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District of Columbia Public Service Commission (DCPSC) tightened performance standards for Pepco, threatening to fine the beleaguered power company unless it improves reliability within two years and matches the performance of the nation’s most dependable power providers within a decade.  Under the new performance measures, Pepco must reduce the frequency of outages by 9 percent each year, beginning in 2013. It must reduce the length of outages by 3.4 percent annually.

On Friday, Pepco applied for a 5.3 percent rate increase that would cover the costs for the performance standards, cover the cost a typical District residential customer $5 a month and provide the company with an additional $42 million a year.

The provisions do not mandate a penalty if Pepco falls short, but current law allows the commission to fine the company $10,000 per offense for failure to perform reliably. The commission and the D.C. Council have asked Congress to raise the maximum penalty to $100,000. The commission has never used the authority it has to fine Pepco because Pepco had always exceeded weaker reliability standards that have been in place. 

Pepco has about 778,000 residential and commercial customers in Washington and in Montgomery and Prince George’s counties. Neither the performance standards nor the rate increase would apply to Maryland customers, although regulators there are finalizing tougher regulations, and Pepco is expected to seek a rate hike in Maryland. Maryland legislators passed a bill in April that imposes a $25,000-a-day fine on electric utilities for each violation of reliability standards. The standards are to be enforced by July 2013.

The push for higher reliability standards comes after an investigation by The Washington Post that found Pepco ranked near the bottom nationally among electricity companies in terms of keeping the power on and bringing the lights back once the electricity goes out. The Post found that the average Pepco customer experienced 70 percent more outages than customers of other big-city utilities. And the lights stayed out, on average, more than twice as long.  The newspaper’s study concluded that Pepco’s reliability began faltering five years ago and that company officials failed to stem the decline. Reliability in Maryland was substantially
worse than in the District, where many lines are underground.

After the articles, Pepco executives acknowledged they had failed to provide reliable power and vowed to improve. They said planned upgrades would cost an average residential customer an additional $1 a month. The proposed D.C. rate increase would pay for those improvements, along with maintenance and new equipment. (Wash Post, 7/12/2011)