This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Pepco Holdings' CEO Discusses Q2 2012 Results - Earnings Call Transcript

On July 20, we received decisions in both the Pepco and Delmarva Power distribution base rate cases in Maryland, which we found to be disappointing. A summary of the decisions can be found on Slides 4 and 5.

For Pepco, the Commission approved an $18 million annual increase in electric distribution base rates based on a 9.31% return on equity, but directed Pepco to reduce the amount of the rate increase by the annual cost of certain energy advisory programs and seek recovery of these costs through the EmPower Maryland Program. This reduction is currently estimated at $1.5 million.

Lower depreciation rates were approved resulting in an annual reduction of depreciation expense of approximately $27 million. The Commission also authorized recovery of $9 million of storm costs that were charged to operation and maintenance expense in 2011. The reversal of this expense and the establishment of the regulatory asset will occur in the third quarter.

For Delmarva Power, the Commission approved an $11 million annual increase in electric distribution base rates based on a 9.81% return on equity and authorized lower depreciation rates resulting in an annual reduction of depreciation expense of approximately $4 million. In both cases, the new distribution rates and depreciation rates were effective July 20.

The Commission rejected our proposals aimed at timely cost recovery in both cases and authorized a return on equity for Pepco that is among the lowest in the country. We view the Commission’s unwillingness to adopt mechanisms that would enable timely cost recovery to be disappointing and that it will necessitate the filing of frequent rate cases. While our deep and experienced regulatory staff is prepared to pursue this path, we view the frequent rate cases as inefficient and costly to the customer.

In response to these orders, we have extended our current hiring freeze indefinitely and we are in the process of rigorously reviewing our overall operating expenses. We are currently evaluating the orders to determine what actions, if any, to pursue. Also in Maryland, on July 25, the governor issued an executive order to find ways to improve and strengthen the state’s electric distribution system. The executive order sets in place a process to evaluate the effectiveness and feasibility of underground lines in selective areas, options for other infrastructure investments in the electric distribution system and options for financing and cost recovery for capital investments.

3 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.54 -0.51%
FB $98.06 -5.80%
GOOG $667.50 -2.40%
TSLA $147.44 -9.30%
YHOO $26.87 -3.90%


Chart of I:DJI
DOW 15,823.23 -381.74 -2.36%
S&P 500 1,831.59 -48.46 -2.58%
NASDAQ 4,223.8970 -139.2470 -3.19%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs