When Pepco was asked to provide some tips for saving on energy costs in the sweltering summer months, as the heat index stretched into triple digits, a spokesperson suggested that D.C. residents should simply stop using their air-conditioners so much.

“When you hear your HVAC kicking on, it’s kind of like a cha-ching sign,” Chuck McDade told WUSA9. “That’s dollars that’s going toward my energy bill.”

What McDade and WUSA9 failed to report, however, is that Pepco requested a rate hike in 2019 that allowed the utility company to rake in $108 million from D.C. customers—but didn’t end up using most of it.

Then in 2023, Pepco went back to the Public Service Commission, which regulates D.C.’s utility companies and must approve any rate increases, and asked for another hike for 2024 to 2026 that would net $190.7 million.

The three-person commission rejected Pepco’s initial request, but in November approved a more limited plan for 2025-2026 that is expected to raise D.C. residents’ bills by a total of about $11 per month while bringing in $123.4 million for the utility company.

PSC Commissioner Richard Beverly, the lone dissenting vote, described the decision as a “regulatory trainwreck that unreasonably promotes Pepco’s interest at the expense of ratepayers.”

“Unfortunately, the only thing that is clear to me about this arrangement is that ratepayers (including the Federal and District governments) are being given a bill for $123 million with a justification that, to me, could be summarized as ‘because Pepco said so,’” Beverly wrote in his dissenting opinion.

Pepco’s May revenue was more than $27.6 million, and $33.6 million in June, according to its monthly filings. Starting in June, right before McDade advised customers to turn up their thermostats during a heat wave in order to save money, utility bills went up by about 17.7 percent (about $20 per month) due to increasing charges from the company that supplies Pepco with energy, PJM Interconnection.

As bills increased and profits rose, Pepco mailed 17,357 disconnection warnings in May and another 13,886 in June as heat and humidity continued to climb. The utility shut off power to a combined 2,464 customers during those two months, according to its monthly filings.

But as Pepco looks forward to the two-year rate increase approved in November, the Office of the People’s Counsel, which advocates on behalf of D.C.’s utility customers, filed a lawsuit challenging the increase and accusing Pepco of misspending at least $94 million.

“The stakes are high,” People’s Counsel Sandra Mattavous-Frye writes in OPC’s June newsletter. “Not only does the outcome affect Pepco customers’ monthly bills but also could influence how DC utilities propose rate hikes in the future. If the court agrees with OPC, it could force the PSC to reconsider the rate plan under stricter procedural standards and potentially provide greater transparency and public engagement.”

Taken together, the allegations, along with Pepco’s increasing revenue and its subsequent request for more rate hikes, raise the question: Are D.C.’s electric utility and electricity supplier profiting too much from D.C. residents?

More profits, more problems 

In March, the Office of the People’s Counsel filed a legal challenge to the most recent rate increase approved by the PSC. As Mattavous-Frye explains in her June newsletter, the case “could shape how utilities set rates for years to come.”

The lawsuit is challenging PSC’s approval of Pepco’s multiyear rate plan that implements preapproved rate increases based on anticipated costs, rather than actual expenses. (Rate hikes are historically based on actual spending, rather than predicted expenses, Mattavous-Frye notes.)

“The PSC had previously approved Pepco’s use of an MRP on a trial basis in 2021 but promised to evaluate the effectiveness of that pilot program before considering future proposals,” Mattavous-Frye says in her newsletter. “That review never happened and the PSC approved Pepco’s new multiyear rate plan without first analyzing the pilot.”

Harrison Pyros, the spokesperson for public utility advocacy group We Power DC, calls the unspent millions “expropriation.”

PSC responded in a July court filing that their decision to award another rate hike to Pepco for 2025-2026 reflected “reasoned consideration and the Commission’s balancing of competing views and public interest considerations.”

The accusations rest in part on testimony from Courtney Lane, an analyst from Massachusetts-based energy economics company Synapse Energy Economics, a consulting firm that specializes in electricity and gas regulation. 

Testifying on behalf of the District government, she warned the PSC against approving another hike because the multiyear plan “does not provide appropriate incentives to [Pepco] to contain its costs or protect its customers from unreasonable rates,” and did not “incentivize [Pepco] to act in furtherance of the District’s climate goals.”

Instead, the plan “uses the guise of supporting the District’s climate goals as a means to increase business-as-usual investments that do not adequately advance the District’s energy and climate goals,” Lane said in her written testimony in January.

Pepco was granted this multi-year rate hike to raise $108 million for needed infrastructure investments, but Lane testified the company actually spent $94 million less than expected. OPC and one of the PSC’s own commissioners believe Pepco pocketed the extra revenue instead of returning it to ratepayers.

“It’s like when you’re a child, and your mom gives you $20 to go to lunch and it only costs $15 but then you pocket the five, right?” says Pyros with We Power DC. “That’s not your money. Technically, that $5 belongs to your mom, and in this situation, we are the mom and we are overspending on something and not getting the full bang for our buck.”

