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Georgetown merchants say Pepco hasn’t paid

(Published November 5, 2001)


Staff Writer

As public hearings get underway to examine who’s to blame for the series of power line explosions and fires that have plagued Georgetown and other D.C. neighborhoods since last year, some Georgetown merchants are accusing the city and Pepco of falling down on promises to promptly reimburse them for losses suffered in the power outages.

"The mayor and Pepco guaranteed us that this would be a short, sweet deal," said Edward Marucci, general manager of Fino and two other Georgetown restaurants.

"But we haven’t gotten anything," he said. "It’s turning out that the people in the neighborhood are talking about a class-action suit."

The business owners’ complaints against Pepco and the city have escalated since nighttime infrastructure repairs recently got underway and as the District’s Public Service Commission prepared to open three days of hearings on Nov. 5 on the outages.

The hearings are intended to investigate the power breakdowns’ causes and assign responsibility for paying for upgrades to the city’s electrical power system. The hearings will not directly address the losses suffered by the merchants.

Marucci and other business owners said their losses, particularly those from a three-and-a-half-day power loss in June, have hit merchants especially hard since the Sept. 11 terrorist attacks have compounded the losses. Many businesses have lost as much as 50 percent of their business in recent weeks, he said.

"The mayor told us, ‘We’re going to take care of you, don’t worry,’ but it hasn’t happened," said Marucci, the self-described leader of a group of merchants seeking to recoup losses.

The string of mysterious explosions and fires along underground power lines, which came to public notice early last, has flipped heavy-metal manhole covers into the air, sent flames and acrid smoke pouring from manholes, and interrupted power to thousands of homes and businesses for hours and days at a time.

In the most serious outage last June, several blocks of M Street NW in Georgetown lost power for three and a half days, forcing many businesses to close for nearly a week and costing local businesses about $8 million, according to the Georgetown Business and Professional Association.

The most publicized incidents have occurred in Georgetown, but fires and explosions have also taken place in other areas of the city, with most occurring in Wards 1 and 2.

Marucci and other merchants said their efforts to recover their losses from Pepco have been met with form letters and red tape. Marucci said that Fino, located at 3033 M St. NW, has suffered losses of about $30,000 this year from power-outages.

But he said attempts to recover the losses from Pepco "are not going well."

He said his restaurants sent in claims to Pepco, backed up with sales records from the period prior to the shutdown. "They sent us back a form letter saying they want tax returns from last year and profit-and -loss statements, and so on," he said. He accused Pepco of trying to draw the process out. "The burden shouldn’t be on us," he said. "They caused the power outage."

Mohammad Esfahani, owner of Tahoga at 2815 M St. NW, said Tahoga and two other restaurants he owns lost about $80,000 in the June power blackout. "We were closed for almost a week," he said.

Esfahani said that recovery of those losses is especially important in the current weak D.C. economy. "My business is off 50 percent, and a restaurant’s profit margin is maybe 4 or 5 percent in good times," he said. "We really need that money."

Marie-Claudette Etter, owner of King Travel and Tours at 3029 M St. NW, said her business lost more than $40,000 during the June outages.

"We haven’t gotten a penny from Pepco," she said. "And honestly speaking, I don’t even bother with it anymore. I don’t have time to be running after Pepco. I have to survive. ...But if a group will get together to sue them, I’ll participate anytime."

Pepco spokesman Charles Taylor denied that Pepco is dragging its feet on processing claims from the Georgetown businesses.

"The kinds of documentation we’re asking for are the same kind of documentation an insurance company would ask for," he said. "We’re processing (claims) as expeditiously as possible."

Taylor said that as of September, Pepco had received "several hundred" claims arising from the June service breakdown and had resolved "more than half." However, he acknowledged that most of the resolved claims were for residences, not businesses.

"Business claims are more complicated," he said. He also said that the business claims were generally for larger amounts of money.

Several business owners also said the response of the Williams administration has been inadequate.

"We had a meeting with the mayor, and he talked about getting us loans through the Small Business Administration," said Esfahani. "But we don’t need loans -- we need to be repaid. There was damage here."

Fino owner George Behesh agreed that loans will not resolve the problem. "You could get an SBA loan before all these Pepco problems. A loan -- that’s not for free, you know? They (Pepco) need to cover the damages," he said.

Williams administration spokesman Chris Bender said that the city’s leverage with Pepco is limited.

"We’d like to see people reimbursed," he said. "We’d like to see Pepco make some sort of a deal with these owners ... (but) there’s only so much the mayor can do to influence a private company."

Bender also noted that the city recently made $100 million in grants and loans available to D.C. businesses with losses due to the economic downturn since the Sept. 11 terrorist attacks. But he acknowledged that that package was not intended to recoup business losses from the Pepco outages.

Public Service Commission Chairman Angel Cartagena said the hearings this week will give city officials a chance to assess Pepco’s degree of responsibility for the power outages.

"Basically, we want to ask, ‘Where does the liability lie? What do we have to do to fix the problem?’ and ‘Who’s going to pay for it?’" Cartagena said.

The commission chairman said he expects the hearings to show that overuse of the existing power grid led to the explosions and fires. "Basically, our system is overloaded," he said.

"We want to ask Pepco, ‘Did you see that overload coming? What did you do about that?" he said. "If we find that they haven’t been maintaining the lines, then their shareholders must pay. If we find that they’ve been doing a good job of maintaining their lines, then the ratepayers will have to pay."

But Herbert Harris Jr., chairman of the Consumer Utility Board, a quasi-governmental, all-volunteer body of consumers that also plans to participate in this week’s hearings, said he is skeptical of the PSC’s willingness to make Pepco pay for system upgrades.

He noted that Pepco made a substantial profit earlier this year when the utility decided to stop producing the electricity it sells to its customers, deciding instead to sell five of its seven power plants for $2.65 billion. In the future, Harris said, Pepco will purchase the electricity it distributes on the open market.

"The selling of those plants and the revenue produced puts front and center the question of who will pay for the maintenance and upgrading of the local power grid, because there’s no question that Pepco has the financial resources to do it," Harris said.

Harris said his group questions whether the PSC will assign the costs of the Georgetown project to Pepco.

"The costs of that project are estimated at $30 to 40 million," he said. "As sure as we’re sitting here, you can be sure that (Pepco) will file a request with the PSC to re-coup those expenses. The question is whether the citizens of D.C., most of whom don’t live in Georgetown, should be forced to pay for this upgrade of the system in Georgetown."

Long-term upgrades recently began in Georgetown and are expected to take about three years to complete as part of a larger streetscape program. Most merchants said they welcome a long-term solution to their electrical woes. But some merchants complained that the repairs, too, are hurting their businesses.

Fino owner Behesh pointed out that for work on the power lines to begin at 11 p.m. each weeknight, the city has begun to enforce emergency no parking regulations along M Street starting at 10:30 p.m. He said the city has started giving tickets and towing cars precisely at 10:30 p.m.

"Do they want the businesses to make money, or do they want to ticket people?" he asked. "Whose side are they on?"

A spokesman for the District’s Division of Transportation said that the ticketing is done to keep the streets clear of cars and allow the power line work to go on, not to make extra money for the city.

Still, Behesh said that he has a jazz band playing in Fino every night until after midnight. "I’m losing $1,500 in business a day," he said. "We’re paying the bands, but nobody comes in."

He threw up his hands.

"They’re killing us," he said.

Copyright 2001, The Common Denominator