Saturday, March 05, 2011

Council Update from Marc Elrich

Marc Elrich updates constituents on Pepco and his plan for a countywide rapid transit system.

PEPCO - Monopoly Power, Monopoly Problems

Montgomery County residents continue to suffer from the worst-case scenario of what happens when people are subject to monopoly power. PEPCO has, and has had for some years, the least reliable power service in the region. Last summer, I attended the Public Service Commission hearings on PEPCO's failures during the 2010 blizzards and, although PEPCO was as evasive as possible, a few disturbing facts were extracted from them.
When asked what kind of service PEPCO was striving to provide, they answered that their goal was to be the best. When the commissioners asked where their service performance ranked, it took a long time to get to the bottom of it -- literally, the bottom. It took a couple of questions to discern that they weren't in the first quartile. Then it was established that they weren't in the second quartile either. So they weren't in the top half of utilities. After a few more questions we found out that PEPCO was not in the third quartile. It is in the fourth quartile and then, after this excruciating delay, we found out that they were the worst. For one year? No. For how long? After shuffling some papers they were able to establish that they've been there for four years (that they had paper work on). So striving for the best, but the worst for at least four years.
Two points are worth clarifying. First, being the worst wasn't the result of a couple of storms, it was because of their day-in/day-out performance - "blue sky" performance as it's called. We then found out that despite striving to be the best, they had reduced expenditures over the previous year. So their effort to be the best somehow translated into reducing their maintenance expenditures.
But PEPCO isn't all bad. In fact, as the Washington Post reported on Feb. 12, PEPCO paid investors $240 million last year, saw their stock price increase by 12%, and paid their CEO $3.1 million. And the Post also recently reported that PEPCO underspent its tree- trimming budget in the District by hundreds of thousands of dollars in some recent years, even though they claim that trees are the biggest problem they face. Remember, the Public Service Commission approves PEPCO rates based on PEPCO’s projected expenses, so PEPCO has apparently been able to justify rates based on expenses they never undertook. This works for them.
It doesn't work for us. Monopolies always represent a threat because of the potential that they will abuse their position. Today, PEPCO controls the power lines, not the power generation, and what we pay them for is the use of their lines. They are a "natural" monopoly. No one else can realistically come in and install competing poles and lines because the cost would be daunting and the public would never stand for even more poles and lines in our rights of way. So having one company control the lines makes sense, a lot more sense than having only one company provide power.
But if we're going to have a monopoly over an essential public service, its performance and its allocation of income for reasonable profits must be carefully scrutinized and tightly regulated, which is why we have a Public Service Commission. Unfortunately, just having a regulatory body is not enough – to be effective, it must be actively engaged in regulation. As bad as PEPCO's answers were to the questions I mentioned above, it was distressing that the Public Service commissioners had to ask PEPCO about their performance. I expected the commission to know that answer, to have standards and to hold utilities to those standards. I was mistaken.
So where do we stand now? There's a lot of discussion about new regulations that will establish performance standards and tie future rate increases to achievement of those standards. That's a good thing, if they get implemented with teeth. There's been jaw-boning - everyone from the Governor down has taken note of PEPCO's profits and suggested that the needed investment in infrastructure should come from shareholder dividends, not customers' pockets. But this may be easier said than done. There's no indication that PEPCO believes that their shareholders should take less so more can be reinvested in improving the neglected infrastructure. After all, existing regulations entitle the utilities to a return on investment and a profit on that investment as well. All of this leads to ever increasing rates.
This has me concerned because after years of failing to invest in their infrastructure and putting shareholders above customers, their "punishment" is that they'll be forced to invest now and be paid well for doing it. PEPCO is already eligible for a rate hike to compensate them for the power they COULDN’T sell during the power outages. Yes, the law allows them to get higher rates for reduced energy consumption. I'm still grappling with what the implications might be if, over time, customers buy more efficient appliances and use less electricity. Will PEPCO get rate hikes to compensate them for consumer investment in energy efficient devices?
So we may be facing higher rates in the future, and hopefully improved service. I began investigating if we might have any other choices for electric power delivery and I rediscovered public power utilities. A public power utility is as its name suggests – a utility owned by the public, by the government. The list below shows the top twenty in size; the top thirteen all have more customers than PEPCO has in Montgomery County (~306,000).
Municipality State Number of customers
1 Los Angeles Department of Water & Power CA 1,461,521
2 Puerto Rico Electric Power Authority PR 1,452,946
3 Long Island Power Authority NY 1,111,903
4 Salt River Project AZ 939,579
5 CPS Energy (San Antonio) TX 689,339
6 Sacramento Municipal Utility District CA 590,677
7 JEA (Jacksonville) FL 414,769
8 Memphis Light, Gas and Water Division TN 410,518
9 Austin Energy TX 400,005
10 Seattle City Light WA 387,714
11 Nashville Electric Service TN 357,020
12 Omaha Public Power District NE 339,657
13 Public Utility Dist No. 1, Snohomish County WA 317,612
14 Colorado Springs Utilities CO 208,257
15 Knoxville Utilities Board TN 196,302
16 Orlando Utilities Commission FL 188,569
17 Clark Public Utilities WA 186,021
18 Tacoma Public Utilities WA 166,311
19 Santee Cooper(S Carolina Publ Serv Auth) SC 162,690
20 EPB - Chattanooga Electric Power Board TN 158,845
A spokesperson from the American Public Power Association (APPA) came to our recent Council hearing on PEPCO and gave a brief introduction to public power. I was intrigued by the concept and by her assertion that public power generally costs less. Public power is controlled by and answerable to the public and it has no shareholders who expect $240 million off of the operating income every year - money that could be used to invest in upgrades and, when possible, lower rates.
One frequent comment I've heard is that buying PEPCO to convert it to a public power utility would be expensive and time-consuming. The time-consuming part doesn't bother me, if it's worthwhile. One just has to be patient and work through to the end. Expense is probably the make or break issue. The switch to public power has made sense for a number of other municipalities across the country. According to the American Public Power Association, 16 have made the switch from investor-owned to public power utility. The largest of those was Long Island Power Authority which has more than 3 times as many customers as Pepco has in Montgomery County. I believe we owe it to our community to further explore this option. That is why I joined 7 of my colleagues in signing a memo to County Attorney Marc Hansen asking for clarification on certain legal issues that need to be considered in evaluating the benefits to becoming a public power utility.
Switching from PEPCO to public power is no doubt complicated and not something to be undertaken lightly. There are many questions that I don't know the answers to, but because of the current situation I am interested in exploring alternatives. If public power advocates are right, and the transition would result in more reliability, greater accountability, and maybe even lower costs, there is no harm in exploring this option. Public power exists in blue states and red states. It has nothing to do with politics, and everything to do with service and price. I think all of us can agree that service and price matter to us as well. If we can do better for ourselves, we should. And if we can't, then we need to make sure that #1 job of the Public Service Commission is to ensure that PEPCO's #1 priority is its customers.
If you’re interested in more information about public power utilities, here are some links to relevant pages on the website of the American Public Power Association regarding the benefits of public power and information for communities considering the public power option.
If you have thoughts, insights, or information on PEPCO or public power, I'm interested in learning more.
Marc Elrich
Councilmember At-Large

