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Washington Post analysis: Why Pepco can't keep the lights on

By Joe Stephens and Mary Pat Flaherty
Washington Post Staff Writers
Sunday, December 5, 2010; 12:38 AM

In high-powered Washington, one of the world's most wired and connected metro areas, the region's leading electric company has trouble just keeping the lights on.

Pepco delivers power to 778,000 customers in the District and neighboring parts of Maryland, including some of the most affluent communities and most important institutions in the nation. But in reliability studies, the company ranks near the bottom in keeping the power on and bringing it back once it goes out, an analysis by The Washington Post has found.

In fact, the average Pepco customer experienced 70 percent more outages than customers of other big city utilities that took part in one 2009 survey. And the lights stayed out more than twice as long.

Pepco's reliability began declining five years ago, records show; company officials acknowledge that they have known of the problem but that they only started to focus on it more recently.

Moreover, Pepco has long blamed trees as a primary culprit for the frequency and duration of its outages, implying that the problem is beyond its control. But that explanation does not hold up under scrutiny, The Post analysis found. By far, Pepco equipment failures, not trees, caused the most sustained power interruptions last year.

Pepco says it is embarking on a five-year program to improve reliability.

Over the past year, storm outages have captured the attention of Pepco's customers and local politicians. Tens of thousands lost power for days after snowstorms in February and thunderstorms in July. Businesses closed; the frail headed to shelters; anger flared.

But Pepco's reliability problems are more pervasive. Some of Pepco's most disturbing failures come quietly on days with no violent weather, according to The Post's analysis of industry data, interviews with experts and a review of thousands of pages of documents.

In recent years, Pepco has placed near the bottom for daily reliability in surveys that compared power companies around the country. Pepco tends to have more sustained power interruptions, defined as those lasting longer than five minutes. And when the lights go dark, they tend to stay off longer. In one 2008 survey, Pepco finished last among participating utility companies on two of three reliability measurements, records filed with regulators show. Pepco stopped participating in that annual study after its last-place finish.

"These numbers tell me Pepco has been falling behind the industry," said Joydeep Mitra, a reliability specialist at the Institute of Public Utilities and a professor at Michigan State University. "It's about time they caught up."

Pepco's performance has deteriorated, even as delivering power to homes and businesses has become Pepco's primary business. Pepco now buys energy and then delivers it to homes and businesses on the company's distribution lines.

With winter approaching, when snow, ice, rain and wind exacerbate outages, there are questions about whether Pepco officials are more prepared than they have been in the past. Pepco officials say they are ready for what comes and have a multiyear plan for improving performance.

"The number one commitment today at Pepco is to increase reliability," said Pepco Region President Thomas Graham.

Pepco has blamed the region's heavy tree cover for many of its performance problems. And there is no question that during major storms, falling limbs are a primary enemy.

But there is no independent ranking establishing the Washington region's tree cover as the "fourth most dense" in the nation, as the company has told regulators. Forestry experts estimated that the D.C. region's tree canopy is about average.

Further, in the few cities that Pepco says have a denser canopy than the District, the local electric companies have outperformed Pepco in daily reliability, The Post's review found.

The findings came as no surprise to Mark Gottlieb, administrator of the 150-resident Springvale Terrace senior living center in Silver Spring. Two residents overcome by the cold during winter outages were sent to a hospital, Gottlieb said.

The facility lost power again in major storms at the end of July. And on calm days this summer, it suffered several outages lasting as long as a day, Gottlieb said. Perspiring staffers hauled meals upstairs to residents.

"It was terrible," said Norma Jackson, 76, a Springvale Terrace resident who spent a month in the hospital after a March outage and now endures exhausting dialysis treatment three times a week. "I almost lost my life.

"I still gasp every time the lights flicker - and sigh when they come back on."

Before cold weather sets in this year, Gottlieb, who came to Springvale after the winter storms, plans to stock up on generators, he said.

'Not been a secret'

In 2009, Pepco had more outages and longer interruptions than Dominion Virginia Power, which serves most of Virginia, and Potomac Edison, which serves Western Maryland. And Pepco's customers experienced sustained outages more frequently than those of Baltimore Gas and Electric, which serves all or parts of 10 Central Maryland counties and Baltimore City. The duration of outages at BGE exceeded those at Pepco.

