AGENDA ITEM #1

July 19,2012
Discussion
MEMORANDUM
July 17,2012
TO: County Council
.FROM: ~ i t h Levchenko, Senior Legislative Analyst
SUBJECT: Discussion: Pepco Response to the June 29 Storm Event
The following officials and staff are expected to participate in this meeting:
Maryland Public Service Commission
• Douglas Nazarian, Chairman
Pepco
• Tom Graham, President, Pepco Region
Montgomery County Government
• Eric Friedman, Director, Office of Consumer Protection
Maryland Legislature
• Brian Feldman, House of Delegates - District 15, Chair ofthe Montgomery County
House Delegation
• Brian Frosh, State Senator - District 16
Chris Voss, Manager of the Office of Emergency Management and Homeland Security
(OEMHS) will also attend the meeting. The Council has scheduled a separate briefing for July 24,
focusing specifically on the County Government response to the June 29 storm event.
Attachments to this memorandum include:
• June 29 Background Slides (from OEMHS) (©1-9)
• July 9 News Release from Council President Berliner (©10-12)
The Council President has invited Douglas Nazarian, Chairman of the Maryland Public Service
Commission, to provide his thoughts on the Commission's upcoming review of Pepco's response to
the June 29 storm event in particular.
1
He can also speak to the Commission's ongoing work regarding
electricity reliability issues and Pepco's rate increase review.
Pepco Region President Tom Graham will also participate in the meeting to provide Pepco's
perspective on these issues.
Eric Friedman, Director, Office of Consumer Protection, will speak to the County's position
and advocacy efforts before the Public Service Commission.
Montgomery County Delegate Brian Feldman and State Senator Brian Frosh are also expected
to participate in the meeting.
June 29 "Derecho" Storm Event
Pepco provides electricity to approximately 88 percent of Montgomery County's electricity
customers. The recent "Derecho" storm event on June 29 resulted in 238,000 (or 77 percent) of
Montgomery County's 309,583 Pepco customers losing power? Some Pepco customers lost power for
more than a week. Problems from the loss of power were exacerbated by the extreme heat experienced
by the region at that time and the fact that the "Derecho" storm hit with relatively short notice and its
impacts were widespread, well beyond just the DC region.
In advance of the Council's July 19 discussion with Mr. Nazarian and with Pepco, Chris Voss,
Manager ofOEMHS, has provided some summary slides (see ©1-9) regarding the scale and scope of the
power outages and some issues associated with Pepco's response (both in Montgomery County and in the
District of Columbia and Prince George's County). As noted on the slides, a number of critical facilities
lost power as a result of the storm, including both of the Washington Suburban Sanitary Commission's
(WSSC) water treatment plants and most nursing homes and assisted living facilities. 72 hours after the
storm, Montgomery County still had 59 critical facilities without power. Montgomery County also had
550 out of 800 traffic signals out of power soon after the storm event.
On July 9, Council President Berliner issued a statement (see ©1O-12) stating that "Pepeo's
performance - on every level was unacceptable." He notes a number of short-term issues requiring the
Public Service Commission's attention (including its review of Pepco's performance in the June 29
storm) and some longer term work that needs to be done to make Montgomery County less dependent on
"this centralized monopoly", such as micro grids and distributed generation and, ultimately, perhaps
alternatives to Pepco.
Not surprisingly, the Council received hundreds of emails and letters questioning and criticizing
different aspects ofthe restoration effort. Council President Berliner is in the process of compiling and
summarizing this correspondence and will provide this package to fellow councilmembers, the Public
1 The Maryland Public Service Commission has scheduled legislative style for September 13 and 14 to review the
major outage event reports filed by the applicable electricity distribution utilities (including Pepco). The Commission will
receive public comments at 8 evening public hearings during August (dates, times, and locations to be determined).
2 Most ofthe County's BG&E customers (13,622 out of 13,663) and about one-third of the County's First Energy
customers (9,823 out of 28,725) also lost power.
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Service Commission, and Pepco officials when completed. While this package will include many issues
and questions (many specific to the June 29 event), Council Staffhas noted a few general questions below
for discussion:
1. Preparedness:
• What, if any, impact has Pepco's increased vegetation management efforts had with regard
to minimizing isolated outages and/or outages from major storm events like the June 29
storm?
