In seeking approval for its transformation — made possible by what’s known as deregulation — Pepco told regulators in Maryland and the District that the changes “would allow it to have a ‘laser-like focus’ on its distribution efforts, systems and facilities,” according to public filings.
Critics such as Betty Noel, a former people’s counsel in the District, say something entirely different happened.
“To preserve the bottom line for their investors, they . . . put their attention on buying up nearby utilities,” Noel said. “They needed money to do that, and they cut from maintenance.”
Pepco executives have dismissed Noel’s analysis, saying that reorganization issues were settled a decade ago and that increasing maintenance is now one of their primary concerns.
“We are in the second year of a five-year, $910 million plan to improve reliability — a level of investment unprecedented in our company’s history,” Pepco spokeswoman Myra Oppel said.
When Democrat Martin O’Malley took over as governor in 2007, he pressured Kenneth D. Schisler, appointed by his Republican predecessor, to resign as chairman of the Public Service Commission. He appointed a replacement described as a consumer advocate.
Retired Pepco vice president James Potts lays much of the blame for the widespread outages on public officials.
After legislators lifted energy rate caps early in the decade as part of deregulation, experts expected that competition would drive down electricity prices. Instead, prices spiked.
Public anger grew, but elected officials no longer had any authority to slow the price rise. Potts said politicians responded by holding down rates on what they could still control — the amount Pepco charged for delivering the high-priced power to area homes.
O’Malley “was elected on the promise he would reduce electric rates,” Potts said. But “the increases that Pepco was allowed were not adequate to cover inflationary costs. So they have had to trim costs wherever they could.”
O’Malley spokeswoman Raquel Guillory called Potts’s account “just wrong,” saying that the governor would never have agreed to allow the company to shirk its maintenance responsibilities.
Even in the avowedly pro-consumer O’Malley administration, some critics say, the Maryland commission remained relatively hands-off, at least until after The Post’s investigation into Pepco’s reliability.
At an August 2010 hearing into outages related to summer storms that year, Nazarian seemed unaware of how poorly Pepco had performed in recent years. “How far below average is Pepco in terms of frequency of outages?” Nazarian asked a Pepco executive at one point.
On Tuesday, Nazarian acknowledged that the hearing was “the light bulb moment” when he realized the depth of Pepco’s problems and what would be required to fix them.
“The revelation we came to in 2010 is, we need to be in a position to say, ‘Here are things you absolutely have to do,’ ” Nazarian said.
Since that hearing, and The Post’s investigation, government officials have been more demanding. In April 2011, Maryland legislators passed a bill that imposes a $25,000-a-day fine on electric utilities for each violation of reliability standards. In July 2011, D.C. regulators tightened performance standards for Pepco, threatening to fine the company unless it matches the performance of the nation’s most dependable power providers within a decade.
In December, Maryland regulators fined Pepco $1 million — the largest penalty in the commission’s 102-year history — for failing to fix problems that led to frequent outages.
Alice Crites contributed to this report.