to do the same thing. There are a few ways to do that.

They talked about the limited resources. Well, if you look at the law, the funding for the PSC comes from the utilities. You could actually raise their rate, the rate they pay to provide more resources for the PSC, whether it’s going to outside consultants or bringing more people in-house so the PSC can do a better job.

If you also look at the last rate increase decision, it was sort of buried in the decision but the Commission seems to have gotten the public interest standard backwards. There was an obscure tax issue that Pepco was using to partly justify its rate increase. And the Commission said, ‘We don’t understand this tax issue, but we’re going to err on the side of caution and raise its rates based on that.’ That’s backwards. The legislature needs to always be aware of these decisions so that when the PSC does something this incorrectly, they feel the pressure and do better next time or even go back and change it.”

D-16 Delegate and State Senate Candidate Susan Lee (D): “I think it was very educational. A lot of our colleagues are unaware of some of the issues and we can get about 2,000 bills a year. Unless you’re on that committee that has jurisdiction over this, you don’t know what’s going on so this is very helpful to educate us legislators so that we make an informed vote.

I did not vote for the automatic increase rate for Washington Gas, because in my gut I felt there was something not right about it. Even though I was told by some colleagues to vote for it, I didn’t. And I’m glad I didn’t vote for it. I think we need to get informed. Maybe it was OK, but we have to know why we voted for it.

Utility law is very complicated. It’s very hard to understand and when you have so many bills in front of you, you want to know. I think this group here coming together is good for education. This affects so many consumers. When the derecho came, there were a lot of people in my district who were without power for a whole week and a lot of elderly people who were affected. I want there to be some kind of reliability and accountability. If there’s going to be a rate increase, there needs to be some kind of increase in reliability and accountability too.”

Gubernatorial Candidate Charles Lollar (R): “I learned a lot. I learned an awful lot and what I learned disappointed me even more than what I knew about the situation before. The closest word I can use to describe what’s going on right now is tyranny and it’s abuse of power at the highest levels. Unfortunately, the folks who are suffering the most are the everyday consumers.

I think they [Pepco] have an unfair relationship advantage. I’m not prepared to blame the Democratic party but I am prepared to blame the individual people that have made the system what it is. I do believe that when you have an unbalanced system that heavily favors one party over another, this is the kind of response that you get. There’s a lot of strong-arming. There are strong and forceful relationships that are literally causing people to do things that in their right mind, they would not do.

The power held at the highest levels of our state is incredible and it’s crushing good elected officials and appointed commissioners that want to do the right thing. Let’s put the blame where it needs to be. This idea of charging someone a fee before they get appropriate services is wrong no matter what party you’re from.”

County Councilmember and County Executive Candidate Phil Andrews (D): “I think it’s important for people to understand that utility companies are very active in elections. It’s completely legitimate to look at where candidates get their sources of funding, to understand who is supporting them, who thinks they’ll be responsive to what they want.

The need for reliable power in Montgomery County is one of the most important issues because it’s been so unreliable for so many years. The entire County Council attended that 2010 meeting in Baltimore with the Public Service Commission where we saw, for the first time, the commissioners noted that they didn’t know Pepco was in the bottom quartile of reliability among its peers for years.

It was alarming to hear that was news to the commissioners. It should’ve never gotten to the point where we’re at. In order to get reliable power in Montgomery County, it’s necessary to have a reliable Public Service Commission to get on top of things. That wasn’t the case for years. Montgomery County has done what it can to intervene as a county but we have no actual authority. It’s about indirect influence through the PSC and through intervening in rate cases.”

D-16 Delegate Candidate Gareth Murray: “The bottom line is we have to look at both sides. There are definitely some things that, just based on what I see, are things that definitely are in Pepco’s favor. It is a monopoly. When you have that kind of power, I think the only thing the legislature has is the ability to control rates. Pepco is going to be Pepco. They’re not reliable. We know that.

But the other thing we have to deal with is it’s going to take a very long time. If, in fact, some of the things that were said are true, that they’ve been neglecting the infrastructure for so many years, it’s not a quick fix. So I think there’s a need for us to look at other things that they can do to make life a little easier for the consumer. One thing would be back-up generators and Pepco would foot the initial bill and the consumer would pay a little bit on their power bill each month, but at least they would have some kind of safety net.

It would also take some legislators to sit down and look at things like regulations that look at where you put trees that could fall on power lines. Also, people on the Public Service Commission need to understand what they’re doing. You need someone with a background in it.”

D-16 Delegate Candidate Jordan Cooper: “I believe that the information provided this evening seemed to indicate that Pepco was abusing their power. I think that there’s evidence of that as you see Pepco flouting historical precedent. But on the other hand, potentially as a result of advocates like Abbe [Milstein], you do see Pepco has heard the message that we demand better reliability.

They’re responding now, maybe not nearly in the manner we’d like them to respond. But I think that Pepco is currently taking steps to improve reliability. It seems as though Pepco held the PSC hostage after saying that we won’t improve our infrastructure unless we get the tracker.”

Flickr photo by Bill in DC



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