Maryland Public Service Commission Releases Derecho Findings March 14, 2013
No one needs to tell you how long we, as a community, have suffered from a lack of reliable electric service. You have lived it for many many years, and it is likely that we will continue to suffer from subpar service for years to come. But there is hope on the horizon.
There was a time, to our great regret, that the Maryland Public Service Commission itself was not aware of how bad things were here in Montgomery County. It literally wasn't until August of 2010 that the Commission realized that Pepco had been in the lowest quartile nationally for reliability over a five year stretch. That should never have happened and the Chairman of the Commission at the time apologized for it. Since that time however, the Commission has begun to turn things around and focus intensely on the issue of reliability. Its latest order issued just a couple of weeks ago, is further evidence that the Commission has gotten the message.
The order is the result of the Commission's examination of how the utilities fared in response to the devastating impact of the Derecho that tore through our community and our state on June 29.
The order speaks powerfully to the vast "disconnect" that exists between the expectations and needs of our residents and the capabilities of our regulated utilities to meet those needs. The order recognizes that reliability has become even more of an absolute requirement given how dependent we have become on electricity to not only heat and cool our homes, but to connect with the world with our phones, internet, and cable.
As a result, the Commission is seeking to strengthen its reliability standards and to hold Pepco and the other utilities more accountable in the process, including:
* Adding performance after major storms to the reliability standards. Currently, the standards do not include outages after major events. The Commission now realizes that it is not ok for people to be without power for 9 days in a row -- even after a major event -- and that the performance of a utility should include consideration of how they respond after such an event;
* Giving a serious look at "performance based ratemaking", a concept that I have been pushing for a number of years. It is as straightforward as it sounds -- tying Pepco's financial returns to how well it performs;
* Directing the utilities to improve upon their "estimated time for restoration" (ETRs). Telling people that 90% of us will have our power in 3-4 days (or whatever) is not particularly helpful to the family that is trying to figure out whether they need to find alternative arrangements for themselves, their aging parents, and their pets;
* Making sure that their is absolutely no misunderstanding when it comes to knowing the status of our most vulnerable residents -- those in special care facilities -- and the need to take care of them as a top priority.
More broadly, the Commission has made it clear that they want the reliability of the system to be addressed faster than currently contemplated. They want to see new plans, new actions, and they want to see them soon. They also want a more detailed examination of the costs and benefits of a vastly improved system and have retained a consultant that will provide the Commission with an economic analysis of the impact of poor reliability.
All in all, I really believe that the Commission is now committed to focusing on this fundamental utility obligation and I hope, as I know you do, that this renewed commitment will lead to a vastly improved system.
Supporting State Legislation that Levels the Playing Field Between Ratepayers and Utilities March 14, 2013
When a utility asks the Commission to approve higher rates, something that happens almost every six months, they bring an army of lawyers and "experts" to support them. These proceedings are not, as I have said before, for the faint of heart. They are expensive and time consuming. That is why I sponsored legislation years ago to ensure that our County was involved in these proceedings on your behalf.
Other states, notably California where I used to practice utility law, make it possible for consumer organizations to effectively participate. How? By allowing the Commission to compensate those groups for their reasonable costs of participating (lawyers and perhaps experts) where, and this is important, the Commission finds that the organization has made a significant contribution to the findings of the Commission, and where their effort was not duplicative of others.
Del. Carr sponsored legislation that would have made that possible here in Maryland, and he asked me to testify in behalf of his bill. I was happy to do so. Not surprisingly, the utilities were strongly opposed to the measure. They like the system just the way it is, thank you very much. And perhaps not surprisingly, the Committee voted it down. I hope that Del. Carr will continue to push for this reform that would democratize this critically important process, a process that is fundamentally not available to our residents and ratepayers.
Pepco's Latest Request for a Rate Hike December 19, 2012
What would a report from me be without some mention of Pepco? As many of you know, Pepco has recently filed a new request for a rate hike with the Maryland Public Service Commission. Pepco is seeking to recover $60.8 million from ratepayers; get an increase in its return on equity for investors; and institute a form of an automatic "tracker" that would allow them to recover 100% of certain incremental reliability related expenditures that they make in the future.
Our County fought hard against Pepco's last request for a rate hike, and fortunately the Commission essentially agreed with the County. In that case, the Commission rejected three-quarters of Pepco's proposed rate hike; reduced its return on equity as a result of its poor performance; and rejected the tracker as antithetical to proper ratemaking principles and consumer protection.
