Pepco Holdings’ rate cases include grid resiliency charges

Pepco Holdings (NYSE:POM) (PHI) has six pending rate cases across its jurisdictions that request an annual rate increase of $260m, Pepco President, Chairman and CEO Joseph Rigby said on May 3.

PHI filed three additional distribution base rate cases in 1Q13, Rigby said during the company’s 1Q13 earnings conference call.

On March 29, for instance, Delmarva Power and Light filed an electric distribution base rate case in Maryland seeking approval of an annual rate increase of $23m based on a requested return on equity of 10.25%.

“As in [Potomac Electric Power Company’s (Pepco)] Maryland case, we have requested approval of a three-year grid resiliency charge to provide for the timely recovery of proposed accelerated reliability spending to address the recommendation in the Maryland governor’s grid resiliency task force report issued last fall,” Rigby said. The grid resiliency charges and the accelerated spending activity, including undergrounding activity, are not costs that the company would incur to meet current reliability standards and go over and above what is needed. The company would not move forward with those activities at this time if it does not get recovery of that through the grid resiliency charge.

Rigby said the proposed incremental spending that would be recovered by the charge is $4m of capital expenditures for feeder upgrades and $6m for accelerated tree trimming.

Intervener testimony is due June 10, with hearings before a hearing examiner to begin on July 15. Rigby also said that a decision is expected in 4Q13.

On March 22, Delmarva Power filed an electric distribution base rate case in Delaware seeking approval of an annual rate increase of $42m based on a requested return on equity of 10.25%. As permitted by state law, an interim rate increase of $2.5m will be implemented on June 1, subject to refund.

A decision is expected during 4Q13, he added.

On March 8, Pepco filed an electric distribution base rate case in the District of Columbia seeking approval of an annual rate increase of $52m based on a requested return on equity of 10.25%. A decision in that case is also expected in 4Q13, Rigby added.

Evidentiary hearings for Pepco’s Maryland electric distribution base rate case filed in November 2012 were held in April, with additional hearings scheduled for May 15 and 16. Initial briefs are due on June 3, and reply briefs are due on June 14.

“The expected timing of the decision has been moved from June 28 to July 12 due to the additional evidentiary hearings to be held later this month,” he said.

Hearings for Delmarva Power’s natural gas distribution base rate case will be held in August with a decision expected in the case by the end of 3Q13.

Rigby also said that hearings are scheduled for August with a decision expected in 4Q13 in the Atlantic City Electric distribution base rate case in New Jersey.

“In total, the six pending rate cases request an annual rate increase of $260m,” he said. “In an effort to reduce regulatory lag, each of the cases includes a request for forward-looking reliability plan additions through December.”

Reducing regulatory lag is a significant focus, he said, adding that the company’s preference continues to be to achieve this by adopting mechanisms that mitigate the need for frequent rate case filings, which it views as costly and inefficient.

FERC matters

Rigby also said that on April 3, the company filed a response to the FERC Section 206 complaint filed by state regulators and public advocates in its jurisdictions.

“The complainants challenge the base return on equity and the application of the formula rate process, each associated with the transmission service provided by Pepco Holdings utilities,” Rigby said. “Our response requests that FERC dismiss the complaint on the grounds that it failed to meet the required burden to demonstrate that the existing rates and protocols are unjust and unreasonable.”

Also, on April 1, Pepco filed a rehearing request of the FERC order issued on Feb. 28 in connection with the termination of the Mid-Atlantic Power Pathway project. The request challenges the reduction of the return on equity applicable to the abandon cost, as well as the denial of 50% of the cost incurred before Nov. 1, 2008, which are about $2m, he said.

“For the remainder of 2013, we will continue our progress on executing our strategic plan by focusing on improving system reliability and the customer experience, continued effective execution of our $1.2bn construction budget and achieving timely and reasonable investment recovery through constructive regulatory outcomes will be critical,” Rigby said. “At the same time, we will work to achieve meaningful cost efficiencies to keep operating and maintenance spending in check.”

Earnings report

Among other things, Rigby said that for the three months ended March 31, the GAAP loss from continuing operations was $430m, compared to earnings of $63m for the same period in 2012.

Pepco reported on May 3 adjusted net income from continuing operations (Non-GAAP) of $57m for the three months ended March 31, compared to $50m for the same period in 2012.

About Corina Rivera-Linares 2892 Articles
Corina Rivera-Linares, chief editor for TransmissionHub, has covered the U.S. power industry for the past 15 years. Before joining TransmissionHub, Corina covered renewable energy and environmental issues, as well as transmission, generation, regulation, legislation and ISO/RTO matters at SNL Financial. She has also covered such topics as health, politics, and education for weekly newspapers and national magazines. She can be reached at clinares@endeavorb2b.com.