Pepco spokesperson McDade tells City Paper via email that the upgrades the company funded with the 2021–2023 money led to “record reliability” in their crews responding to power outages in 2024.

But Lane slammed Pepco in her testimony for not providing the PSC with a list of the specific projects it was seeking to fund with the next rate hike. Pepco instead proposed to use the next $128 million to replace old infrastructure or perform maintenance work. 

“These are activities that are core to the traditional duties of the electric distribution company,” she wrote. “Pepco has not adequately explained why undertaking these traditional goals would justify a [multiyear rate-hike plan].” 

The PSC ultimately approved Pepco’s request for rate hikes in 2025 and 2026. Although the panel (with Beverly in dissent) OK’d a smaller increase than the utility asked for, the approval will increase the bill for average customers by about 11 percent over the next year.

Pepco also raised its delivery rate by 5 percent this year, so the average D.C. household electric bill rose from around $95 in December to about $114 in January, according to We Power DC. And with the 17.7 percent June supply charge increase, the average bill for the summer of 2025 now sits at around $135 per month. D.C. residents will be hit by another rate increase come January 2026, according to the plan approved by the PSC, that is expected to add another $3.80 per month to the average bill.

“To continue reliably meeting the energy needs of our customers, we file a Multi-Year Plan, which is a forward-looking proposal that details planned infrastructure upgrade and maintenance costs for three years into the future,” McDade tells City Paper. “This is a highly regulated process that was approved by the DC Public Service Commission.” 

In its lawsuit, OPC also alleges that PSC failed to follow its own rules for holding hearings to review all evidence before approving a rate hike, and that the PSC failed to hold Pepco accountable enough for allegedly misspending the money from the 2021-2023 rate increases.

“What we don’t want to do is create a situation where the company just gets a lump sum of money every year without having to really establish that it used the money that it already received prudently,” Assistant People’s Counsel Ankush Nayar tells City Paper.

PSC Office of Technical and Regulatory Analysis, via spokesperson Whitney C. Douglas, disputes OPC’s allegations that the commission failed to hold a required evidentiary hearing. She notes that the commission “does not take rate increases lightly” and reviewed “all evidence and testimony presented” during three public hearings last spring. 

Douglas also notes that the utility regulator was aware of the allegations that Pepco misspent millions earned via the previous rate hike and responded by ordering Pepco to undergo audits comparing its forecasted expenditures to its actual expenditures from 2023 to 2026. Pepco also must now “include a rate reduction for customers should the annual reconciliation filing demonstrate that Pepco is overearning” and create a “lessons-learned framework” that draws from this situation to evaluate similar proposals in the future, Douglas says.

Too little, too hot

While OPC’s lawsuit wends its way through the Court of Appeals, D.C. residents and businesses are stuck with increasingly higher bills, and advocates worry a “lessons-learned” approach may be too little, too late. Electrical bills are increasing for everyone as summer temperatures soar to dangerous highs, making air-conditioning a life or death issue for some people.

Since May, there have been 376 heat-related emergency medical responses in D.C., according to DC Health. In Maryland, 13 people have died of heat-related conditions this year, including one in Montgomery County and one in Prince George’s County; Virginia has reported three heat-related deaths. D.C. has not released fatality figures.

At the same time, unemployment rates in the D.C. area continue to spike as convicted felon and President Donald Trump slashes thousands of federal jobs while the new package of legislation he signed into law threatens to remove tens of thousands of D.C. residents from Medicaid. And a critical utility payment assistance program for D.C. residents ran out of its federal funds in March.

Federal policy research classifies households with an energy bill of more than 6 percent of their household income as having an “unaffordable” energy burden, and households with an energy bill greater than 10 percent of their income having a “severe” energy burden. OPC reported that in D.C. households that qualify for food stamps, people spend 20.5 percent of their income on energy bills—more than double the national standard for a severe burden.

Pepco operates a $2.5 million Customer Relief Fund, but advocates worry that the summer surcharges, plus the yearly hike to customers’ bills, have tipped more people into precarity. 

“If you look at the percentage of people who receive the assistance, but still fall behind on their bills, the number is above 50 percent,” says Pyros of We Power DC. He notes there are almost double the number of shutoffs to people unable to pay their bills this May and June compared to those same months last year (though Pepco suspended shutoffs during the 2025 winter season).

Ward 1 Councilmember Brianne Nadeau introduced legislation in February to formalize  blocking electricity shutoffs during the summer and the winter, but the bill is currently pending committee review. 

D.C. residents may be eligible for help paying high electrical bills via the District’s various utility relief programs. Residents can also call Pepco directly at (202)-833-7500 or visit their relief page for more assistance information. Residents who need help contesting their Pepco bills can also visit OPC’s website for more information on how to file a complaint of their own, and potentially seek legal representation from OPC afterward.