We will be fighting hard for you again in this case. The rate case will begin next year and will be decided by the Commission sometime this summer. You can watch my comments on Pepco's request, starting at 1:50 here, or see a statement issued by seven members of the Council here.
Update on Pepco September 25, 2012
On September 13, the Maryland Public Service Commission held a hearing in Baltimore to better understand the recovery and service operations of Pepco and other utilities during the June 29 Derecho storm.
The PSC raised several concerns with Pepco officials. Among them, the amount of contractors used, the impact of their long-term reliability work during the storm, and the duration of outages following the storm. A final report from the PSC will be released soon.
Meanwhile, last month I took part in the inaugural session of Governor O'Malley's roundtable on electricity distribution. Because reliability is such an important (and unfortunately ongoing) issue for us, I was pleased to share with the Governor and his staff a first-hand experience of what we've been dealing with in Montgomery County. I shared with the roundtable several thoughts on how we can bring about reliable, efficient, and green electricity.
I continue to believe that our County should explore the possibility of public power as an alternative to Pepco. It may ultimately not be a good fit for the County, but I do believe it is an option that needs to be fully considered. Towards that end, I have asked our County Attorney to reassess his previously stated view that in order for the County to move towards public power, we would need the explicit approval of the state legislature. If that remains the case, it would be a very steep hill to climb.
Alternatively, I have asked the Governor to support Montgomery County serving as a national model for what some call "Utility 2.0", a 21st century utility system that would serve our need for reliable, green, efficient power. As Chair of the Transportation, Infrastructure, Energy & Environment Committee, I will be hosting a forum for advocates and architects of Utility 2.0 to explain what it would look like and the benefits it would bring to our community and the state.
Public Service Commission Hearing on Pepco and Pepco's Self-Evaluation July 31, 2012
So many of you have contacted me or my office in response to the June 29 storm and Pepco's poor performance in the aftermath. Last week, the Chairman of the Maryland Public Service Commission and Pepco officials attended a Council briefing in Rockville. (You can find my closing remarks from this briefing here.)
During the briefing, Chairman Douglas Nazarian announced that the Public Service Commission would be hosting a public hearing as part of the official record of the June 29 storm (Case #9298). The public hearing will take place on August 7 at 7:00 PM, at the Council Office Building in Rockville in the 3rd Floor Hearing Room. (100 Maryland Avenue, Rockville MD 20850).
If you wish to speak at the public hearing, you need only attend the meeting and sign up to speak on the sign-in sheets that will be provided. Unfortunately, it is not possible to sign up in advance. If you are unable to attend or wish to submit testimony before the hearing, you may send your testimony to:
David J. Collins, Executive Secretary Maryland Public Service Commission
Case #9298 6 Saint Paul Street Baltimore, MD 21202-6806
Because the Maryland Public Service Commission is the only body with regulatory authority over Pepco, it is extremely important that your voices are heard by this state agency. I have shared all of the emails our office received on the storm with the Chairman of the PSC, the Governor's office, and our state delegation. So do know that they are aware of our strong concerns. Indeed, the Governor just last week established a state working group to come up with recommendations on specific steps we should take to bring our grid into the 21st century.
Late yesterday, Pepco made its required filing with the Commission, in which it provides more details regarding its preparation and performance. You can find the filing here. There are interesting factoids as well as certain, limited admissions of things they could have done better. But, not surprisingly given the potential of significant penalties, Pepco argues that it did as well as it could under the circumstances. Our County will be reviewing the filing in detail and participating in the investigation on your behalf. But, in the meantime, I hope that you will seriously consider making your own voice heard - either at the meeting on August 7th, or directly with the Commission.
Public Power: Is it Right for Montgomery County? September 28, 2011
For the past five years, Pepco has ranked in the lowest quartile nationally in terms of reliability - and these numbers are only measuring non-storm related outages. Our residents lose power more often on sunny days than anyone in Maryland. This unplugs the economic engine of our state, costs our residents and businesses hundreds of millions of dollars, damages our competitiveness, disrupts lives and exposes our elderly, infirm, and children to needless risk.
Pepco knew their system was deteriorating but placed the needs of its holding parent company, PHI, and shareholders above ratepayers. It failed to make the necessary investment in infrastructure maintenance and upgrades and failed to properly maintain its tree trimming program. Equally disappointing is the fact that our state regulators, the PSC, did not even know that it had been this bad for so long.
These circumstances led our County to formally request the Public Service Commission for the following relief: if two years pass and Pepco is not performing in at least the second quartile for reliability, then the Commission should use its authority to modify Pepco's service area to remove Montgomery County and revoke Pepco's authority to exercise its franchise to provide electrical service.
