Good for the District. But the move immediately raises the question: What about suburban Maryland?
Storm-related outages typically affect more people and last longer in Montgomery and Prince George’s counties than in the District. Why isn’t Maryland doing the same?
Sadly, despite strong public pressure to fix the chronic outage problems, Maryland is thinking small.
Yes, Maryland regulators are studying a Pepco rate proposal that includes adding a surcharge to pay to bury some power lines.
But the Maryland plan doesn’t go far enough. It calls for putting just six so-called feeder lines underground, three each in Montgomery and Prince George’s.
That’s one-tenth as ambitious as what the District is proposing, even though Maryland has more customers. (Feeder lines carry power from substations to neighborhoods. A typical one serves about 1,200 customers.)
Another big difference: The District government has committed to pay for half of the approximately $1 billion cost of burying the 60 lines. That means customer rates would rise by less than they would if Pepco handled all the financing itself.
It also means Pepco would forsake $24 million a year of potential earnings — a part of the deal that doesn’t exactly please the utility.
“This is a breakthrough in financing. It’s less expensive for the public to do it than for the utility to do it,” said Montgomery Council member Roger Berliner (D-Potomac-Bethesda), a utilities expert who would like to see Maryland try something similar.
The fact is, Maryland’s small-minded approach reflects a broader problem. Both utilities and regulators resist new ideas that have the potential to improve reliability while reducing waste and holding down costs.
That was a key message of a new report in Maryland by the Energy Future Coalition, which was asked by a state task force to recommend how to transform delivery of electric service.
It urged a long list of reforms, which it stressed are possible using existing technologies: Let solar panel users sell power back to the grid. Give customers mobile phone apps to remotely manage their appliances and air conditioning. Fine-tune rates to reward or punish utilities depending on their performance.
But the report, called Utility 2.0, warned that it would be an uphill battle to implement such changes. It said, “Utilities are not good innovators, but are highly risk-averse and conservative entities.”
That’s why it’s up to the public to push elected officials and regulators to make sure the utilities serve our interests, rather than the other way around.
The District’s plan comes after widespread disgust over outages spurred Mayor Vincent Gray to get personally involved. The D.C. Council and city regulators still have to approve the proposal, but it has broad support.
An intriguing twist in the project is Pepco’s reluctant acceptance of the District’s big role in paying for it. That hurts Pepco’s finances, because the utility doesn’t reap its usual return on equity (or earnings) on the part that the District is covering.
Joseph Rigby, Pepco Holdings president and chief executive, acknowledged it was unusual for his company to make a sacrifice like that. He said Pepco did so to satisfy customers’ desires for better service and to take advantage of the city’s readiness to make a deal.
“I was not going to forgo the opportunity to be able to work with the city. It was also very, very important that we take significant steps to meet our customers’ expectations,” Rigby said in a telephone interview.
“In no way, shape or form do I want to sound like we’re being magnanimous here,” Rigby said. “We’re in business to make money.”
Unfortunately, for that very reason, Rigby also warned that it would be hard for Pepco to copy the District’s financing plan in suburban Maryland. He said there’s a limit on how much Wall Street would allow.
If we’re going to keep the lights on and adapt to the future, that sounds like just the kind of resistance that the public needs to overcome.
For previous Robert McCartney columns, go to washingtonpost.com/mccartney.