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Re-regulate D.C. power
(Published November 29, 2004)

Electric rates in the District of Columbia will soar in February, as consumers lose the protection of government regulation over what essentially remains a monopoly provider of power to city homes and businesses.

But don’t scream at the Potomac Electric Power Co. (PEPCO) when your higher bills arrive. Most of the blame for the 26.2 percent average increase in electric bills coming this winter, and a smaller average hike of 9.2 percent in next summer’s bills, rests squarely on the shoulders of the District’s elected officials.

Nine of the 23 other jurisdictions, all states, that got on the deregulation bandwagon with D.C. officials in the late 1990s have already taken steps to re-regulate their public utility systems – some, like California, after it became all too apparent that competitive market forces, rather than reducing rates, were driving prices so high that consumers couldn’t pay their bills.

Meanwhile, Mayor Anthony A. Williams and the D.C. City Council have been too preoccupied with finding ways to lavish public subsidies on Major League Baseball millionaires and wealthy developers to notice that disaster is about to strike the pocketbooks of D.C. residents.

The D.C. government’s advocate for utility service consumers, People’s Counsel Elizabeth A. Noel, has been tirelessly beating the drum, but her warnings have gone unheeded by the city council. In an ironic twist, Noel currently finds herself allied in court with PEPCO officials in an effort to preserve a power-purchasing deal that PEPCO struck when it sold most of its generating plants at the dawn of deregulation. If PEPCO loses, according to Noel, an estimated $541 million in costs will be passed along to consumers.

The District’s electricity deregulation law, passed in 1999 and implemented in phases, renders the Public Service Commission powerless to stop runaway rate increases after a price cap expires on Feb. 7, 2005. PEPCO, as the government-selected default power provider for D.C. consumers, must simply file its new rates with the commission, which is empowered only to check the calculations. Rates of any competing electricity providers – and there is only one, Washington Gas Energy Services, which serves a minuscule portion of the market – are not regulated by the commission.

PEPCO’s new rate structure, which goes into effect on Feb. 8, passes along the company’s costs of purchasing the power that it distributes to its 225,000 D.C. customers. According to Public Citizen, a national consumer advocacy group, the region’s wholesale power prices have skyrocketed 75 percent under deregulation, forcing PEPCO to buy electricity at prices far above the actual costs to produce it. (PEPCO no longer generates electricity, though the D.C. government required as part of deregulation’s approval that the company maintain ownership of its power plant in Northeast Washington.)

Deregulation was intended to lower prices for consumers, but that clearly is not happening here. Fixing the disastrous electricity deregulation experiment in the District will take time, and city leaders should squander no more before they move to re-impose regulation.

Copyright 2004, The Common Denominator