On the typical electric bill, Pepco’s new surcharge might be a mere 6 cents a month, but in the annals of Maryland utility policy, the charge is a completely new chapter.
Maryland’s Public Service Commission broke with years of precedent last Friday when it approved letting Pepco charge customers $24 million for extra infrastructure work, in advance, by way of a grid resiliency charge. Pepco’s surcharge will be levied on top of what customers already pay and, according to the company, will be spent to upgrade 24 feeders.
Until last week, the commission had denied requests for similar surcharges — commonly referred to as trackers — including a request last year from Pepco.
Now that a tracker has been allowed, some fear denying others will be a challenge.
“If we now deviate from our historic ratemaking principles and allow this GRC tracker, it will be difficult to find a principled way to deny future requests by other Maryland utilities for tracker surcharges for their similar reliability plant infrastructure projects,” Commissioner Harold D. Williams wrote in opposition. “Today we are letting the tracker genie out of the bottle, and I fear it will continue granting the wishes of Maryland utilities for many years and we may never get it back in the bottle.”
Several cases, including one by Baltimore Gas and Electric, pending before the Commission include requests for trackers.
Separately, the utility had sought a $60.8 million rate increase. The PSC granted only $27.9 million, which will hike the average electricity bill about $2.41 a month.
In an emailed statement, Pepco vice president Myra Oppel said: “We are still analyzing the details of the Commission’s decision. We believe the Commission took a step in the right direction for improving grid resiliency, but our customers would be even better served if the Commission were to approve additional aspects of our proposal.”
Pepco won the surcharge dollars on a 3-1 decision of the commission, with one commissioner, Lawrence Brenner, agreeing to the charge simply to avoid a stalemate. Usually the PSC has five members, but the resignation of former Chairman Douglas R.M. Nazarian left a vacancy on the commission, which as yet to be filled.
Brenner said in his written concurrence that Pepco presented its proposal as “all or nothing, take it or leave it,” saying if it did not receive the tracker, it would not do the work.
“My reaction to that is who is regulating whom here,” Brenner wrote.
But he still joined two of his colleagues in allowing the tracker.
In July 2012, the PSC denied Pepco’s request for a surcharge. Opponents have questioned what changed since to prompt a fundamental shift among the commission.
“Nothing has changed,” said Paula M. Carmody, head of the Office of People’s Counsel. Her office is an advocate for Maryland’s utility customers.
While the surcharge may not be a large monthly increase on most bills, it is a big change in policy, and one that is not fair to customers, she said.
A surcharge is not needed for Pepco to deliver the reliable service that customers want and deserve, she said.
“These are reliability-related expenses, and it [reliability] is a core responsibility,” she said. “As a distribution company, you are responsible under the law to maintain a safe and reliable system. A 2010 investigation determined Pepco spent several years not doing its job. Now they come in and ask for special treatment. We say repair and maintain the system, make sure it is fully reliable for customers and do it through the normal ratemaking process.”
However, last fall a task force appointed by Gov. Martin O’Malley (D) recommended in the wake of the June 2012 derecho that surcharges may be appropriate to accelerate improvements to the grid. Maryland Energy Administation also supported the charge.
Forecast as a thunderstorm, the June 29, 2012, derecho took the region by surprise when within minutes strong winds downed trees and snapped utility poles. Just after the storm, the number of Pepco customers without power in Maryland peaked at 410,679, leaving almost 77 percent of Pepco’s 534,601 Maryland customers without lights, fans, refrigeration or air conditioning. For some customers, their power was off for as long as eight days.
The task force’s recommendation formed the backdrop against which commission approved Pepco’s tracker, it wrote in the order.
While the commission wrote that, to date, it found similar surcharge requests lacking, it determined that a “properly defined tracker proposal, when aligned with specific and measurable milestones and expenditures, can be appropriate.”
Abbe Milstein, who founded of Powerupmontco after the derecho, said the tracker should be appealed.
“In my opinion this is ripe for something that should be brought up on appeal, it is not something that should be let go,” she said. “The bigger issue with this tracker is what it has now created in the state.”
Parties have 30 days from last Friday to appeal the decision.