Pepco reliability plan 'cobbled together' without detailed study, report finds

By Joe Stephens and Mary Pat Flaherty
Washington Post Staff Writers
Tuesday, March 8, 2011; 12:14 AM

Pepco's multimillion-dollar plan to reduce power outages and improve reliability was "cobbled together" without detailed study and could fail to achieve its goals, a team of independent consultants has found.

The consultants told Maryland regulators in a new report that Pepco appears to have put the plan together in a single month as "a quick attempt to throw money at the problem, or, more accurately, to quickly promise to throw money at the problem."

It recommended that Pepco revamp the plan to emphasize its most vital parts, such as tree trimming.

"Pepco acknowledged that it does not know whether the projects in the new plan will actually achieve its reliability goals because it had not fully analyzed them," the report said. "With this ready-shoot-aim approach a portion of the Company's planned capital spending is almost certainly poorly targeted."

Bob Hainey, a Pepco spokesman, disagreed with the consultants' conclusions about the reliability plan. "We don't feel like that is something that was just cobbled together," Hainey said. "We're spending millions in additional money to trim trees. We will probably have a discussion with them on that."

Pepco announced the plan amid harsh criticism for ongoing reliability problems. It has been the cornerstone of Pepco's repeated public pledges to improve after sustained complaints from customers, elected officials and regulators about the utility's performance.

Pepco officials have estimated that the five-year improvement plan would cost customers in the District and Montgomery and Prince George's counties about $1 more a month, if regulators approve a rate hike. The utility has 778,000 residential and business customers in the region. The consultants' report estimated that the plan would cost $256 million in Maryland alone.

Maryland's Public Service Commission requested the report in October and directed Pepco to pay for the evaluation.

The consultants and a spokesman for the commission declined to comment on the report and its findings.

Hainey said the company is still examining the report but is pleased that the consultants found the power system overall to be "well-designed" and "robust." Since last summer, Hainey said, Pepco has trimmed 1,500 miles of tree line. He said that work is paying off in increased reliability.

District regulators on Monday separately proposed rules that would impose financial penalties on Pepco if it failed to meet new reliability standards and move into the ranks of top-performing utilities nationwide by 2020.

Hainey said Pepco does not oppose enforcement standards that are "fair and reasonable."

Maryland's Public Service Commission ordered the independent examination in response to extended power outages that came after storms last winter and summer. The evaluation focused on Maryland and was conducted by First Quartile Consulting of El Segundo, Calif., and Silverpoint Consulting of Allentown, Pa.

The consultants concluded that Pepco's reliability fell in 2004, after the company failed to increase efforts to improve its distribution system following 2003's Hurricane Isabel.

"Normally one would expect a utility to spend more on preventative maintenance after such an event to counteract the increased risk of outages caused by hurricane damage," the consultants said in their 136-page report, which was filed last week. "Pepco, however, responded with insufficient preventative maintenance. . . . Not surprisingly, conditions on the system continued to deteriorate."

The report said that Pepco's spending on tree trimming and other vegetation management has been "inadequate" and that the company "routinely failed to meet its annual trimming goals."

The consultants recommended that Pepco focus on increasing preventive maintenance, analyzing outage statistics and coordinating communications with its customers.

A Washington Post investigation published in December found that Pepco's customers in Maryland had substantially more day-to-day power outages than its customers in the District. The newspaper's study determined that reliability began declining five years ago and that Pepco 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 analysis found.

The consultants' nine-week investigation focused on outages related to four major storms in 2010. The report concluded that the factors that caused storm outages also played a major role in blue-sky outages, which come on days with no severe weather.

The report concluded that Pepco's vegetation management budgets in recent years "were never adequate enough to provide for the required level of [tree] trimming."

The report also said Maryland laws that restricted tree trimming raised the cost of maintenance. It concluded that if Pepco's more aggressive program were adequately funded, it would significantly improve reliability.

During field inspections, the consultants said, they found a number of problems that should have been identified during Pepco's routine examinations, including deteriorating power poles, broken guy wires and loose insulators. Some of the damage appeared to be storm-related.

"This is not surprising, as Pepco does not perform after-storm inspections or patrols to look for, for example, broken branches in overhanging trees that can easily come down in the next storm - faults waiting to happen," the report said.

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