Regulators should reduce Pepco’s latest rate request by more than $105 million, OPC filing says
BALTIMORE – Pepco should receive a limited $14.8 million rate increase, about $105 million less than its request, the Office of People’s Counsel said in a brief filed with the Public Service Commission this week. Most of the company’s request is unsupported by the evidence, premature, excessive, contrary to law, or better borne by shareholders, OPC said.
“Pepco’s customers have endured distribution rate increases nearly every year since Exelon acquired the utility in 2016,” said Maryland People’s Counsel David S. Lapp. “Pepco’s request would result in distribution rates that have more than doubled since 2016, increased by 56 percent since just 2020, and are 17 percent higher than current rates, all well over the pace of inflation. Utility profits are growing rapidly, but customers are suffering under the weight of Pepco’s rising distribution rates.”
OPC recommends substantial reductions in Pepco’s request by lowering regulator-set profit levels from what Pepco is seeking. Pepco has requested a 10.5 percent return. OPC’s filing explains that a 7.7 percent return better reflects market conditions and Pepco’s status as a low-risk regulated utility.
The Commission should allow Pepco to recover reasonable costs supported by evidence, but it should reject costs that are speculative, excessive, premature, or better borne by shareholders, OPC’s filing says. Therefore, OPC recommends numerous reductions to Pepco’s claimed costs, including those related to:
- Several major capital costs Pepco wants customers to pay, including more than $180 million requested for the White Flint Substation;
- More than $50 million in capital projects that Pepco had not shown were complete and serving customers before the Commission heard the case;
- $1.4 million in Pepco’s legal bills related to the case that Pepco is asking customers to pay for; and
- A $51.1 million increase tied to a tax-accounting change that Pepco says may be required, but that the IRS has not yet ruled on.
OPC’s brief also asks the Commission to apply the recently enacted Utility RELIEF Act limits on utility compensation for certain employees. The law restricts rate recovery of supervisor compensation, including salaries, bonuses, and certain benefits. OPC explains that Pepco’s request likely includes costs subject to the new limits and asks the Commission to identify and remove any amounts that state law now bars from recovery.
OPC’s brief updates the position it presented in expert testimony earlier this year. At that time, OPC recommended that Pepco’s distribution rates be reduced. Since then, Pepco withdrew its request to set rates using projected future costs following passage of the Utility RELIEF Act’s forecasted test year one-year moratorium and also updated its standard test-year request based on additional information and adjustments. OPC also updated its position after further review of load-growth projections, withdrawing an adjustment tied to those projections. Overall, these changes shifted OPC from its initial position to agreeing that a limited increase of $14.8 million was justified.
The Commission will rule on Pepco’s rate request late this summer after reviewing the record and the parties’ briefs.
The Maryland Office of People’s Counsel is an independent state agency that represents Maryland’s residential consumers in electric, natural gas, telecommunications, private water, and certain transportation matters before the Public Service Commission, federal regulatory agencies, and the courts.
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