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O’Malley to seek surcharge to harden Md. electric grid

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Maryland Gov. Martin O’Malley (D) on Wednesday will ask the state’s utility regulators to adopt a controversial plan to allow electric companies to charge ratepayers in advance of serious maintenance upgrades.

In exchange, the utilities would have to meet a stricter standard of reliability.

The plan, O’Malley said, will add a “dollar or two” to most Marylanders’ monthly electric bills so that Pepco and other companies could complete several years of planned tree trimming, line burial and other improvements in a shorter span of about 24 months.

If successful, the plan would accelerate a long-term schedule for hardening a grid that has repeatedly failed customers in the Washington region and beyond in recent years, O’Malley said.

In a 131-page report that will be released Wednesday, a task force created by the governor proposes coupling the surcharge with several other changes that would amount to a rewrite of Maryland’s century-old system for evaluating future rate increases.

Maryland would tighten reliability standards for electric companies and break from industry trends by measuring companies’ performance during storms, not just when the weather is clear. The state would also tie rate-hike requests to records on reliability.

“We are urging the Public Service Commission to give the utilities some impetus and push and some greater predictability in accelerating the investments to the grid that would make it stronger and more reliable,” O’Malley said in an interview with Washington Post editors and reporters.

“The bottom line is we all may pay another dollar or two a month on our utility bills, but it will accelerate the investments that will spare us from having to throw away 400 bucks’ worth of food whenever a big event comes in.”

In backing a system for utilities to automatically recover costs for some upgrades, however, O’Malley is at odds with the Maryland Office of People’s Counsel, AARP and most Montgomery County lawmakers in the General Assembly.

Pepco, the dominant provider in Washington’s Maryland suburbs, has ranked near the bottom nationally among electric companies in its ability to keep the power on and restore it after outages. Last year, the state levied its largest fine ever on the utility — charging $1 million for failure to trim trees and fix other problems that led to the frequent outages.

Many lawmakers and consumer advocates who have been critical of Pepco have said a surcharge, or “tracker” fee, would essentially reward the company’s past bad behavior by giving it new revenue to get its maintenance program back on track.

“We have strongly opposed their requests for trackers,” People’s Counsel Paula M. Carmody said. “In our view, we’re talking about core system distribution responsibilities of the utilities.”

Carmody said she had not been briefed on the report. O’Malley said he outlined the report’s findings in a meeting with the state’s largest utilities Tuesday morning.

“The report is thorough, and the task force did an admirable job in mapping out an overall plan to improve reliability for our customers,” Pepco spokeswoman Myra Oppel said.

Del. Tom Hucker, a Montgomery County Democrat who has been a vocal critic of Pepco, said he also had not seen the report, but he was skeptical of any plan to allow a surcharge.

“I don’t think anyone disagrees that hardening the system is the most important task,” he said. “The question is, who pays for it? If [Pepco] has been able to make big profits by maximizing dividend and skimping on routine maintenance, to me the discussion should begin with, ‘How does the state recapture for ratepayers the money Pepco should have been spending on maintenance all this time?’ ”

O’Malley said he expects such criticism.

“There will no doubt be debates, and there will be people who say [utilities] should do it anyway and . . . don’t ask us to pay for it,” O’Malley said. “If we weren’t seeing more violent weather events, that would be a reasonable response.”

Abigail Hopper, O’Malley’s energy adviser, said the proposal would mirror existing programs in 28 other states that allow utilities to add surcharges for maintenance. She said the process would be careful to limit the amount utilities can charge.

“This would put maintenance in fast forward,” Hopper said. “If they were going to trim all of their trees in a four-year period, this could do it in two years. That is something that will have a big impact on the reliability of the system.”

The Public Service Commission rejected more than half of a $5.50 rate increase sought by Pepco in July, three weeks after a storm knocked out power to hundreds of thousands and led to widespread outrage over the length of time it took the power company to restore electricity. If it adopts O’Malley’s proposal, the effect on ratepayers could be nearly the same as Pepco’s initial request.

Mary Pat Flaherty contributed to this report.

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