With all that in mind, the County Council began an investigation into what options may exist, other than Pepco, as our sole service provider. In February of this year the Council asked the County Attorney a series of threshold statutory, regulatory and legal questions that we believed we need to understand as a first step.
Earlier this month we received his response. In his memo the County Attorney suggested that, given the novel issues addressed in the opinion, the Council may wish to also obtain the opinion of the Maryland Attorney General before pursuing the matter any further. That is the next step that the Council will be taking, and we will be seeking the opinion of Maryland's Attorney General Doug Gansler in this matter.
Although we do not have public power in Montgomery County, it is not new to Maryland. Since the 1930's the Southern Maryland Electric Cooperative has been customer owned and operated and serves 150,000 residents. Public power authorities do not serve shareholders. Their sole purpose, focus and mission is to serve its owners - its customers. Public power monies get invested in the local community, they can be more responsive to the values of residents such as the desire for clean energy, and their reliability is considerably higher than that of Pepco.
Much of the editorial criticism of our exploration of public power is that it would mean "government run power". That simply isn't true. Most of the large public power entities in the country are run by independent boards of directors.
No one on the County Council has definitively concluded that public power should be pursued. We simply want to understand it better, particularly given our County's public position that Pepco needs to be replaced if they don't get better fast. I will keep you abreast of developments as these discussions continue.
Pepco's Efforts in Preparation for Hurricane Irene August 26, 2011
Yesterday, Pepco distributed this press release which discusses their efforts to prepare for Hurricane Irene. Among them, the utility has ramped up their call center so that it maintains 24-hour coverage beginning today. In the past, I know that it has been a frustrating task to get in touch with Pepco; I am hoping that this time, it will be different.
Pepco's line crews will work extended hours during what the company is already calling a "multi-day restoration effort", as they expect that high winds will cause significant outages. Pepco leadership shared this morning that they have already secured hundreds of mutual assistance crews that comprise a complement of resources that is unprecedented for Pepco.
To report an outage, call Pepco at 1-877-PEPCO-62 and press "1". Pepco asks that even if you think a neighbor has already reported your street as experiencing an outage, that you still call to report your home as out also. If you have access to the Internet, you can report outages at Pepco's website. They now have an app to report outages, available for free at the App Store. (The iPhone expert on my staff expects that this app could really simplify the process of reporting an outage, and, if Pepco has the information available, also simplify checking back on the status of outages.)
To report a downed wire, call Pepco at 1-877-PEPCO-62 and press "2". Of course, never go near any downed wires.
Pepco is urging its customers to take the following precautions, among others, in advance of the storm:
-Assemble an emergency "storm kit". Include a battery-powered radio or television, flashlight, a first-aid kit, battery-powered or windup clock, extra batteries, special needs items, an insulated cooler and a list of important and emergency phone numbers.
-Keep at least a three-day supply of non-perishable foods and bottled water and have a hand-operated can opener available.
-Have adequate prescription medicines or infant supplies on hand.
-If you or someone you know uses life-support equipment that requires electricity to operate, identify a location with emergency power capabilities and make plans to go there or to a hospital during a prolonged outage.
Pepco is also reaching out to its customers who have registered with them as needing electricity for critical medical equipment, to help them prepare for an extended outage.
An Update on Pepco July 29, 2011
So far this summer we have been relatively fortunate that our power outages have been kept to a minimum. Knowing that, if you have experienced an outage - blue sky or storm related - you may not agree. But, in fact, so far we have been spared from the mass storm outages of prior years.
That said, I continue to work aggressively to make sure that Pepco reforms its corporate culture and serves its customers as it should in order to become a top performing electric utility. The County has submitted a brief to the Maryland Public Service Commission in its investigation of the company and our brief details in very specific terms the changes that we believe are necessary in order to have Pepco perform as it needs to. In addition, the County has requested that the following remedies be enacted:
� Require that Pepco/PHI's shareholders, not Pepco's customers, bear the cost of improving the quality of its service to at least a "second quartile" reliability level; � Consider reducing Pepco's allowed rate of return on equity and require Pepco to provide certain billing credits to its customers; and � Ultimately, consider modifying Pepco's service territory or revoking Pepco's authority to exercise its franchise.
The Public Service Commission's investigation has revealed that as Pepco's customers experienced the very real impacts of the company's neglect of its infrastructure and ratepayers, the same impacts were not felt by its parent holding company or its shareholders. I, for one, was not surprised when Pepco earned the title of "America's most hated company." Now is the time for our state regulators to use the full scope of their authority to remedy this unacceptable behavior by a regulated utility. Our County deserves and expects no less.
