Opponents of Potomac Electric Power Co.'s proposed rate increase in the District of Columbia said yesterday that electric bills in the city should go down this year rather than up by the $45 million Pepco wants them to.
It was opening day of testimony at the Public Service Commission on the 16 percent rate rise that Pepco wants by June of next year. The increase would boost the average electric bill in the District by $3.30 per month.
People's counsel Brian Lederer, however, said it would be only the first step in Pepco's plan to boost rates by $96 million over the next five years.
The arguments from Lederer and other opponents of the rate increase, outlined in refiled testimony, follow the general approach of Pepco's critics in Maryland and Virginia, where similar rate increases are pending.
For too long, the opponents say, Pepco has been allowed to charge customers now for unfinished power plants that may not even be needed in the future. Pepco's accounting practices need reworking, the opponents argue, and its profit margin ought to be lower than it is.
"Pepco has overestimated the growth in (electricity) demand since 1971, one of the poorest prediction records on the whole Eastern Seaboard," said Lederer's consulting attorney John Schell in an interview before the case opened.
"This year we've done the first independent load forecast ever . . . we should be able to prove that Pepco's entire increase in unnecessary. The company is in substantially better financial health than it is leading the public and the (Public Service) Commission to believe."
To prove that contention, Lederer spent $310,000 to hire Schell and a team of 10 consultants - he called them "the best in the business" - to put together hundreds of pages of number-filled documents that littered the tables alongside Pepco's similar pile of paper at yesterday's proceeding.
The trial-like hearing involves cross-examination, objections, motions and rebuttals by platoons of lawyers and is expected to last at least three months.
Pepco president and board chairman W. Reid Thompson told the three-member Public Service Commission that the utility is earning "abysmally low" rates of return: 8.32 percent on Destrict billing rates where a 9.06 rate was previously authorized, in December 1976 and 10.7 percent on its common stock instead of the 13 percent the commission authorized in 1976.
"The reason is obvious," Thompson said. "The rates went into effect for 1977 based on 1975 costs." Pepco filed projected revenues for the first half of this year that, Thompson said, showed that the situation will get much worse if there is no major rate boost.
"Such a decline would severely damage the company's status in the financial markets and impair in ability to provide reasonably reliable service to its customers," Thompson said in his prepared testimony.
Lederer's consultants challenge all of Thompson's contentions.
A Richmond utility economist, David Parcell, said in prefiled statements that Pepco could successfully sell stock in competition with other utilities if its return is in the 8.8 to 9.16 percent range on its investments. A 9 percent rate would allow District utility bills to be cut by $20.7 million a year according to accountant James Marquart.
Thompson said yesterday he did not know where Pepco stands in comparison with other utilities' rates of return, "but a comparison with 24 utilities all in bad shape wouldn't be any indication of condition."
Charles King, another local consultant for Lederer, said Pepco has $250 million of construction work under way and is collecting $54 million form its customers - $22 million from those in the District - for power plants that won't be producing until 1981 or after.
"The construction work in progress (by 1980) will have grown to $345 million without any new generating capacity added whatever," King said.Only a few utilities are allowed to figure their rates like this, he said. Although some states recently have authorized the practice, the Federal Regulatory Commission has rejected it.
The excess construction arises from Pepco's consistently wrong forecasts of electric demand, the critics said.While other utilities have been off by about 10 per cent, Pepco's guesses have been wrong by 25 percent.
Utility spokesmen in the past have said Pepco's customers have led the nation in energy conservationsince 1973, thus throwing off the estimates. Construction plans have been revised downward four times since then.
Thompson said anyone engaged in building unnecessary plants would be "bereft of his senses totally," given the current financial conditions unfavorable to construction. "We will present, evidence to show further it is in the customers' long-run best interest that construction work in progress remain in the rate base" he said.
Pepco said it will file a rebuttal to Lederer's criticisms next week. Representatives of the General Services ic Associations also are questioning hotel and apartment building associations and the D. C. Federation of Civisc Associations also are questioning Pepco officials this week.