Capital Business

May 10
A year after a controversial merger with Chicago-based Exelon, D.C.-based Pepco Holdings is preparing to spend up to $720 million to upgrade the electrical grid in some of the Washington area’s fastest-growing neighborhoods.

Construction on what’s being called the “Capital Grid Project” is set to begin next year and finish by 2026 at the earliest.

“We’re trying to set the city up for the next 20 to 30 years,” Pepco chief executive David Velazquez said. “We’re trying to put the infrastructure in place to allow the city to grow, to allow us to serve our customers reliably.”

The plan is meant to help the company meet the new requirements of the District’s shifting economic landscape. Over the past 10 years, an influx of younger workers into the District and its surrounding suburbs has prompted a redevelopment boom in neighborhoods such as Shaw, Logan Circle, NoMa, Columbia Heights and Adams Morgan, putting new strain on the city’s power system.

Although the utility has spent hundreds of millions of dollars a year on basic repairs, it has made few large-scale improvements to its power infrastructure.

 “We haven’t made significant changes to the configuration of how we bring power into the city in probably over 30 years,” Velazquez said. “Some of that infrastructure has continued to age.”

Pepco said it would likely request a rate increase to defray costs, but not before 2022. And the work itself is expected to stimulate job growth in the city as construction crews are hired.

“The more we can do locally, the better off we are,” Velazquez said.

The plan still must be approved by the D.C. Public Service Commission, which oversees local utilities.

The new program represents an additional infusion of cash beyond the $500 million Pepco already spends each year on repairs and grid modernization. Pepco wants to gut three of its existing “substations” — nondescript buildings where power is stored and processed at the neighborhood level before connecting directly to homes — and replace aging equipment with more efficient, modern technology. The company also plans to install roughly 10 miles of new underground transmission cable.

Pepco executives say the upgrades are long overdue. The company’s Takoma substation, for example, is 85 years old and has had few major enhancements since it was set up.

“These need major reconstruction,” Velazquez said. “It’s somewhat similar to a highway. At some point you have to rebuild the road; you can’t just repave it.”

The project comes a year after Exelon acquired Pepco Holdings for $6.8 billion. The combination had been opposed by the D.C. mayor and was narrowly approved by city regulators.

In voting 2 to 1 to approve the deal, the D.C. Public Service Commission said it “was in the public interest,” noting that the utilities would deposit $72.8 million in a “customer investment fund,” set aside $11.25 million for energy efficiency and conservation programs targeted toward low-income residents and carve out $21.55 million for pilot projects, such as modernizing the electricity distribution grid.

Company executives say the newly announced upgrade plans were in the works before the Exelon merger was conceived and that they would have pursued the upgrade even if the merger had not been completed.