Regulators Promised to Review Pepco's Spending. They Approved a Rate Increase Instead.

By 2027, Pepco will have captured $231 million more in rates, taking nearly a quarter billion dollars from DC residents and businesses.

In early December, DC’s regulators were split on how to handle Pepco’s $180 million rate increase request. For 10 months since the initial filing, the three-person board of the Public Service Commission debated Pepco’s spending, dealings, and overall trustworthiness. In the end, the PSC approved Pepco’s rate hike, giving the monopoly utility $123 million more in rates and cementing five straight years of spiking rates. Commissioner Richard Beverly was the only no vote.

How did we get here? Beverely’s dissent gives us an answer: the District’s regulators are fundamentally failing to do their job, instead bending to the will of the local utility. In his dissent, Beverly raises so many red flags about this process, it looks like a carnival. To approve this rate increase, the following needed to be properly reviewed: Pepco’s spending efficiency, Pepco’s climate strategy, and the public benefit of Pepco’s last rate increase. None of this happened. When Pepco said jump, our regulators jumped. Or as Beverly put it, they approved millions of dollars simply because Pepco asked.

That was a lot of jargon, so let’s dig in. Washington DC is fresh off three years of constant rate increases. In 2021, the PSC approved a multi-year rate plan (MRP), which allowed Pepco to capture $108 million from DC residents and businesses to improve infrastructure. This had never been done in the District before, and the PSC promised to review Pepco’s spending and performance.

Cut to today: that review hasn’t been done. This means regulators don’t know whether Pepco’s initial rate increase served the public or was even necessary, but the commissioners approved more rate hikes anyway. At a time when 20% of DC residents are in utility debt, approving a rate increase without ample evidence is both baffling and dangerous.

And what about Pepco’s spending review? Typically called  a “prudence review,” regulators analyze how Pepco is spending its money on projects and whether that is efficient and necessary enough (i.e. prudent) to be factored into rate increases. If Pepco is spending haphazardly and conducting bad business on projects, regulators will order that Pepco must shoulder the burden of those costs, not ratepayers.

The prudence review was never done. This means that Pepco could be spending ratepayer money both lavishly and incompetently, and our regulators would have no official document that proves it. Instead—and this is worse—our regulators are operating on a “100% prudence” assumption, meaning Pepco says every dollar they spend is necessary. Which means when Pepco demands more money, it’s necessary.

Pepco’s spending has been so dubious, opponents have expressed concern that Pepco is manipulating its reporting. DC’s Office of the People’s Council, Apartment and Office Building  Association, We Power DC, and others have all found issue with Pepco’s spending and plans, with outside firms like Synapse Energy Economics casting major doubt on Pepco’s most recent increase application.

On top of all this, Pepco’s entire excuse for this rate increase was climate resiliency. Missing from their final plan were any comprehensive strategies to integrate solar projects or battery storage. If raising rates is supposed to accelerate our city’s clean energy independence, this plan is an abject failure.

So to surmise: in addition to getting fleeced by Pepco and failed by regulators, our utility will continue to burn toxic oil and gas.

In the end, the District’s PSC approved $123 million more for Pepco with no spending review, no public benefit review, and seemingly, no actual oversight. Cases like these beg the question: what are these regulators good for besides rubber-stamping million-dollar packages for billion-dollar corporations?