• Is Pepco's infrastructure in Montgomery Count particularly susceptible to major storm
events? Will Pepco's planned replacement of aging infrastructure over the next several
years make a significant difference in major storm events such as the June 29 storm?
• How does Pepco determine its appropriate "maintenance" level of in-house and contractual
staff versus its "peak" staffing level when supplemented by the importation of outside
assistance during major storm event responses?
• How does Pepco determine how much outside assistance to request and/or how much
assistance Pepco is eligible to receive (from its membership in the Southeastern Electric
Exchange and/or other avenues)?
• What are the limiting factors as to how many outside contractors Pepco can bring in? Is
one limiting factor the number of contractors Pepco has the capacity to coordinate and
manage? Is a cost-benefit analysis done in considering how much outside assistance to
seek?
2. AssessmentlRestoration
• What work does Pepco begin immediately, once weather conditions are safe?
• What work does Pepco wait to do until its damage assessments are completed?
• How does Pepco determine when to begin restoration work specific to the County's list of
critical facilities? Some restoration work begins immediately (e.g., water filtration plants)
while other work (related to nursing homes and assisted living facilities) seems to wait until
assessments are completed and/or other infrastructure is repaired.
• Why does Pepco's assessment of storm damage take so long (one to three days)? Would
additional staffing reduce the assessment timeframe?
3. Communication
• Why can't Pepco provide more specific estimated times of restoration (ETRs) for specific
facilities once the assessment process is completed? Do other utilities in the region or
nation provide more specific ETRs at an earlier stage in the restoration process?
Pepco Reliability and Current Rate Increase Request
The issue of Pepco's reliability was brought to the forefront two years ago during the major
regional snow event in February 2010 and by a July 2010 severe rain event, both of which resulted in
widespread and multiple day power outages in Montgomery County.
In the summer of 20 1 0, Pepco disclosed that it ranked in the bottom 25% of utilities for two
common measures of day-to-day reliability. Pepco also released a multi-year "Reliability
Enhancement Plan."
On August 12,2010, the Maryland Public Service Commission (PSC) opened an investigation
(Case #9240) into the reliability and quality of the electric distribution service of Pep co. A key
element of the investigation was an independent 3rd party (consultant) review of Pepco's system
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reliability. A Montgomery County work group also did a study of Pepco's reliability and presented
this information to the Commission.
In December 2011, the Commission fined Pepco $1.0 million as a result of its finding that
"Pepco failed to maintain its system properly over a period of years; that those failures subjected its
customers to excessively high frequencies and long durations of electric outages during storm events
and on fair-weather days, and that Pepco compounded those reliability problems through poor
customer communication." The Commission also noted that, as part of its next rate case (ongoing
now) the Commission "will disallow the increased amounts that are due to Pepco's imprudent
management in years earlier."
Montgomery County's Office of Consumer Protection (OCP) advocates for the County before
the Maryland Public Service Commission on a range of issues affecting Montgomery County residents,
including: Pepco's reliability, customer services issues, rate increases, smart meter deployment, etc.
OCP Director Eric Friedman will be available at the discussion to provide an update on the current rate
case and the County's position regarding that rate case.
This past April, the PSC approved new reliability and service quality standards (Case # RM43).
This was the culmination of an extensive process, including substantial advocacy by Montgomery
County and State officials for improved oversight of Pep co.
Pepco also has a rate increase request before the Commission (Case #9286). In June,
Montgomery County submitted a brief opposing elements of Pepco's requested rate increase related to
higher infrastructure spending as a result of past underinvestment and other issues.
Attachments
KML:f:\levchenko\dep\energy issueslpepco issues\council discussion pepco reliability 719 12.doc
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Montgomery
Council Council
From the Office of Council President Roger Berliner July 9,2012
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Contact: 240-777-7828
Montgomery County Council President
Roger Berliner's Statement on Pepco's
Performance Following June 29 Storm
ROCKVILLE, Md., July 9, 2012-Montgomery County Council President Roger
Berliner made the following statement on Pepco's performance after the June 29
storm that left many Montgomery County residents and businesses without electric
power for extended periods:
No issue is more important than reliable electric power. And the simple and sad
truth is we don't have it and we haven't had it for far too long. Enough is enough.
