Economy

Drowning In Profits And Tax Subsidies, Pepco Slow To Restore D.C. Power After Storm

Heavy storms over the weekend knocked out electricity for millions of Americans across the mid-Atlantic, including hundreds of thousands of residents of the District of Columbia. Pepco, the utility corporation that has a monopoly over electric services in the D.C., is estimating that it won’t have power restored to 90 percent of households until Friday.

“How many times have we been through this before?” asked D.C. Mayor Vincent Gray. “Friday is just not good enough.” Indeed, Pepco is a popular target for discontent in D.C., and for good reason. In the last few years, the company has cut service and maintenance, even while it made millions in profits and paid its executives fat bonuses:

As the good-government website OurDC notes,”From 2008 to 2010, Pepco CEO Joe Rigby earned $8.8 million and Pepco top officers earned more than $22 million. During that same period, Pepco reported $882 million in profits, paid no federal and state income taxes and received $817 million in tax refunds.” Yet as the money rolled in, the Maryland Public Service Commission allowed Pepco to cut back on maintenance, in order to divert funds to dividends and management bonuses…Pepco faces a simple reliability equation: The more it spends on improving service, the less is available for dividends and executive bonuses. CEO Rigby is a major shareholder, so in effect awards himself a commission when he keeps infrastructure spending low and dividends high.

Adding insult to injury, according to Citizens for Tax Justice, Pepco has not paid any net federal corporate income tax for the last decade (despite those millions in profits):

Pepco Holdings: The company recorded small restructuring charges in 2010. The study reallocated these charges to the years they were actually spent. This slightly increased U.S. pretax profits in 2010 and slightly reduced them in 2011. Tax deferrals, primarily from accelerated depreciation, reduced the company’s taxes substantially, as did other factors. The company does not appear to have paid any net federal income tax for at least a decade.

In the last four years, Pepco has actually paid a negative 39.5 percent corporate tax rate, meaning it received millions in tax subsidies from the government. And for that, D.C. residents received a company that can’t get the power back on for a week after a storm.