March 28, 2011

Montgomery Council Vice President Berliner Testifies Before Maryland Public Service Commission in Support of Strong Standards That Would Lead to Bette

Release ID: 11-076
Release Date: 3/25/2011
Contact: Neil Greenberger 240-777-7939 or Cindy Gibson240-777-7827
From: Council Office

ROCKVILLE, Md., March 24, 2011—Montgomery County Council Vice President Roger Berliner, who has led the County’s efforts to force electric provider Pepco to deliver better and more reliable service, today in Baltimore asked the Maryland Public Service Commission to support the establishment of strong standards that would lead to better service from the utility.

“Standards, per se, are not the answer,” testified Council Vice President Berliner, who chairs the Council’s Transportation, Infrastructure, Energy and Environment Committee. “What we need—at least for Pepco—are standards that match those of the best performing utilities in the nation. That is what our residents expect and that is what our residents deserve. Nothing less. And that is what you must insist upon.”

The complete text of Council Vice President Berliner’s statement today:


Revisions to COMAR 20.50 – Service *
Supplied by Electric Companies – Proposed * Administrative Docket
Reliability and Service Quality Standards * RM 43

Prepared Statement of Council Vice President Roger Berliner

On Behalf of Montgomery County

March 24, 2011

On behalf of Montgomery County’s Executive, our County Council and our almost one million residents, we commend you for initiating this proceeding.

As the Chairman has said on numerous occasions, it is harder to judge a utility’s performance if you don’t have standards against which to measure them by.

That is why so many states have adopted reliability standards and why the Governor is supporting, and the House of Delegates is poised today to pass, legislation requiring such standards.

Our County is the poster child for why we need both stringent standards and meaningful financial penalties if those standards are not met. According to nationally respected surveys, the performance of our utility, Pepco, on normal, sunny days, has been in the lowest quartile in the nation for the past five years.

And while there has been a lot of focus on storms, and the length of time our citizens are without power in the aftermath of storms, the far more critical measure in fact is how the system operates during normal weather conditions. This is why the County strongly believes there must be two distinct standards: one for reliability during normal weather conditions and one for how a utility responds to major storm events. Because it stands to reason if a system fails to deliver reliable power during normal conditions, it will fall apart under stress.

And for five long years, our citizens have endured a system that fails to provide remotely reliable service during normal conditions and completely falls apart during a storm. My constituents have characterized their service as “third world” and it is probably a toss up as to whether they receive more reliable service than customers of the other Pepco – the Pakistan Electric Power Company.

The cost of this failure – measured by almost any standard -- has been extraordinary. You have heard all of the stories – and they are true. To me, this sorry state of affairs is best captured by the fact that during this extraordinarily difficult economic time, people are dipping into their life savings to spend tens of thousands of dollars on back up generators so that their families are safe and their power stays on. This should not be happening, commissioners, and I know that you know that too.

As you and your staff know, our County has filed extensive written comments in this proceeding. Today, I would like to highlight two absolutely essential points.

The first is this: standards, per se, are not the answer. What we need – at least for Pepco – are standards that match those of the best performing utilities in the nation. That is what our residents expect and that is what our residents deserve. Nothing less. And that is what you must insist upon.

And you will not be alone in doing so. That is precisely the approach that the Public Service Commission of the District of Columbia has adopted in just the last two weeks. According to that Commission, their proposed new rules would require “Pepco to improve its reliability to match those of the nation’s best performing utilities.”

The people of Montgomery County are no less worthy of top performing service than the people of the District of Columbia and we urge you to adopt an equally rigorous stance.

I have heard and read Pepco’s concerns with respect to costs, and I have heard the Chairman express somewhat similar concerns. I understand that concern, but I would urge you to not fall into the mindset that the Electric Power Research Institute (EPRI) warned about over a decade ago. In describing investments in reliability, EPRI observed that these investments have traditionally been “cost-based, selecting the least cost way of achieving the criteria, rather than value-based, selecting the way that maximizes customer value.”

It is time to focus on customer values. And our customers, our constituents, rightfully value a very high level of service reliability.

And while there has been a lot of focus on how much it may cost to bring Pepco out of its third world status and into the realm of top performing utilities, very little has been said about the economic costs of outages. They are huge.

Less than two years ago, the much respected people at the Lawrence Berkeley National Laboratory published a study entitled “Estimated Value of Service Reliability for Electric Utility Customers in the United States.” That study concluded that the average cost to a medium to large financial institution or a real estate organization of a single, eight-hour outage was approximately $150,000. That’s $150,000 for one eight-hour outage. Do you know how many outages our residents have endured over the past five years of eight hours or more? I don’t, but I am willing to bet it is more than twenty, which would mean that the cost to this one type of business over that time exceeded $3 million. Then multiply that number times the cost to all the other businesses and residents. It is staggering. It is crippling. And it is unplugging the economic engine of our state.

And finally on the issue of costs, I would urge you to not overlook your own capacity to allocate those costs fairly between ratepayers and shareholders. I think it is fair to say that in the case of Pepco, their shareholders have fared better than their customers. So, when you decide whether and how Pepco should recover its costs, you are within your rights to take into account this fact coupled with the enormous costs incurred by its ratepayers.

Our bottom line to you on standards – at least with respect to Pepco – is that you require nothing less than top performance.

Our second issue is to ask you to make sure that there is meaningful accountability. And by meaningful, we mean that Pepco should know going in that if they fail to meet the standards met by other utilities in the country, they will face significant financial penalties. We do not believe civil penalties are sufficient in that regard. Like our representatives of senior citizens, AARP, we believe you should adopt the Massachusetts model, and put at risk up to 2.5% of their authorized return. That will get a utilities attention. That will get the attention of the Board of Directors. That will get action. And that is what we need. We need more than just a PR blitz. We need standards equivalent to those met by top performing utilities backed by substantial financial penalties – penalties comparable to the cost imposed on customers for poor performance.

Commissioners, you have the responsibility, authority, and, we submit, the obligation to fix this mess and ensure our citizens reliable electric service. And we are confident you will do so.

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