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Tuesday, July 17, 2012

Daily Journal 07-16-12: White Flint, Pepco, Municipal Taxes)

Today started in White Flint at the location of the future “Pike & Rose” development that Federal Realty has initiated. This development is on that big lot where the Toys R Us was for many years near Montrose Road and 355.

Federal Realty is going to turn those acres of asphalt into a spectacular community of residences, retail and commercial space. Today was the groundbreaking, attended not only by yours truly but the Governor and Lieutenant Governor, County Executive, Council President, and others.

I am passionate about moving ahead on the redevelopment of Rockville Pike, which will become the urban spine of our economic future. With all the great projects coming online up and down The 355, that area is going to become one of the most interesting and enjoyable places to live in the country.

Then back to the office to continue working on the #FixPepco campaign, which is taking off--- we have over 2,000 petition signers now. I think its working to put the focus where it needs to be, on the regulators who are not doing their job. Our Maryland Public Services Commission is tasked with ensuring that consumers are protected from the monopoly utilities. They haven’t gotten the job done and the Governor needs to start over at that failed regulatory agency. Please sign!

Next up, a Gov Ops committee meeting on an issue that I have been learning more and more about in my time at the Council – the issue of municipal tax duplication. This is the problem where residents who live in our county’s municipalities (about 17% of county residents living in cities such as Rockville, Gaithersburg, and Takoma Park) pay property tax for a county service that the city has decided to provide. The county is required by the state to refund that double property tax. For many years, however, the county did more than just refund the double property tax; we provided the municipalities with additional funds. That fact is not well understood; to the contrary, some residents of these municipalities are under the erroneous impression that they pay higher taxes because the county does not refund their double taxes.

We have a lot of work to do to get closer to a resolution and to ensure a process that works for both the county and the municipalities in the future. The committee is going to keep focusing on this issue and take some specific steps later in the year. You can read more about the issue in this council staff memo (PDF).

Finally, a quick interview with ABC News about #FixPepco, which led the 5:30pm TV news!, and now I am preparing to visit with the Western Montgomery Citizens Advisory Board at 7pm. I’m sure we’ll be talking Pepco…

Friday, July 13, 2012

How to fix Pepco

It has been about eight years now since the crisis at Pepco came to light, and as far as Montgomery County residents are concerned, nothing has changed.

The 2012 "derecho" storm is the latest disaster, but the problem has been growing for years. In 2011, there were hundreds of thousands of power outages after an ice storm. There were severe outages from storms in 2010, and 2008, and after Hurricane Isabel in 2003.

In Maryland, utility companies are granted a monopoly in exchange for submitting to direct supervision by one agency, the “PSC” (Public Service Commission). The PSC is an independent agency, but the Governor appoints its members and has the power to replace them.

That's why I started a petition on to Gov. O'Malley and the Maryland legislature, which says:

"The state regulators at the PSC are failing. The chairman of the PSC, Douglas Nazarian, has admitted that they were slow to recognize problems at Pepco. But he is still in charge of the PSC and so are the rest of the slow responders. Why?" 

"The PSC is an independent agency, but the Governor appoints its members and has the power to replace them." 

As a county government, we have no direct power over Pepco. I can talk until I turn blue about what I think Pepco needs to do better, the fact is that only the PSC can change Pepco, and only the Governor can change the PSC.

Thank you for joining my call to bring accountability to Pepco and Maryland's utility companies. I welcome your comments below.

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
Anthony J. Kamerick, Senior VP/CFO
David M. Velazquez, Executive VP
Kirk J. Emge, Senior VP/General Counsel
John U. Huffman, President/CEO, Pepco Energy Services

Wednesday, July 11, 2012

Daily Journal 07/09/12: Wheaton, Digital Government, Pepco

On Monday, I met Larry Couch, chair of the Justice and Advocacy Council (JAC) of Montgomery County. The JAC is a Catholic organization that advocates for our low-income. We talked about a variety of issues, including the Working Families Income Supplement, a tax benefit that helps our low-income families by supplementing their wages. The JAC fought to create the original State Earned Income Tax Credit, which the county matches with its own local tax credit.  We talked about working together to get the county to a 1-1 match of dollars provided by the state (today we add about 75% of the amount). 

Next, Councilmember Navarro and I convened a discussion about Wheaton public safety issues with Chief Manger, and Mid-County Regional Services Center Director, Ana Lopez van Balen, and their teams. We reviewed progress from the Wheaton Public Safety Audit of 2004 and parameters for a new public safety initiative there. Our goal is to integrate these elements of the Wheaton Public Safety Task Force into the larger effort of Wheaton Revitalization. More soon.

In the afternoon, I attended a GO Committee on IT issues. As the Council lead for Digital Government, I have been working to accelerate the county’s digital strategy. I was very happy to review the substantial agenda that has been put forward by our agencies on open data, digital citizenship, data visualization, social media, mobile platforms, and other areas– and not only for county government but also MCPS, HOC, MNCPPC, and Montgomery College. These groups will be working together on a range of initiatives in these areas and residents will begin to see the results soon.

In the evening, I met with the Silver Spring Citizens Advisory Board. We talked about Pepco and who has accountability for ensuring that we have decent electric power here in the County. The point I stressed to the group is that I believe its time for the Governor to give us a fresh start at the PSC.  The PSC is the only entity in the state that has direct authority over Pepco.  They are an independent state agency and their members are appointed by the Governor. The Governor needs to appoint new members because these members are not getting the job done.