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One-time charges sap Pepco parent's gains during record summer heat

By Jia Lynn Yang and Mary Pat Flaherty
Washington Post Staff Writers
Friday, February 25, 2011; 10:59 PM

Pepco's parent company enjoyed higher sales last year from customers who turned up the air conditioning during a sweltering summer, but earnings fell sharply because of one-time charges.

The company's earnings dropped to $139 million, down 38 percent compared with last year, largely because of an expense related to reducing its debt after it sold Conectiv Energy in July. If it weren't for these special charges, profits would have risen 47 percent to $276 million, according to the company's earnings report Friday.

Pepco benefited from record heat last summer, which drove higher sales. A measure of how much customers were likely to use air conditioning during the summer was up 48 percent.

The company's Pepco unit, which operates in the Washington area, said its revenues were $2.3 billion, essentially flat compared with last year. It spent more money on operations and maintenance, however, because of several severe storms last year.

Pepco said it made $359 million in capital improvements last year, compared with $288 million in 2009.

"Pepco's results demonstrate our continuing commitment to improving the company's system reliability and customer service," said Anthony J. Kamerick, senior vice president and chief financial officer of Pepco's parent company, PHI. "Over the next several years, we plan to increase our investment in electric infrastructure."

Pepco's parent company said the firm spent approximately $15 million to restore power to about 250,000 customers - most in the Washington area - after snow and ice storms in January.

Pepco's response to the storm drew criticism from customers and legislators, a circumstance Pepco Holdings Chairman Joseph Rigby addressed in a conference call. The political fallout from the storm included calls in Montgomery County for replacing Pepco with a public provider to proposals to fine Pepco and other power companies if they fail to meet new reliability standards proposed by the Maryland Public Service Commission.

Repeating what he and other executives have said during a recent spate of local and state hearings, Rigby told analysts that reliability "is priority one for us."

He also said he expected that Maryland regulators would set the reliability standards.

In an attempt to rehabilitate the company's image, Rigby, who is paid a base salary of $880,000, had said he would not take a raise or bonus this year.

yangj@washpost.com flahertyp@washpost.com

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