That does not include the companies' performance during big storms. Major outages caused by severe weather are not included in routine reliability statistics, because storms tend to be local and frustrate neighborhood-to-neighborhood comparisons. But records suggest that Pepco at times took longer to restore power than did neighboring utility companies.

The Post analysis of data from regulators and power companies shows that Pepco has long lagged behind on industry performance averages. Details of Pepco's performance have been available to regulators in the District and Maryland for years, as part of the company's required filings.

"It's not been a secret," said James Potts, a Pepco vice president who retired in 2006.

The Post found that Pepco's reliability slumped after 2005. Before then, its performance was closer to industry averages, records show. Customer satisfaction sagged about the same time. By 2009, Pepco had fallen into the bottom 25 percent of U.S. energy utility companies in customer satisfaction.

A 2009 report from Pepco Holdings, the utility's parent company, shows that spending on tree trimming and other vegetation management at Pepco and its sister power companies remained "relatively stagnant or decreased" from 2005 through 2008. Over the same period, the report notes, "reliability . . . worsened."

Pepco told regulators that in 2009 it spent nearly $8.5 million on maintenance in Maryland alone and an additional $6 million in the state on tree trimming. Pepco declined to release comparable figures for the District.

The Post's analysis found that service was far less reliable for communities served by Pepco in Maryland, on average, than for those in the District. One reason might be that two-thirds of District customers are served by underground lines, while 80 percent or more of Maryland customers get power through aboveground wires somewhere along the route.

Pepco is required to report to regulators its worst neighborhood lines and to devise plans to improve them. But there hasn't been much improvement. A decade ago, Pepco identified its worst 13 feeder lines in the state. Ten of those still need to be improved.

In interviews, Pepco executives blamed a run of violent weather for major outages that have angered its customers over the past year and led to public hearings in Montgomery and Prince George's counties. They also said the spike in outage statistics came, in part, from changes in how Pepco counts interruptions.

Even so, they acknowledged that they first recognized a broader pattern of outages about 18 months ago and then began trying to isolate the causes. Pepco executives said some of their past improvement efforts had been stymied by community leaders who asked to have trees trimmed sparingly to preserve neighborhood appearance.

Overall, Pepco executives did not challenge The Post's findings.

"Our stats are not where they need to be," Joseph M. Rigby, chief executive of Pepco Holdings, said Thursday in an interview. "Pick whatever metric you want."

"Some of this inability to get this stuff done, we have to own some of that. We do. I'm not running away from it," he said.

Pepco's filings with District regulators show that in 2008 the company spent $446 per customer on transmission and distribution of electricity; $133 went toward operations and maintenance. That made Pepco the seventh-highest spender among 23 utilities that participated in a survey that year. Further comparisons are difficult because neither Pepco nor many other companies make detailed spending public.

In response to public complaints, Pepco has said it plans to increase spending on reliability improvements by $190 million in the District and Maryland over the next five years.

Rigby said Pepco has not determined the economic impact of the outages on the local economy. But Pepco and its investors have enjoyed attractive earnings and share prices that have nearly doubled since 2009. Pepco Holdings has about $8 billion in revenue, Rigby said, including what he called pass-throughs to other companies that generate and transmit the power that Pepco delivers.

Pepco executives said they have had to balance spending on reliability with expenses in recent years, even as electric rates have increased. And they make no secret of whom they expect to shoulder the cost of enhancements.

"We're going to be spending more money," said William M. Gausman, senior vice president for strategic initiatives for Pepco Holdings. "Ultimately, people will have to pay for these improvements."

Pepco's chief executive told stock analysts in an October call that Pepco's rate increases this past year in the District and Maryland were too small and that the company would seek more money by next summer.

Pepco customers, Gausman said, "can't afford us to be the best in everything. But we will have to be better than we were; there's no question about that."

Norma Jackson agrees. For the retired public school librarian, a pattern of brief outages culminated in March, when the power in her retirement community blinked out. It stayed off, hour after hour and into the next day, then the next and then the next, she said.

