About four months after the Maryland Public Service Commission denied most of a rate increase request by Pepco, the investor-owned electric utility is asking for another hike.
Pepco filed a request Friday with the PSC for a $60.8 million increase in its base rates, or about $7.13 more per month from the average customer, to pay for reliability upgrades to its system. That new rate would increase allowed return to Pepco’s investors from about 9.31 percent to about 10.25 percent.
“We are focused on improving the reliability of service for our customers,” Pepco Region President Thomas Graham said.
Currently, Pepco investors earn about 5 percent on their investment. Having a higher allowed rate of return would help Pepco attract capital at cheaper rates, said Kevin McGowan, vice president of regulatory affairs.
Montgomery County Council President Roger Berliner, an outspoken Pepco critic, said he does not think his constituents are prepared to reward Pepco by increasing their returns.
As Pepco works to complete its reliability improvements, it also has expanded its five-year upgrade plan from $900 million to $1 billion.
On top of the rate increase, the utility also asked the PSC for permission to charge a graduated fee over the next three to four years to fund resiliency improvements to its grid in response to recommendations by the Governor’s Grid Resiliency Task Force, convened over the summer in response to the June 29 derecho.
Intending to use the money to accelerate tree trimming, upgrade 12 more feeders each year and bury six feeders underground, Pepco asked for permission to charge its average customers an additional 96 cents a month in 2014, $1.70 a month in 2015 and $1.93 in 2016 to fund a portion of the estimated $192 million it would cost to make those improvements.
The rest it would attempt to recover through future rate increase requests.
Berliner (D-Dist. 1) of Bethesda said Pepco’s request is known as a “tracker,” an automatic repayment to the utility without it having to prove the money was spent prudently.
Most utility commissions find them abhorrent, said Berliner, a former utility attorney.
“The question is, ‘Why isn’t Pepco capable of accelerating its work on reliability, which is its most fundamental obligation, without a special tracker?’” he asked.
Coupled with the charge, Pepco has proposed stricter reliability standards that it must meet in 2015. Should it not meet those standards, it would be required to credit customers up to $1 million of the charge over the three-year period. But if it meets the standards, it would earn an additional $1 million.
Pepco sought a $68 million rate increase last year. In July, the PSC denied all but $18.1 million, allowing only what was required to meet the legal and statutory mandates to provide safe and reliable service, according to a news release from the commission.
That requested increase was also intended to recover Pepco’s investments in reliability improvements.