Potomac Electric Power Co., which last week saw its request for higher electric rates in Maryland turned into an order to cut customers' bills, now faces the threat of a similar about face order in the District of Columbia.
The D.C. people's Counsel has recommended Pepco's rates be rolled back by $20.5 million a year instead of increased by $45 million as the utility company wants.
People's Counsel Brian Lederer called for the cut in electric rates in his final brief, filed Friday, opposing Pepco's application to the D.C. Public Service Commission for higher rates.
The PSC has been considering the request since late last year and is expected to rule some time this summer. Lederer has spent $300,000 and hired a team of outside consultants to attack Pepco's request point by point, producing the most comprehensive critique ever made of a utility rate request in the District.
If Pepco gets the higher rates it is asking for, the average electric bill in the district will increase by about $3.30 a month. Lederer instead wants a cut amounting to about $1.50 a month for most customers.
Last Tuesday, the Maryland Public Service Commission rejected Pepco's request to raise rates for customers in Montgomery and Prince George's counties by $24 million a year and instead ordered Pepco to cut bills by $248,000 a year.
The Maryland decision is believed to be the first time in that state's history that a utility's request to raise rates was answered with an order to lower them.
Similar issues are involved in Pepco's rate increase applications in Maryland and the District of Columbia - how much profit should the company be allowed to earn on its investment? What period of time should be used in measuring the profit? How should customrs be charged for power plants that are under construction?
Pepco's application contends its rate of return on its investment in facilities serving D.C. customers should be increased by .25 percent to nearly 10 percent; Lederer recommends a 9 percent profit.
Citing steadily rising costs, Pepco called for basing the profit measurement on the 12 months through June 1978, Lederer calls for using 1977 data.
Rejecting the quarter-percentage-point increase asked by Pepco and point increase in rate of return asked by Pepco and sticking to 1977 figures would rule out any increase in Pepco's rates, Lederer's brief argues.
To cut Pepco's rates by $20.5 million, the People's Counsel calls for a basic change in the way customers are charged for power plants that are under construction.
At present, construction work in progress (SWIP) is included in the investment rate base upon which the company's rate of return is based. In effect, the company is allowed to collect a full profit on plants as soon as construction begins.
Lederer would allow Pepco to include only environmental protection construction in the rate base. The company would be allowed to charge for funds used in other plant construction, but that would amount to $20 million a year less than the total if Pepco includes CWIP in the rate base.
Lederer's brief notes that 35 states do not allow any construction work in progess to be included in the rate base and several others put strict limits on it. Pepco contends the D.C. rate base has included construction in progress for years and the trend in the industry is toward that accounting technique.
The People's Counsel brief cites the much-improved financial health of Pepco as evidence the company does not need higher rates. Since 1975 - when Pepco was in financial trouble - the company's earnings per share of common stock have grown from $1.16 to $1.82, Lederer notes, Return on common stock equity has jumped from 7.9 percent to 11.75 percent, a level that company officials acknowledged "may be the highest that the company has earned."
In Maryland, Pepco won its case for keeping construction work in the rate base, but lost its bid to figure rates on projected operations through June 1978. On the rate-of-return issue, Pepco was asking 9.91 percent and the Maryland People's Counsel recommended 8.7 percent; the PSC settled on 9.12 percent, noting Pepco had made extraordinary profits last winter's severe cold.
As in the District of Columbia case, Pepco's Maryland application included more than two dozen other controversial points, each making a fractional difference in power rates.