Pepco CEO says utility is plugged in to future

Transformation is under way, shareholders told

May 10, 2000|By Shanon D. Murray | Shanon D. Murray,SUN STAFF

With electric competition in Maryland just ahead, Potomac Electric Power Co. must transform its traditional business while expanding its retail enterprises, its chairman and chief executive told shareholders at the annual meeting yesterday.

This year "will be the last year during which we operate as a traditional, full-service regulated utility that produces electricity and delivers it to captive customers," said John M. Derrick, chairman and CEO of Pepco, the Washington utility that also serves Prince George's and Montgomery counties.

"We are specializing in being a top-flight electricity-delivery company, with rapidly growing energy and telecommunications retail businesses," Derrick said during the meeting in a Bethesda hotel.

As part of its transformation of its utility business, Pepco is divesting its power plants to focus on distribution over its power lines. Derrick said he expects the bulk of Pepco's generating assets - which have a combined book value of $1.8 billion - to be sold by the end of the year.

Derrick said it was "ironic and regrettable" that, just as Pepco was preparing to sell its power plants, the utility experienced what he called "the most adverse environmental accident in Pepco's history." On April 7, a 5-inch crack in Pepco's pipeline in Southern Maryland leaked about 110,000 gallons of oil into Swanson Creek, adjacent to the utility's Chalk Point power plant. The spill stretched for 13 miles.

"We have committed all necessary resources to the cleanup effort and have pledged to stay with it until the job is done," Derrick said.

Meanwhile, Pepco will focus on capturing opportunities in a deregulated marketplace.

After the sale of its power plants, Pepco will rely heavily on Pepco Energy Services, an unregulated affiliate that sells energy and energy-related products and services to residential, commercial and industrial customers.

Another key part of Pepco's post-deregulation strategy is Starpower, a fiber-optic network that provides cable television, local and long-distance telephone and high-speed Internet and other products.

Earnings up 14%

Pepco's earnings per share for the year that ended March 31 increased 14 percent to $2.01.

The utility's subsidiaries, including Pepco Energy Services, contributed 16 cents per share, compared with 13 cents per share in 1998.

Also yesterday, Pepco's board of directors elected Dennis Wraase as the utility's president, a position previously held by Derrick.

Wraase has served as Pepco's executive vice president and chief financial officer since last year. He has been with the company since 1974.

Shares of Pepco closed yesterday at $25.0625, up 50 cents.

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