Pepco has faced increasing scrutiny over expensive customer bills in recent months. A new ruling could have a lasting impact on how the utility calculates its rates.
A D.C. court just reignited the debate over high electric bills
Pepco has faced increasing scrutiny over expensive customer bills in recent months. A new ruling could have a lasting impact on how the utility calculates its rates.
The D.C. Court of Appeals found that the D.C. Public Service Commission should have investigated factual disagreements over calculations Pepco used to propose its rates — which affects the amount that customers could be charged. (Maddie Poore)
The D.C. Court of Appeals has shaken up the fraught debate over what residents and businesses pay for electricity in the city, issuing a ruling Thursday that tossed out a previously approved multiyear rate hike.
While it doesn’t have an immediate impact on energy bills for residents, the ruling reopens a discussion around how utilities should set future rates. Advocates hope the ruling could help hold Pepco’s rate-setting process to a higher standard and, in turn, ensure customers aren’t paying unreasonable costs.
The D.C. Public Service Commission, an independent regulatory agency, oversees D.C. utility companies. Whenever Pepco and Washington Gas want to increase rates, they have to get the agency’s approval. Over the past five years, the commission approved two increases from Pepco, using a framework that allows for rates to be approved years in advance based on projected budgets. While utility companies say multiyear frameworks allow them to execute necessary infrastructure investments, consumer advocates have expressed concerns over their accuracy.
Advocates, utility companies, and regulators have been debating the issue for years, but Pepco customers in D.C. have taken particular notice in recent months, as many reported receiving particularly expensive electric bills this winter.
A technical, but consequential lawsuit
The most recent multiyear rate plan was approved in 2024, and went into effect from 2025 to 2026. But last March, the D.C. Office of the People’s Counsel (OPC), which advocates for the city’s utility consumers, and the Apartment and Office Building Association (AOBA), a real estate industry group, challenged the plan in the D.C. Court of Appeals, arguing that the Public Service Commission ignored required due process when it approved the increase.
The court — the highest in D.C. — ruled in their favor Thursday, finding that the commission should have further investigated factual disagreements over calculations Pepco used to propose its rates (which affects the amount that customers could be charged).
In one case, Pepco’s calculations differed from AOBA’s by $49 million. In another, the parties disagreed about the accuracy of Pepco’s projected energy use per customer. In explaining the differing opinions over complex forecast methodologies, the court wrote: “If you find that difficult to decipher, join the club!” What is clear, the court added, is that there are factual disputes between the two parties, and a trial-style hearing — with cross-examination and expert witnesses — was necessary to resolve them.
Not holding this kind of evidentiary hearing goes against established norms, according to the court. “This case also appears to be one of the first times the Commission approved any rate plan after holding only a ‘legislative-style’ hearing, instead of the evidentiary hearings it historically held,” wrote Associate Judge Joshua Deahl in the ruling.
The court also questioned the commission’s decision-making process, noting that the body failed to explain why it credited Pepco’s calculations despite the AOBA disputing the numbers. One of the agency’s own commissioners, Richard Beverly, had written in a dissenting opinion last year that it wasn’t clear “how the majority arrived at adopting Pepco’s calculations over AOBA’s.”
What’s next
In the short-term, nothing will immediately change about customers’ utility bills. But it does mean that Pepco’s multiyear rate plan method will need to be reviewed again, and this time, under stricter standards. The Public Service Commission will now have to hold an evidentiary hearing to resolve these disputes and show why a rate increase is justified.
“We are committed to working constructively with the Commission, stakeholders, and the public to reach an outcome that is fair, transparent, and in the best interest of customers,” a Pepco spokesperson said in a statement to The 51st, adding that it stands by the framework it used to determine its rates. “Multi-year plans support essential investments in grid reliability and safety for customers in the District.”
The court ruling came down the same day that the D.C. Council was holding an oversight hearing with the Public Service Commission. Ward 6 Councilmember Charles Allen asked commission Chairman Emile Thompson about next steps now that the court had vacated the commission’s order approving the 2024 Pepco rate increase.
Thompson couldn’t provide an in-depth timeline or details, but said there would "certainly" be an evidentiary hearing.
“Rate cases are not theoretical exercises,” said OPC’s Sandra Mattavous-Frye in a press release. “They determine what families pay, what small businesses can afford, and whether District residents are being asked to shoulder costs that have not been proven necessary and prudent.”
Allen also asked Thompson about the $49 million dollar discrepancy between Pepco and AOBA’s calculations. “Would that not have been a space where an evidentiary hearing would have wrestled with that large discrepancy?” he asked.
For nearly 10 seconds, Thompson was silent. Finally, he said, "I don't know. To be honest, I don’t know. I can't foresee how the evidentiary hearing would play out."
In a statement to The 51st, a commission spokesperson said that the agency is reviewing the order and will address next steps in the “near future.”
Sam Delgado is a freelance multimedia journalist living in D.C. She was previously a Future Perfect fellow at Vox.com and a production manager at More Perfect Union.
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