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Mid-Atlantic Blackouts Expose Pepco’s Deregulation Follies

July 9, 2012

Massive storms that tore through the Mid-Atlantic June 29 left hundreds of thousands of residents of Maryland, Virginia and the District of Columbia without power, sweltering in the record heat.

While most of the region had its power restored within a few days, more than half of the estimated 800,000 customers of the Potomac Electric Power Co. – Pepco in D.C., and Maryland were still without electricity five days after the storm hit. With more than 70,000 still in dark at the time of writing, Pepco has the slowest rate of restoration of all the area’s utilities.

And in in the midst of 100-degree temperatures, this has many Pepco customers steamed.

Says D.C. resident Tonya Oliver, who lost power three times in one week:

My husband, two-year old daughter and dog have shuffled back and forth from hotels to friends’ homes in a desperate attempt to stay safe during these incredibly high temperatures.

Oliver isn’t alone in her frustration. In less than two days, 1,800 customers signed a Change.org petition calling on the utility to invest its profits towards improving the system’s reliability. 

Pepco’s problems are not new, with blackouts not just happening after storms but on high usage days when the grid overloads. In 2010, the Washington Post found that Pepco customers experienced 70 percent more outages than customers of other big city utilities. And the outages lasted more than twice as long.

Pepco’s now infamous service problems have their origins in the energy deregulation movement of the 1990s, says Utility Department Director Jim Hunter, which encouraged the company to slash investment in staff recruitment and basic maintenance.

While most utilities are guilty of cutting back on hiring and infrastructure investment, Pepco is one of the worst offenders, says Hunter:

It has the smallest maintenance staff in the region. They haven’t hired the people they need to realistically meet the demands of their customers.

For Washington, D.C., Local 1900 Business Manager Jim Griffin, Pepco’s trouble in keeping the lights on is the direct result of the company’s refusal to recruit and train a new generation of linemen.

Pepco has half the linemen and double the number of customers it did 20 years ago.

Griffin, who represents more than 1,000 Pepco employees, says the full-time line repair crew on staff was more than 200 when first started at the company 39 years ago. Today it is less than 100.

Says Griffin:

We’re all hands on deck, but it’s hard when we don’t have that many hands to begin with.

In 1999, the Maryland General Assembly deregulated its utility industry, forcing companies to sell off their generating capacity and giving customers a choice of providers. The goal, said deregulation supporters, was to foster competition in the electrical industry and drive down prices. The District of Columbia followed suit a year later.

The reality of deregulation turned out to be quite different. Most customers choose not to switch distributors and rates in most areas went up, not down, most notoriously at Baltimore Gas and Electric, which announced a 72-percent rate hike in 2006 when state-mandated price-caps came off.

Deregulation also gave utilities an easy way to boost their profits by reducing their payrolls and cutting back on training, recruitment and basic maintenance – shortcuts that pleased Wall Street shareholders but caused major headaches for customers and staff.

At Pepco, more than 50 percent of the company’s union work force is eligible for retirement, while new hiring has slowed to a trickle. It is a trend that has Local 1900 worried.

As early as 2007, then-business manager John Holt predicted future service problems unless Pepco got serious about attracting new workers, testifying before the D.C. Public Service Commission that it needed to “aggressively hire new workers.”

Sadly Holt’s pleas resulted in only 30 new hires.

As he told the Electrical Worker in 2009:

They didn’t take it as seriously as I hoped they would.

Pepco fills in the obvious gaps after major storms by bringing in outside contractors, but temporary workers are no replacement for full-time employees, says Griffin.

Not only are there no guarantees that the contractors Pepco brings in abide by the same training and safety standards that Local 1900 does, the time it takes to get out-of-area workers set up and on the job costs precious restoration time.

Says Griffin:

We had people from Oklahoma, Florida and Quebec coming in. Getting them here can take 2 to 3 days. And that’s 2 to 3 days you don’t have power because Pepco didn’t have the manpower to get the work done in the first place.

Basic maintenance and upkeep have also suffered. In December, the Maryland Public Service Commission found the company guilty of neglecting tree-trimming and equipment upgrades.

Montgomery County Council President Roger Berliner told the Washington Post:

We’re now paying the price now of the neglect of the system over many years.

Also aiding Pepco’s shoddy service, says Hunter, is a little-known decision by Maryland and D.C. regulators that allows the utility to recoup funds lost during outages.

Under the complex billing arrangement known as “decoupling”, Pepco can raise rates to compensate for payments lost during blackouts, thus removing any financial incentive to restore service or reduce outages.

Says Hunter:

No matter what happens, Pepco will get its money, so there is no reason for the company to go out and hire new people to stop blackouts in the first place.

Despite these obstacles, Griffin says Local 1900 members have responded to the crisis with tremendous professionalism. Linemen have been putting in 12-16 hour days since June 30, working in record-breaking heat under extremely dangerous conditions.

Says Griffin:

There are downed wires and trees everywhere. Luckily no one has been hurt.

Local 1900’s call center employees have also been putting in long hours, dealing with frustrated and increasingly irate customers still in the dark.  

Says Griffin:

Our members not only work for Pepco but live in the communities served by it. Our families have been suffering along with everyone else. And because of all the hours we are putting in, we can’t be with them during this crisis.

The local was in midst of contract negotiations when the storm hit.  Bargaining has been postponed until the restoration is complete.

Boosting new hires in one of Local 1900’s top bargaining goals, says Griffin.

Not only is the company not replacing retirees, it’s actively encouraging early retirements. Pepco needs to get new people in here and properly train them.

In neighboring Virginia, Dominion Power reports that power has been restored to 98 percent of its customers.

Pensacola, Fla., Local 1055 member Jacqueline Green, working as part of a Gulf Power crew helping to restore power to Dominion customers, was killed July 3 when her bucket truck lost control and hit a tractor-trailer.

Says Hunter:

It’s a reminder of the sacrifices utility workers make every day to keep the lights on for us all.

Photo used under a Creative Commons License from Flickr user shonaliburke