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Bill calls for study of whether Pepco abandoned Md. franchise

Having been dragged before state and municipal lawmakers in recent weeks to testify about a lack of reliability in its electricity delivery, Pepco now faces losing its right to operate in Maryland.

A group of state lawmakers has introduced a bill to look at whether the power outage problem that has plagued Pepco and its customers since last year is tantamount to the company abandoning its franchise to operate in Maryland. The house bill dovetails with efforts by the Montgomery County Council to wrest control of electric service from Pepco. The council is considering moving to a public power arrangement where electricity is delivered by a utility set up and overseen by local government.

Del. Bill Frick, a Montgomery County Democrat, and 13 other lawmakers introduced HB 1110 on Friday that would require state regulators to hold hearings on Pepco and its right to operate in Maryland. The bill calls for hearings to begin in September, with the Maryland Public Service Commission making a decision by Dec. 1 on whether the power company has “abandoned or constructively abandoned its franchise as an electric company.”

Frick said having the PSC review the matter was proper procedure, but he was confident the agency could arrive at only one conclusion.

“I view this as a closed question that Pepco has abandoned its franchise,” Frick said. “Pepco has forfeited its right to this monopoly.”

If Pepco is found to have abandoned its franchise, that franchise could be transferred to another operator.

“It’s the only monopoly that’s able to fail this big, and for this long,” Frick said. “The only reason Pepco even has customers is because they don’t have any competition.”

Last Tuesday, Pepco executives, along with those from Baltimore Gas & Electric Co. and Allegheny Power were in Annapolis to testify before the House Economic Matters Committee. Committee members grilled Pepco officials for the power outages and for lack of progress in addressing the problem.

Pepco has been called to task for how it handled summer and winter storms in 2010 that left tens of thousands of customers without power, often for multiple days. Joseph M. Rigby, president and CEO of Pepco Holdings Inc., Pepco’s parent company, has testified before the PSC already this year, as well as before the Montgomery County Council, that the company is undertaking a $574 million, multi-year “Six-Point Reliability Enhancement Plan” that will upgrade infrastructure and increase spending on tree-trimming to prevent downed power lines from fallen trees and branches.

“While no utility can guarantee there won’t be outages when ice, wind and trees rip down power lines, we will not accept gaps in our own operations that add to customer frustration and inconvenience,” Rigby wrote in an open letter to customers.

Rigby said last week he would not take nearly $900,000 in bonuses because of Pepco’s performance.

Lawmakers representing one of Pepco’s most crucial service areas have also taken the first steps in a plan that would strip Pepco of its monopoly. On Monday, eight of the nine Montgomery County Council members signed off on a memo tasking the county attorney to look at the legality and procedure for implementing a public power model in the county.

“Our residents have endured the total failure of both Pepco and the regulatory system that is supposed to protect us for far too long,” wrote Montgomery County Council Vice President Roger Berliner in the memo. “The cost to our county of this twin failure has yet to be fully quantified — but its cost to our public health, safety, economy, competitiveness and general well being is almost incalculable.”

A Pepco spokeswoman did not respond to a request for comment.

The public power model is a throwback to the days before deregulation where power service would be handled by a department of government just like water or solid waste service. In Maryland, five communities — Easton, Berlin, Thurmont, Williamsport and Hagerstown — still own and operate their own power companies, just as they have in the decades preceding deregulation.

Municipal power utilities in Maryland own their wires and infrastructures and are regulated by the Public Service Commission. They operate as nonprofits as opposed to for-profit investor-owned utilities like Pepco.

Shares of Pepco closed at $18.72, up 1 cent, in New York Stock Exchange trading on Tuesday.