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Pepco, intervenors dispute cause of large new‑business variances as reconciliation proceeds
Summary
Pepco attributed most of a sharp rise in 2023 new‑business capital spending to inflation, higher contractor costs, changing customer demand and project timing, while intervenors sought project‑level budgets and clearer CIAC/billing records to verify plant closings used in reconciliation.
Pepco and intervenors clashed at the Public Service Commission over large variances between the utility’s projected and actual 2023 capital expenditures for new‑business work and how prior‑period costs are shown as plant closings that affect reconciliation.
Pepco witness Jacqueline Cantler and Mr. Robert Lemming addressed the company’s approach for new‑business forecasting and the reconciliation of plant additions. Cantler said Pepco uses several inputs—historical spending, outage and engineering analysis, inspections and customer requests—to set new‑business forecasts and that the company applies its cost‑control and procurement processes when projects are authorized. She told commissioners that much of the 2023 variance is due to higher contracting and material costs (inflation and supply constraints), changing project complexity, and timing (projects shifting among years). Cantler also noted that some new‑business costs are offset by customer contributions (contributions in aid of construction, CIAC) per the tariff.
Intervenors pressed for project‑level detail and traceability. Aoba’s counsel and others asked why large 2023 CapEx numbers do not always match plant closings in the same year; Lemming explained that expenditures and plant closings differ because plant closings represent cumulative project spend moved into plant‑in‑service when a project is completed, while 2023 capital expenditures are amounts spent that year even if projects remain in progress.
Specific points of contention included: - Lack of project‑level budgets in rebuttal exhibits for staff/parties to verify how much of the 2023 variances relate to projects that were completed and placed into service during rate year 3 (plant closings) versus projects still in flight. - Allocation of indirect/overhead charges to ITNs; parties requested more granular backup showing how indirects were assigned to new‑business ITNs (residential/commercial) and why indirect allocations rose markedly in 2023. - How reimbursable billings (CIAC or third‑party chargebacks) were posted in accounting and whether accruals for billable work were labeled and trued up to prevent double counting in rate recovery.
Cantler and Lemming pointed parties to company discovery responses, project concurrence committee (PCC) decks and annual informational filings as the places where supporting detail can be found; both witnesses said much of the underlying ledger and project work papers are voluminous and were produced in discovery for parties to examine.
Why it matters: Pepco is asking the Commission to reconcile rate revenues with 2023 actuals under a multi‑year plan. The prudency determination depends on whether projects were justified when launched, whether cheaper alternatives existed and whether project accounting and allocations are accurate and transparent. Parties will use project‑level backup, PCC documentation and ledger work papers to test the company’s claims.
What’s next: The hearing record will include discovery exhibits, the company’s reconciliation schedules (plant closings and capital expenditures), and witness testimony. Parties will likely file follow‑up discovery to reconcile indirect allocations, CIAC postings and to request feeder‑ and project‑level engineering and cost detail for the largest variances.
