Pepco seeks $30.6 million in Year‑3 reconciliation as commissioners press for more detail

Pepco asked the Public Service Commission to approve a $30.6 million revenue reconciliation for Rate Year 3 of its multiyear plan, but commissioners and intervenors used hearings this week to challenge the level of supporting detail in the company’s filing.

The reconciliation request appears in Pepco’s filing and supporting schedules and was restated several times during cross‑examination of company witnesses. Commissioners and counsel asked for more granular documentation tying the company’s actual spending to the FERC account detail the company provided in its original rate application and rebuttal exhibits.

Why it matters: the reconciliation will adjust customer rates to reflect the difference between the revenue requirement the commission approved and Pepco’s actual costs in the rate year; the company’s $30.6 million request is large enough that commissioners asked for clear line‑item evidence before they rule. Several commissioners said they want clearer links between budgeted FERC accounts, where dollars were booked, and why deviations occurred.

What Pepco presented: Company witnesses explained that the reconciliation total is driven by a mix of higher operations and maintenance (O&M) spending, rate‑base changes and tax/revenue variances. In testimony and on the stand Pepco attributed a portion of the O&M variance to higher pension costs, a rise in minor‑storm spending and other items the company described as largely out of its control. Pepco also told the commission it had removed certain vendor costs or taken other adjustments before calculating the reconciliation number.

What commissioners and intervenors pressed for: Multiple commissioners and staff asked the company to provide project‑level budgets, and an itemized “matrix” that tracks movements of costs from one FERC account to another (for example, where expenses initially budgeted to FERC account 923 were charged to account 588). Commissioners said the single‑line variance statements in the current schedules are not adequate for a robust prudence review. Staff and intervenors said they used discovery but still lacked a complete accounting that links budget entries, accounting charges and the company’s explanation for significant variances.

Pension and storm drivers: Company witnesses said pension expense volatility — and the fact that Pepco’s filings are not smoothed in the same way as other utilities’ accounting treatments — explains much of the O&M variation. Commissioners asked whether a regulatory smoothing or a separate deferral mechanism could make customer bills less volatile in the future. Pepco witnesses said that while they had not proposed a pension smoothing mechanism in this reconciliation, commissions can adopt deferral or smoothing mechanisms to address such volatility.

Requests for additional data: Commissioners asked Pepco to provide (1) an itemized map showing, for each material variance, the originating budget FERC account and the account actually charged; (2) project‑level comparisons of budget vs. actual where amounts are being requested in rate base; and (3) explanatory materials that show how the company managed and attempted to mitigate O&M growth during the rate year (for example, evidence of deliberate deferrals, canceled work orders or other operational actions).

Next steps: Commissioners indicated they will consider whether the data supplied in discovery and on the record is sufficient to warrant the requested reconciliation, and several asked staff to follow up on missing schedules. The hearing record remains open for additional filings and data responses; commissioners signaled they expect more targeted schedules and project‑level spreadsheets if Pepco wants full reconciliation recovery.

Sources: Public testimony and cross‑examination in the Pepco Rate Year 3 reconciliation hearing; Pepco compliance schedules and discovery responses filed in case 9655.