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Pepco executives acknowledge need to improve reliability

By Mary Pat Flaherty and Joe Stephens
Washington Post Staff Writers
Monday, December 6, 2010; 5:19 PM

Senior Pepco executives acknowledged Monday that the company has failed to provide reliable power to its customers and repeated their previously announced plan to improve service over the next five years.

That upgrade will cost the average customer in Maryland and the District an extra $1 a month if regulators approve a rate hike, Pepco said at a news conference. The increase would be phased in beginning in about 18 months, they said.

Pepco region president Thomas Graham said that while the company was not asking customers to lower their expectations, Pepco still was urging them "to level their expectations" during major storms.

The executives appeared a day after The Washington Post reported that Pepco's day-to-day reliability began declining five years ago and that Pepco now ranks at or near the bottom in industry surveys of reliability. The average Pepco customer experienced 70 percent more outages than customers of other big city utilities that took part in one 2009 survey, The Post reported. And the lights stayed out more than twice as long.

Pepco did not announce additions or changes in an "enhancement" plan it first released this summer, following an outcry from the public and political leaders over the company's lag in restoring service after major snowstorms and summer outages. Pepco serves 778,000 customers in the District and Montgomery and Prince George's counties.

The plan calls for adding $100 million in improvements in Maryland and $90 million in the District - costs that the company would pass on to rate payers.

The company said it was hoping to move into the upper half in day-to-day reliability on surveys that compare power companies. Recent rankings have Pepco at or near the bottom of most studies.

"Our customers have told us we need to make improvements in reliability, and we are," said Joseph Rigby, chief executive of Pepco Holdings, Pepco's parent company. "The challenges of 2010 have created a laser-like focus" on reliability, he said.

"Our reliability performance is not where it needs to be," Rigby told reporters. "We are working at maximum capacity, and we are going to stay in that mode."

Rigby said,"We are a good company, and we are committed to meeting our customers' expectations."

Pepco is "not where we want to be" for reliability, said Graham, who pledged that "on a day-to-day basis, service for our customers will improve. We're going to have a high-level of accountability."

Although Pepco has long cited Washington's tree cover as a primary reason for the frequency and duration of its outages, Pepco's internal records show that equipment failures, not trees, caused the most sustained power interruptions last year.

Asked why reliability had been declining, Rigby said it was not due to lack of investment or maintenance. The company has aging wires that date to the 1970s, he said, and has to meet rising demand from customers who often work at home.

The news conference differed in tone from appearances by Pepco executives as recently as August when they suggested to Maryland utility regulators that they were not disappointed by their handling of recent outages.

During an August hearing in Baltimore, Mike Sullivan, senior vice president of operations at Pepco, said: "I think we did a reasonable job of restoring power. I'm not embarrassed by what we did."

Likewise, David Velazquez, Pepco Holdings executive vice president for power delivery, told state commissioners that while the summer had been frustrating for customers and the company, "we responded properly" to outages."

On Monday, Velazquez stressed the improvements that were needed and said, "We are in this, and committed to this, for the long haul." He also praised workers he said have been working hard for customers.

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 statistics do not include the companies' performance during big storms, which experts said can skew results.

In 2009, Pepco ranked in the bottom 25 percent of U.S. energy utility companies in customer satisfaction.

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

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 newspaper's study found.

flahertym@washpost.com stephensj@washpost.com

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