Rapid Transit Update
Brookings Institute Panel
I have been invited to participate in a panel discussion at the Brookings Institution regarding rapid transit this coming Tuesday morning, March 8, 2011 at 9:30 am. Bus Rapid Transit (BRT) has positioned itself as one of the most important additions to sustainable transport in the world, significantly improving urban mobility and lowering the cost of public transit. During the last ten years, 97 cities have implemented BRT corridors, many of them located in Latin America. In the region, BRT has become easy to implement, safe, environmentally friendly and efficient. Often regarded as a second-best option vis-à-vis rail alternatives, the successful implementation of BRT requires concerted efforts to enhance its image, funding and planning. Valuable lessons can be extracted from Latin America’s experience with bus rapid transit; lessons that can serve as a point of departure to discuss the applicability of BRT in the United States. I am honored by their invitation to participate on the panel.
The Latin American Initiative at Brookings will host the discussion of lessons learned from Latin America and the applicability of BRT in the United States. In addition to myself, panelists include Darío Hidalgo, director of research and practice at EMBARQ, WRI Center for Sustainable Transport; Sam Zimmerman, urban transport adviser at the World Bank; and Robert Puentes, senior fellow in the Metropolitan Policy Program at Brookings. Mauricio Cárdenas, senior fellow and director of the Latin America Initiative, will moderate the discussion. After the program, panelists will take audience questions.
If you are interested in attending the event, please RSVP to the staff at Brookings at 202.797.6105 or click here. I hope to see you there.
Latin America’s Bus Rapid Transit Boom–Lessons for U.S. Public Transportation
Tuesday, March 8, 2011, 9:30 am — 11:00 am
The Brookings Institution, Falk Auditorium, 1775 Massachusetts Ave, NW, Washington, DC
Transit Task Force Creation
On February 22, 2011 Montgomery County launched a Transit Task Force, whose mission will be to help make a comprehensive rapid transit system a reality in Montgomery County. I am honored to serve on this Task Force, which was appointed by County Executive Isiah Leggett and will advocate for developing and implementing a system that is consistent with state transportation objectives and complements regional transit operations. Council Vice President Roger Berliner will also serve on the task force, which will be chaired by Mark Winston, a lawyer in private practice who has served on both the Maryland State Transportation Commission and State Roads Commission. Please see the complete press release for a list of Task Force members.

County Tips
Reporting Emergency Power Outages
From severe summer storms to ice storms and even "thundersnow," this past year has been a challenging one for our residents and the hard-working crew members from transportation, maintenance and utilities departments. If you lose power at your own home, it is very important that you call your utility provider right away to make sure they are aware of your service outage. But of course most of us have not memorized our customer service numbers, and if your land line at home is dependent on electricity, you will have to make that call from your cell. Make the process run smoothly by saving the emergency outage numbers for your utility company in your cell phone's address book, along with your account number. That way no matter where you are and what you're doing, you can get the service disruption reported without any delay. Numbers for Montgomery County's three electricity providers are listed below.
Allegheny Power 1-800-255-3443 (Allegheny)
Baltimore Gas and Electric 1-800-685-0123
PEPCO 1-877-737-2662

Let me be your Advocate
Often it may feel that our county government is a large, bureaucratic entity that makes decisions that impact our lives without residents’ involvement. But you are the government, and I am here to be your advocate. County government affects our lives in many ways, from the roads and buses we use each day to our children’s schools, our local parks, and our taxes. If you have an issue, concern or suggestion, please take a moment to let me know, and I will do my best to serve you. My staff and I look forward to hearing from you.
Dale Tibbitts is my Chief of Staff and handles the budget, rapid transit and environmental issues, as well as happenings Up-County; Tiffany Ward focuses on Health and Human Services and Education Committee issues, as well as Mid-County; Mara Parker follows the Public Safety Committee and the East County and also handles my schedule; Debbie Spielberg focuses on transportation and landlord/tenant issues and Western Montgomery County; Claire Iseli handles planning, land use, environmental and zoning issues. Please don’t hesitate to contact our offices at 240.777.7966 or via email at
Thank you!
Marc Elrich
Councilmember At-Large