"We were without heat for about 31/2 days and I couldn't conjure any heat on my own," she said. "I realized I was practically blue. My fingers were stiff. I couldn't feel my arms or down my legs."

Despite the cold, she opened her door so emergency workers could get in if she needed help.

"I realized I was really in trouble and I pulled the emergency cord. I thought to myself, 'You may not make it, kiddo.' "

A rescue squad rushed her to an emergency room, and she remained hospitalized for a month, she recalled. Doctors put her on dialysis.

"I was very lucky to make it through," she said. The outage "was nearly the death of me."

Tree canopy debate

Whenever they are asked to explain the outages, Pepco executives talk first about the trees.

At an August hearing, Gausman was asked why Pepco's reliability rated poorly. Gausman responded: "The largest amount of outages from a frequency standpoint are tree-related."

But Pepco's internal records show that in 2009 the company's workers identified equipment failures as the most common cause of outages, accounting for 44 percent. That was a 24-point increase over the previous year.

Michael W. Maxwell, Pepco Holdings' vice president for asset management, said in an interview that the spike was partly because of an effort to cut the number of outages attributed to "unknown" causes.

By comparison, the company blamed trees for just 24 percent of outages, a five-point drop from 2008. Trees do play a part in most outages during major storms.

In official filings in the District, Pepco has told regulators that its service area includes the "fourth most dense tree canopy in America." And in Maryland, it told regulators that Washington is "the fourth highest ranked major metropolitan city in tree cover." It is an assertion Pepco executives have made time and again. A Pepco chart attributes the information used in the ranking to studies by the U.S. Forest Service.

"I know it does sound like a broken record," Gausman told Maryland regulators at the August hearing.

But Forest Service officials who conducted the studies cited by Pepco - and who are specifically named in the company's charts - disagree.

"I definitely wouldn't say D.C. was fourth in the nation," said David Nowak, lead author of five of the seven studies cited by Pepco. "D.C. is around the national average for tree cover."

Nowak and other Forest Service experts said they discourage outsiders from using their data to rank cities. Their studies cover different time periods, use a variety of methods, survey varying terrains and do not include all cities, they said.

The figures quoted in Pepco's chart do not match those in the most recent Forest Service studies, they said. And even if the numbers did match, Pepco's figures draw on studies of the District only, they said, and not the Maryland suburbs where the company has the most outages.

A 2009 tree study by the University of Vermont, which federal officials described as the most comprehensive to date, also concluded that Washington's canopy was similar to that of other metropolitan areas, and that it was sparser than those in many small cities and suburban communities.

The report's author, geospatial analyst Jarlath O'Neil-Dunne, questioned linking canopies to power disruptions.

"I can't think of a direct correlation," he said. "Vermont is 80 percent forested. If trees were the cause of power outages, we would have no power here. And we seem to do pretty well."

In Pepco's ranking, the major cities listed as having the densest tree cover are Charlotte, Atlanta and Portland, Ore. Data from power companies in those cities show that they have outperformed Pepco in frequency and duration of day-to-day sustained outages in recent years.

Forester Mike Galvin of the nonprofit group Casey Trees charged that Pepco has turned vegetation into a convenient villain.

"It's a lot easier and cheaper to say trees are bad" than to upgrade equipment, he said.

Asked about the chart, Gausman did not dispute the experts' statements. Pepco did not discuss the ranking with the Forest Service or any other public agency and did not try to independently confirm its conclusions.

"We did a search, and this is the information that we found," Gausman said. "It was all just done through an Internet search."

He added that Pepco executives "absolutely agree with the Forest Service" about the difficulty in compiling a reliable ranking.

To be sure, Maryland and some local municipalities, such as Takoma Park, have strong laws protecting trees. In the District, authorities struggle with the legacy of now-disavowed 1960s policies that allowed trees to grow around and between power lines, said Earl Eutsler, supervisory forester for the District.

Gausman said those issues have made it especially challenging to keep limbs away from wires.

Storm outages

It is difficult to make comparisons among companies based on outages caused by hurricanes, blizzards and other major storms. Storm intensity varies, and each community presents unique challenges based on terrain and the percentage of power lines underground.

