Santa Claus apparently couldn’t decide whether Pepco’s top executive, Joseph M. Rigby, had been naughty or nice last year.
On the Wednesday before Christmas, Rigby found a rather large lump of coal in his stocking. Maryland regulators fined the electric utility $1 million, the largest such penalty in state history, for years of irresponsible management. It also issued a blistering report that systematically demolished Pepco’s myriad, self-serving rationalizations for its pathetic service.
“Pepco has deluged the record with excuses . . . but we do not find those arguments persuasive,” the Maryland Public Service Commission said in the 94-page order. “The evidence in this proceeding demonstrates conclusively that Pepco has been operating at an unacceptably low level of reliability for several years.”
But Rigby, who is chairman and chief executive of Pepco’s holding company, could take comfort in Santa’s generosity the preceding day. That’s when the company awarded him a new, three-year compensation package worth nearly $6 million in salary and stock, plus bonuses. His annual pay rose from $880,000 in the previous contract to $985,000.
To Pepco’s credit, Rigby had given up a raise and bonus pay last year worth about $900,000 in a bid to placate angry customers in suburban Maryland and the District. Still, it’s hard to justify granting a nearly 12 percent raise in base pay to the man who heads what a national survey in July identified as America’s “most hated company.”
Of course, we shouldn’t be surprised. Except in severe circumstances — think bankruptcy or felonies — the corporate elite often escape being held accountable for shoddy performance.
More important, there’s every reason to think that from the perspective of Pepco’s board of directors, Rigby’s real error was getting caught. By neglecting tree-trimming and other routine maintenance to save money, he and top executives who preceded him were just doing their jobs of churning out maximum revenue for dividends to shareholders.
“Pepco had made deliberate choices to allow its system to degrade,” said Montgomery County Council President Roger Berliner, a Pepco critic and lawyer whose professional specialty is utilities regulation.
“These things don’t happen by accident. They made choices, which favored their shareholders over customers,” Berliner said.
That’s why it’s imperative for the public and politicians to keep up the pressure on Pepco and its regulators. The strategy of favoring dividends over service backfired only because of a grass-roots revolt among customers outraged by repeated, extended power outages.
The complaints caught the attention of such local politicians as Berliner. They, in turn, put so much pressure on the regulators that the latter finally started doing their job of trying to force Pepco to meet its legal obligation to provide dependable service.
There are welcome signs that the uproar has forced Pepco to reform. Pepco personnel and contractors imported from North Carolina and other states have been cutting tree limbs and upgrading power lines and other facilities in numerous neighborhoods, including my own in Bethesda.
Pepco says the number of customers affected by tree-related outages dropped by 55 percent in the 12 months that ended in October.
Also, when Hurricane Irene struck in August, Pepco seemed better prepared than in previous storms. It wasn’t a true test, though, because in our region, Irene hit hardest in communities east of the utility’s service area.
Pepco has raised its game before, only to backslide once controversy has passed. A Montgomery County government study found the company improved maintenance briefly following criticism of its performance in Hurricane Isabel in 2003, but it “soon lapsed into pre-storm practices or worse.”
Moreover, and this is ominous, the commission expressed concern that Pepco is acting two-faced about whether it’s truly committed to improving service. On one hand, the company is paying for a costly advertising campaign boasting how much it’s doing to become more reliable. In the commission hearings, however, Pepco was repeating the old, discredited arguments that it’s just been a victim of bad weather, too many trees and customers who expect too much.
“There is a stark contrast between Pepco’s refusal to accept responsibility and tendency to blame other entities in this proceeding, and the Company’s acceptance of reliability problems and promises to improve reliability outside this case,” the regulators’ report said.
If CEO Rigby wants to earn that $105,000 raise, he’ll need to prove to everyone that Pepco’s pledges to do better are for real.
I will discuss local issues at 8:51 a.m. Friday on WAMU (88.5 FM).