PSC approves small portion of Pepco rate increase request

Pepco pole, via Abigail ReidThe Maryland Public Service Commission on Wednesday approved a small portion of Pepco’s most recent rate increase request.

In its decision, the PSC granted Pepco a rate increase of $8.75 million. The electric utility had requested $37.4 million in rate increases, which actually was amended from the original request of $43.3 million made in December.

The rate increase request was Pepco’s third in three years. The PSC said the rate increase it granted is sufficient “to ensure that Pepco continues to modernize its aging infrastructure in an era of more frequent and severe weather events.”

In June, Montgomery County filed its official opposition to Pepco’s request, arguing the company’s rates should actually be cut by $1.5 million. The $37.4 million rate increase would have meant an almost 3 percent increase for the typical residential customer.

Assistant Montgomery 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.

“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 had also asked for an increase in its return on equity from 9.36 percent to 10.25 percent. The PSC granted an increase to 9.62 percent.

The new rates will mean a monthly rate increase of about 93 cents for a typical residential customer and will go into effect Friday.

In July 2013, the PSC granted Pepco a $27 million rate increase and $24 million grid resiliency charge, or tracker to allow the company to do infrastructure improvements. That decision is still being challenged in court all sides — Pepco is arguing the rate increase should be higher and parties such as Montgomery County are arguing against the tracker.

Pepco’s most recent request included records of the $238.5 million the company spent from October 2012 to September 2013 to improve its infrastructure.

The company claimed it planned to spend an additional $234 million to improve infrastructure in 2014.

Photo via Abigail Reid

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