Pepco admits to reliability problems

By Mary Pat Flaherty and Joe Stephens
Washington Post Staff Writers
Tuesday, December 7, 2010; B01

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.

Thomas Graham, Pepco's region president, 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 changes in an "enhancement" plan it first released this summer after an outcry from the public and political leaders over the company's lag in restoring service after major snowstorms and July 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 ratepayers.

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.

"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."

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.

Rigby said the company also would be willing to "have a dialogue" with regulators about laying out specific performance targets.

Maryland and District regulators can - and do - ask for reports on outages and on Pepco's plans for upgrading certain equipment. But recent rate hikes have not been directly tied to the company meeting measurable goals and repair schedules. That type of link is in place elsewhere, including in New York with Consolidated Edison.

ConEd has sometimes been compared to Pepco because it serves an urban area with power lines above and below ground. New York regulators have put in a system that creates financial penalties for ConEd shareholders and rewards customers with rebates if the utility fails to meet performance goals.

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."

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.

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