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Pepco Seeks Recovery of Maryland Reliability Investments

Friday, November 30, 2012

Proposes Plan to Accelerate Reliability Improvements and Standards

WASHINGTON, D.C. – Pepco, a subsidiary of Pepco Holdings Inc., has been making significant investments in Maryland and plans to make infrastructure investments of approximately $1 billion in Maryland over the next five years to serve its customers. Pepco today asked the Maryland Public Service Commission (PSC) to authorize a $60.8 million increase in base distribution rates to help pay for the reliability investments it has made.

If approved, this would mean a $7.13 per month, or 4.98 percent, increase on a typical residential customer’s total bill of about $143. This equates to $0.23 a day in increased electric rates. A PSC decision is anticipated by July 1, 2013.

“We’ve been working for more than two years now to upgrade and modernize our system, and the work is benefiting our customers,” said Thomas H. Graham, president, Pepco Region. “Customers are experiencing fewer outages, and the outages that do occur have shorter durations.”

In 2011, Maryland customers on upgraded feeders had 58 percent fewer outages and a 69 percent decrease in the duration of outages. From September 2010 through September 2012, Maryland customers overall had 38 percent fewer outages and a 36 percent decrease in the duration of outages. Pepco expects further improvements for the remainder of 2012, in 2013 and beyond as the company continues this reliability work.

“Although we received an order in the last rate case several months ago, today’s filing is necessary to cover reliability enhancements to serve customers,” Graham said. “We’re spending about $1 billion in Maryland over the next five years to improve reliability and modernize the grid that our customers use every day.”

The filing also addresses the recommendations of the Maryland Grid Resiliency Task Force Report issued Sept. 24. The Task Force Report calls for accelerating reliability standards and projects to improve reliability sooner.

In response to the Task Force Report, Pepco is proposing to:

• Accelerate its next four-year tree-trimming cycle to complete the cycle in three years

• Upgrade 12 additional feeders a year for two years

• Underground six distribution feeders (three in Montgomery County and three in Prince George’s

County), significantly improving reliability on those lines

These projects are all accelerated or incremental to the work necessary to meet existing service and reliability standards. If approved by the PSC, the accelerated work will occur over approximately three years.

The costs of the accelerated projects will be included in a proposed grid resiliency charge that Pepco anticipates will be in effect for about three years. As proposed, the grid resiliency charge will begin Jan. 1, 2014, resulting in an increase for a typical residential customer using 1,000 kilowatt hours of $0.96 per month or 0.64 percent. In 2015 and 2016, the impacts for the typical residential customer are projected to be $1.70 per month or 1.13 percent and $1.93 per month or 1.28 percent, respectively.

The Task Force Report acknowledged that such a charge may be necessary because accelerating reliability investments beyond those necessary to meet current standards could impose “undue financial pressure on the utilities.” Those kinds of financial pressures can drive up the interest costs that Pepco – and its customers – pay.

In connection with the grid resiliency proposals, Pepco also is proposing stricter reliability standards that it must meet in 2015 and an incentive mechanism that will require the company to credit customers up to $1 million if

it does not meet the minimum reliability standards and earns the company up to an additional $1 million if it achieves the accelerated standards.

For more information and updates on Pepco, visit www.pepco.com and follow Pepco atwww.twitter.com/PepcoConnect.

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Pepco, a subsidiary of Pepco Holdings, Inc. (NYSE: POM), delivers safe, reliable and affordable electric service to more than 789,000 customers in Maryland and the District of Columbia.