Our residents have had enough. And while this was a big storm, and outages are to
be expected, Pepco's performance on every level was unacceptable.
The length of the outages. The appalling communications. The computer glitches
and data discrepancies. The list can go on and on.
People are beyond angry. I have seen online petitions, Youtube songs and have
personally received hundreds of emails. My first meeting of the week was with a
group of my constituents who have had enough and are ready to organize.
One of our responsibilities as local elected officials - particularly given that
authority over Pepco lies solely with the Maryland Public Service Commission - is
to harness that anger so that it can be a constructive force. I have spent almost 40
years of my professional life at the intersection of energy, utilities, public policy and
the law, so I feel a particular responsibility in this regard, in addition to my role as
President of the Council and Chair of the committee with jurisdiction over energy
issues. And fortunately, we have a lot of well informed residents, so I have been
able to draw upon their suggestions as well.
®
2
So, here is at least a start on what needs to be attended to immediately, in the short­
term, and in the long-term.
First, we need accountability. Real accountability. No slap on the wrists. We need
our Public Service Commission to hold Pepco's feet to the fire. Assuming the
Commission concludes that Pepco's perfonnance does not measure up, and it is hard
to see how they could conclude otherwise, then the consequences must be real. They
have to be big enough to change Pepco' s behavior. I believe our Commission should
follow the lead of other states and adopt what is called "performance based
ratemaking." If the utility performs, it can make money. But if it does not perform,
there are significant penalties.
Pepco needs to make some changes immediately as well. First, it needs to hire more
line men. We need more boots on the ground. I have been told by numerous
sources that Pepco only has 120-130 line men employed fulltime by the company.
This small team of responders on staff means that Pepco is dreadfully slow to
respond to outages. But there are other negative consequences as well. Pepco
participates in what is called a "mutual assistance pact" with other utilities. The
bottom line is, if Pepco isn't able to provide much mutual assistance to others when
they are in need, then it gets less help from others when it is in need.
The other aspect of their operations that needs immediate attention is their computer
system, data retentions capacity and communications. Many customers understand
an outage after a storm of this magnitude, but Pepco's complete failure to
communicate even the most basic pieces of information only adds to the frustration.
The messages I received from constituents during the outage suggested that Pepco
kept almost no record of reports of outages. A resident could call on Monday to
report an outage and be told when calling back Tuesday that it had not yet been
reported. Common sense says that Pepco not only must retain its data - but ensure
that it is actually used to restore outages! Many customers also experienced what
Pepco acknowledged to be a "glitch" where Pepco's computer would calibrate the
remaining outages assuming that if a particular feeder was fixed, all of the homes
served by that feeder were up. Not so. In an era of apps, iPads and smart phones,
Pepco's system is appalling. As one resident said to me today: "It is as though they
are themselves 'disconnected.' "
Those are "immediate fixes." Short-term, we need to improve the resiliency of the
system. We need to look carefully at both undergrounding and redundant feeders.
This system is antiquated and not suitable for this era and certainly not suitable for
the future. We must have highly reliable service. It is not a luxury. It is an
essential, fundamental service. And while some of these fixes will cost a lot of
money, I personally believe those dollars pale in comparison to the dollars that are
lost with each successive outage. And, with climate change, we can expect more
violent storms. We need a modernized grid, a grid for the future.
®
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Long-tenn, we need to be less dependent on this centralized monopoly. We need to
be moving toward what are called "micro grids" and distributed generation such as
roof top solar. The price of roof top solar is expected to come down dramatically,
and we will need to insulate ourselves from Pepco.
And finally, I think we need to continue to explore alternatives to Pepco, such as
public power. We need to increasingly control our own destiny in this vital area.
Public power has a track record of providing more reliable service. Public power
doesn't serve shareholders it is solely responsible to its customers. I think it is time
for our state legislators to give Montgomery County the authority we need to explore
public power through enabling legislation. Any ultimate decision could be subject to
a referendum by our residents and would only be pursued if, after careful due
diligence, our County concludes it is in our best interest and financial feasible.
These are my immediate, short-tenn and long-tenn suggestions. What is clear is that
Pepco's abysmal failure to provide our County with reliable electricity has gone on
long enough.
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