For Pepco, Maryland legislature could be a paper tiger
By Robert McCartney,
Despite all the public uproar over Pepco’s chronic power outages, despite all the politicians’ promises to crack down, there’s a substantial risk that the Maryland legislature isn’t going to do enough to force the utility to keep the lights on.
A much-touted reform bill set to emerge from the General Assembly in coming days could have serious shortcomings.
Although the legislation sets reliability standards for electric companies for the first time and provides for fines if the standards aren’t met, its enforcement will be the responsibility of the do-nothing regulators at the Maryland Public Service Commission. That’s the state body that wasn’t even aware that Pepco had a problem as the utility’s performance slid to the bottom of the nation’s rankings in recent years.
Moreover, the House of Delegates and the Senate have produced competing versions of the legislation – and the House’s version overall has considerably fewer teeth than the Senate’s.
Negotiators are scheduled to iron out the differences this week, and Pepco’s critics inside and outside the legislature are concerned that the feebler alternative could triumph. It seems the electric industry may have too much influence in Annapolis, and Montgomery County too little, to pass a bill that would truly make a difference.
Anything less than a tough, effective law would be a shameful slight of the needs and interests of Pepco’s long-suffering customers, especially in Montgomery, where the electric service has been particularly egregious.
It would also be a disappointment for Gov. Martin O’Malley (D). His energy adviser, Abigail Hopper, said the governor supports the “strongest bill possible” that would “hold the utilities accountable.”
If the House version ends up as law, Pepco wouldn’t face the possibility of paying any penalties for lousy service until 2014. Moreover, its language is so fuzzy that fines could conceivably total just tens of thousands of dollars, even for large-scale outages that weren’t justified by bad weather. That would be a pittance for a company whose parent’s profit in the past two years totaled $267 million.
The Senate version foresees starting the penalties as early as next year, and they could run in the millions of dollars.
Critics of the Senate version say the risk of huge fines would spook Wall Street, so Pepco (and ultimately its customers) would have to pay higher interest rates to borrow money. Others said that worry is overblown. In any case, in order to have any impact, the bill must guarantee that the penalties aren’t negligible.
“The PSC is going to have to have a big stick, or these guys at Pepco are going to continue to do what they’ve done for the past five or 10 years, which is disinvest in maintenance,” said Sen. Brian Frosh, the Montgomery legislator who sponsored amendments that put more bite in the Senate version.
The whole process is maddening, for several reasons. First, it’s beyond doubt that stiff measures are needed, because Pepco’s reliability is so poor.
In Montgomery, more than 10,000 Pepco customers who responded to an online survey reported that they had experienced at least one outage of more than five hours in the past year, according to a report to be presented at a news conference Monday in Annapolis by a working group set up by County Executive Ike Leggett.
The average Pepco customer suffers outages of about 300 minutes each year, compared with the national average of about 200 minutes, according to the nonprofit Galvin Electricity Initiative, which promotes electric reliability. In Europe, most countries average fewer than 100 minutes.
“Abysmal” was the word used by John Kelly, Galvin’s deputy director, to describe Pepco’s performance. He said Maryland is behind many other states, and the District, in fixing reliability standards for utilities.
“The Senate bill is, from our standpoint, more in line with other things going on in the country,” Kelly said.
The legislation’s problems also highlight the effectiveness of industry lobbying. The bill was handled by two committees — House Economic Matters and Senate Finance — that are historically sympathetic to business interests, including the electric utilities.
Although Pepco’s tainted image undermined its influence this year, other utilities, especially Baltimore Gas and Electric, worked effectively to weaken the bill.
Finally, this is another example of the lack of respect that Annapolis often accords the Washington suburbs. It’s fine for Montgomery to pay far more than its share of the state’s bills, but heaven forbid it should expect real help from the capital in addressing an urgent need.
Del. Brian Feldman, chairman of Montgomery’s House delegation, described the problem he faced on the Economic Matters Committee.
“We have four legislators from Montgomery County on a 23-member committee. If you do not come from Montgomery, this was not a big deal,” Feldman said.
Montgomery deserves better. The legislature should make sure the bill sent to O’Malley clearly requires penalties big enough and soon enough to get Pepco’s attention. Then the whole state should make sure the regulators follow through.