One area that Pepco has been extremely active in is tree trimming. After failing to perform adequate tree trimming for years, Pepco suddenly started trimming everywhere, sometimes with alarming results. As Chair of the Council's Transportation, Infrastructure, Energy, and Evironmentt (T&E) Committee, I convened a briefing to look at Pepco's tree trimming policies and practices. The testimony that was provided at the briefing exposed a glaring hole in the oversight responsibilities for Pepco's tree trimming program. The Public Service Commission does not guide Pepco's hand in this instance, and I believe the time may have come for a codification of best practices in our County code so that citizens can be assured that our trees are being protected and properly trimmed, that our citizens know their rights when Pepco seeks to trim their trees, and that the information Pepco provides home owners about their tree practices is overseen by the County and its arborists.
Statement on Pepco Work Group Report April 26, 2011
I want to commend the County Executive and his Pepco Working Group for their valuable contribution to our community and our state regulators understanding of both the cost and causes of Pepco�s unreliable service.
The Working Group report is an indictment of Pepco. What this report makes clear is something that our citizens know all to well their performance has been unacceptable and has adversely affected our quality of life and our ability to attract and hold businesses. Our community deserves nothing less than a best in class utility and it is the job of the Maryland Public Service Commission to make sure we get it.
The report appropriately recommends that the single most important action that can be taken by those outside the company is to establish a carefully considered, aggressive package of financial incentives and punishments that appropriately align Pepco�s priorities with those of the community. I look forward to working with Governor O�Malley and the Public Service Commission to see that happen.
The report makes a number of important observations, including:
Pepco's reliability on sunny days (eg, non major "event" days) is 75 percent below the industry norm (p. 7)
The "cumulative reason for overall outages can be largely attributed to internal system failures." (p. 10). Indeed, the "primary" cause of Pepco's unreliability on normal days is a result of "inattention to" and "underinvestment in" its basic distribution system (p. 14)
Pepco knew or should have known that it had a serious problem, yet these "warnings" were "downplayed, excused, or ignored" (p. 14)
Pepco has approximately two and a half times fewer employees on staff to respond to a major storm event than BG&E; (p 41)
Customers in Pepco's service territory experienced approximately three times as many hours of interruption as BG&E's
Pepco's 6-point plan 'falls short ...in both scope and urgency." (p.iv)
The Work Group "concurs" with the assessment of an independent consultant that concluded that Pepco's 6 point plan was "cobbled together" in a month out of old discretionary projects that had not been funded and a some new projects; that Pepco itself "does not know whether the plan will achieve its objectives, as it did not perform reliability improvement analysis" (p. 28)
The cost of the $275 million plan to improve the system pales in comparison to the cost imposed on our community by sustained outages. 50 percent of Montgomery County's business community who responded to the survey believes that Pepco's shareholders should share in the cost of improving the system. (p. 53)
Our state regulators have not done an assessment of the cost imposed by an unreliable system; Pepco continues to recover its full costs during an extended outage; and there are not the proper economic incentives and disincentives in place (p. 65)
Even as Pepco�s service "deteriorated", its profits were "unaffected." As the report observes, Pepco does not operate in a "free market" environment in which we could expect a correlation between "quality of service" and "profitability." Instead, we must rely upon our state regulators to provide the appropriate financial incentives, something that has not been done to date (p. 4-5)
State Legislation Requires Reliability Standards April 15, 2011
I am pleased to report that our state legislature, led by Delegate Feldman and Senators Frosh, Madaleno and Garagiola, did, in the closing hours, pass legislation that will, for the first time, require the Maryland Public Service Commission (MPSC) to adopt electricity reliability standards.
As you know all too well, today Pepco ranks in the lowest quartile in the nation in terms of reliability and yet have continued to earn their full rate of return approximating 10%.When we have complained to the MPSC about Pepco's reliability, they have responded in part by saying we can't punish them because we have never held them to any standard.Well, at least that is now about to change.
The battleground now shifts to the MPSC.They have all the authority they require to mandate that Pepco provide service as reliably as other top performing utilities in the nation.I recently testified on behalf of our county before the MPSC, urging them to hold Pepco to the highest possible standard.The District of Columbia's Public Service Commission has recently announced its intention to require Pepco to become a top performing utility over a period of years.It would be an extreme disservice to our community if Pepco were required to meet stronger reliability standards in the District than in Montgomery County.
