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Thursday, July 12, 2012

Facts About Pepco

Once again, a major summer storm has passed through the Washington region.  And once again, thousands of Pepco customers faced multi-day outages, this time in crushing heat.  Preliminary reports indicate that during the recent storm, Pepco restored power more slowly than neighboring utilities and struggled to bring in outside workers to help.

While I believe that this performance is deplorable, I also believe that it is ultimately the state regulators who must answer for it.  The Public Services Commission is the agency that regulates Pepco and it is their job to protect us as consumers. 

So let’s take a look at some key facts about Pepco – and ask yourself, where is the PSC?




Pepco’s reliability is still below BGE.

The Maryland Public Service Commission (PSC) collects data on electric outage frequency and duration. The charts below compare Pepco and BGE on both measures. The charts illustrate data applying to all incidents (including major storms) and to “blue-sky” conditions, which do not include storms.

Generally speaking, the data indicate that Pepco and BGE had roughly equivalent reliability through 2004. Hurricane Isabel struck the area in 2003, and after that, Pepco neglected its infrastructure. Since 2008, Pepco’s outage frequency and duration have improved but the utility is not back to its prior record of reliability. Clearly, they still have a lot of work to do.

Pepco is funding shareholders instead of infrastructure.

Potomac Electric Power Company spent $120 million on its reliability enhancement program in 2011. But that is just a fraction of the money it could spend if it wants to. According to the U.S. Securities and Exchange Commission, Pepco Holdings Inc. earned $1.768 billion in after-tax net income from 2005 through 2011. Over the same period, the company paid out $1.535 billion in dividends to shareholders. It’s hard for a utility to put money into its infrastructure when 87% of its profits go out the door. Furthermore, the company collected $508 million in federal tax rebates between 2008 and 2010. Pepco can afford to put many millions more into restoring reliability, but it is seeking a rate increase instead.

Pepco exec compensation is skyrocketing despite miserable failure.

Pepco CEO Joseph M. Rigby said he would not accept a salary increase in February 2011. This gesture seemed to indicate that he recognized our outrage about his company’s failures. Wrong: Rigby accepted other non-salary compensation streams which doubled his pay. And he signed a new employment agreement in December that increased his salary, provided that any salary increases can never be revoked, gave him a “retention award” of $1.5 million (ironic since they should be firing him) and a termination benefit of more than three times his salary.

Rigby is not the only executive to cash in. Below are the compensation packages of PHI’s top five executives as reported in its SEC filing.

Top Five Executives
Total Compensation, 2010
Total Compensation, 2011
Percentage Change
Joseph M. Rigby, Chairman/President/CEO
$3,551,304
$7,161,758
102%
Anthony J. Kamerick, Senior VP/CFO
$2,269,853
$3,142,864
38%
David M. Velazquez, Executive VP
$1,198,792
$4,180,726
249%
Kirk J. Emge, Senior VP/General Counsel
$1,554,890
$1,957,135
26%
John U. Huffman, President/CEO, Pepco Energy Services
$1,194,262
$1,543,076
29%
Total
$9,769,101
$17,985,559
84%