December 27, 2011

PEPCO’S FAILURE to properly maintain its power system recently netted the utility a $1 million fine from Maryland regulators. The amount doesn’t seem like much when compared with the $240 million Pepco’s parent company paid in dividends last year or the costly inconveniences suffered by consumers. But the action was a positive step that should signal a new resolve to make the utility financially accountable for the reliability of its critical services.

Maryland’s Public Service Commission (PSC) handed down a 94-page decision last week that imposes an initial fine of $1 million for what the commission concluded was years of Pepco’s neglect in addressing the issues that caused frequent power outages — on sunny days as well as bad-weather ones — in the Washington area. The commission, which undertook formal proceedings against Pepco in 2010 after receiving an unusual number of complaints from customers and elected officials, described the fine as the largest ever imposed. Pepco said it would not challenge the penalty — which is understandable since, as The Post’s Joe Stephens pointed out,its parent company, Pepco Holdings, earned $1 million in about a day and a half of the third quarter of this year.

More significant than any fine was the commission’s finding that the utility not be allowed to use rate hikes to recover costs caused by its own poor judgment and performance. “Imprudent and inadequate expenditure and neglect” caused an increase in reliability expenses in 2011, the commission concluded as it vowed to review Pepco’s next rate case with an eye toward rejecting increased amounts due to past failings of the utility’s management. Pepco recently announced that it is seeking a $68.4 million increase in electric rates; it will be instructive to see if the PSC follows through on making Pepco’s shareholders, and not its beleaguered consumers, pick up the tab for providing reliable power.

Montgomery County officials led the way in pressing the PSC to take action against Pepco, with a detailed list of complaints about tree trimming and customer service that were largely substantiated. They have already announced their opposition to the rate hike. “I hope the PSC holds true to their word not to make the ratepayers, who have already suffered, pay the price of Pepco’s imprudence,” County Council President Roger Berliner (D-Potomac) told us.

The past year has seen marked improvement in Pepco’s performance, thanks to an aggressive plan to improve reliability, speed of power restoration and communication. But it’s clear from the Maryland commission’s report that the work has just begun and that Pepco, by its past inaction, has earned vigilant watching.