The cost of Pepco's unacceptably poor service has also become clearer.According to the county's survey of our residents and businesses, outages have cost us as much as $300 million.And those costs do not calculate the immeasurable psychological damage -- worrying about our loved ones, our families, seniors, and those who need power to literally breathe.We cannot tolerate, nor should we, anything less than reliable electric service.I will continue to do everything I can to get our state regulators to hold Pepco accountable.
An Update on Pepco March 8, 2011
When I look at the sign on the left, I just sigh.Progress in improving Pepco's reliability is not for the faint of heart.It is a slow process.Slower than it should be.Their five year plan is too long and doesn't even promise to get us to where we should be -- equivalent to top performing utilities in the country.
I am not alone in being critical of the plan.As the Washington Post reported on its front page, an independent consultant reviewed the plan and concluded it was "cobbled together ....as a quick attempt to throw money at the problem, or more accurately, to quickly promise to throw money at the problem."The report goes on to observe that Pepco doesn't even "know whether the projects in the new plan will actually achieve its reliability goals because it had not fully analyzed them."According to the consultant, the plan is a classic case of a "ready, shoot, aim" approach to solving this crisis.
But there is progress in Annapolis.With the leadership of the Governor and Delegate Feldman, and a host of Montgomery County Delegate and Senate sponsors, I do believe we will get a state law that requires Pepco to adhere to reliability standards that meet your expectations and stiff penalties if they fail to do so.I testified last week before the Economic Matters Committee with Delegate Feldman, Majority Leader Barve, and the Governor's representative in support of the effort.And I expect to be back next week before the Senate when it takes up this matter.
Given yesterday's storm there are several items to report to you regarding Pepco.
Power restoration progress:
To report power outages or downed wires Pepco has asked you to call 1-877-737-2662.
On a conference call with Pepco executives today at 1:00 PM, I was assured that the vast majority of power outages would be restored by 11 PM tomorrow evening. That said, it is possible that restoration will continue into the weekend until all power is restored. As of this moment in time, there are 168,000 people without power in the Pepco service area with 115,000 of those in Montgomery County.
Pepco has 11,000 people working round the clock to restore power with local contract crews being brought in and crews from Ohio and the Delmarva area assisting as well. The nature of the snow with its heavy, thick and wet quality was a not a good friend to our trees or our power lines. We do have good coordination going between the County crews that are plowing and the need to get Pepco crews into power affected neighborhoods. There are two Pepco employees assigned to the County's Emergency Preparedness Center working to make sure that plows get into areas with power outages. Pepco reported 2,000 down wire reports and 124,000 calls into their call center.
Our office has been flooded with calls and emails from people who are simply fed up; who continuously got a busy signal when they tried to report a downed line; who called to report an outage last night, and when they went online today, the Pepco map did not show the outage; who are concerned about food safety; who wonder when this will get better. I certainly share your frustration. I have already asked Pepco executives to brief our T&E Committee on February 7th at 2 PM on their response to this storm and their plans to upgrade their system. That briefing will be televised.
Maryland Public Service Commission action: I am pleased to report that every indication suggests that the Maryland Public Service Commission, the state agency that has exclusive and complete authority over Pepco, has gotten the message that there needs to be "standards" for reliability. On January 13, 2011 the Maryland PSC published a proposed rule governing Maryland utilities and the reliability of their service. This proposed rule is comprehensive and covers a wide range of issues, including how fast electrical service must be restored and even how quickly phones must be answered.
While I may differ on how this issue should be addressed, what the penalties should be for failure to meet the standards, and the need for state legislation, the MPSC appears committed to making progress... and that is a good thing. Comments on the proposal are due on February 18th and I will be working with the County Executive and my Council colleagues on our response.
Vegetation management: Pepco has been quite busy trimming and removing tress. We have heard from many of you questioning their decisions as to when, how and how much to trim or cut. We are trying to work with Pepco to assure that good quality practices are used and that consumers are consulted. You should know that utility pruning is solely aimed at line clearance and does not provide for removal of all dead limbs. Comcast does its own pruning and it can be confusing as to which lines are electric and which belong to other utilities.
County Executive's Reliability Working Group:Montgomery County has a Pepco Working Group that is made up of community leaders who were appointed to investigate the reliability of Pepco's service in Montgomery County and formulate concrete steps necessary to improve that service. The Working Group will be reporting to the County Executive in April. In order to gather first hand information, the Working Group is asking consumers to reply to a survey that you can access here.I hope you will help the Working Group with their work and take the opportunity to respond to the survey before January 31, 2011.