DC Paid Pepco $94 million for investments never made

When reading direct testimony to the PSC, We Power DC came across an eye-popping number: residents paid nearly $100 million in rates for investments that never materialized. The number comes from Courtney Lane, a senior principal at Synapse Energy Economics, a firm that analyzes energy and climate challenges, including the complicated spending from utilities like Pepco.

Lane was speaking on financial forecasting methods Pepco used for their rate case where they project how much money they’ll need for capital investment. This number informs what realistic rates should be. Lane found Pepco used a “company-specific forecast,” which led to inaccurate results on the price of real materials and services (Courtney Lane Testimony, 13).

The result? Pepco spent 29 percent less ($53.0 million) than its budget in 2021 and 13 percent less ($41.3 million) in 2022. That’s over $94 million in rates charged that were not needed for Pepco’s stated projects. DC residents paid it anyway. This is blatant expropriation.

The logical thing to ask is if rates were adjusted once “projected costs” became real costs. The answer is of course not. Pepco kept the higher rates in place and the PSC didn’t bother adjusting them.

And while Lane offered a solution of an escalation factor approach, which protects both ratepayers and utilities, the PSC did not take this up. Instead, Chairman Thompson and Commissioner Trabue opted to keep in place the system that overcharges residents, allows Pepco to spend without guardrails, and let a private company keep in place a mandatory ROE (9.5%) that rivals most markets.

Antics like these make the case clear why we need to cut out shareholder greed from our utility system and invest in a publicly owned power system.