Even so, utilities regularly report details on major storm outages to the U.S. Energy Information Administration. Those reports raise questions about Pepco's ability to respond quickly to major outages, compared with its neighbors. The Post analyzed data from six storm-related outages at Pepco that also affected Dominion Virginia and BGE.

The Washington region's three primary power providers have similar percentages of aboveground and underground lines. Pepco has buried 56 percent of its lines, BGE has buried 62 percent and Dominion Virginia has 58 percent of its lines in Northern Virginia underground (versus 38 percent systemwide).

Most memorable among the storms was this year's Snowmageddon, which brought more than two feet of snow to Montgomery County and shut down the region for days. Pepco lost power to almost 98,000 customers at the storm's height, in an outage that began at 7 p.m. Feb. 5, and did not fully restore service for about a week, federal data show.

Dominion, which serves about three times as many customers in Virginia and parts of North Carolina, lost power to 105,000 customers in an outage that began seven hours later and was declared resolved after about 29 hours.

In other words, Dominion's service stayed active longer and was fully restored more quickly - even though roughly the same number of customers were affected. BGE did not report a major outage.

Those figures are reinforced by a study by the Maryland Office of People's Counsel, an agency that represents consumers. The study found that during the storms in February, Pepco customers suffered the longest outages among customers of the six biggest power companies serving Maryland.

Pepco outages averaged 13.6 hours. Other companies had average outages of about six to eight hours; BGE customers suffered interruptions averaging 8.1 hours.

Transparency and accuracy

In interviews after the summer's outages, Pepco executives stressed their desire to be open and accountable to the public.

"We want there to be transparency in the process," Graham, the Pepco Region president, said after an August news conference in Cabin John, where workers trimmed trees in view of television cameras.

A month later, when the company responded to an order to disclose reliability data to Maryland regulators, it did not send the material to their offices. Instead, it placed much of the information on a password-protected portion of the Pepco Web site, saying the volume of material made that a better option. Pepco later agreed to supply The Post with non-confidential portions of the documents.

Difficulty securing solid data from Pepco has long frustrated the D.C. Office of the People's Counsel. Analysts at the independent agency recently discovered that the number of interruptions that Pepco reported in its monthly disclosures did not match those listed in its annual report. Gausman explained in an interview that "there was a mistake," which has since been corrected.

The District People's Counsel discovered a similar problem with feeders. Pepco reported conflicting figures, listing 750 feeder lines in its 2009 report and 806 feeders the following year. "It is questionable that Pepco established 56 new feeders in the course of one year," a report from the People's Counsel said. Once again, Pepco executives said they had made a filing error.

In 2009, the D.C. People's Counsel hired independent consultants to examine Pepco, resulting in a scathing report. The consultants said obtaining information from Pepco was "extremely difficult." Pepco executives delayed, made minimal disclosures and, when they did respond, did so "never in a clear or transparent manner," the report said.

The consultants said they found numerous discrepancies in Pepco's data, indicating that something was "seriously awry" and that the company's dismal reliability record could actually be understating the extent of its problems.

To truly improve, the report said, Pepco should set detailed plans including timetables and deadlines. Otherwise, there is no way to determine whether the company is succeeding, it said.

"Pepco appears to be only committed to performing the minimum required to meet regulations, directives and the law," the report said. "They exhibit no desire to excel."

Pepco officials vigorously disputed the consultant's conclusions, saying reliability is a chief priority.

While the reliability debate continues, Howard Hartmeyer, co-owner of J & H Power Equipment in Crofton, is watching his business thrive. He says generator sales, primarily to homes in Pepco's service area, have jumped 60 percent since June, crowding out all other work at his family-run company. His biggest seller is a natural gas generator that costs about $9,400 installed and can power an entire house. It is a favorite of elderly homeowners on oxygen, who fear being stranded.

"It's a safety thing," Hartmeyer said from a work site in Bethesda. "Out here, everyone's had enough of Pepco."

flahertym@washpost.com stephensj@washpost.com

Staff researcher Magda Jean-Louis contributed to this report.

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