On Friday, the District of Columbia’s utility regulators dealt what may end up being a fatal blow to Exelon’s bid to buy local utility Pepco and become the largest utility in the country. Or maybe not. In a complex decision that almost literally gave those of us in the room whiplash, the Public Service Commission:
• Rejected a controversial deal submitted by the corporations and DC’s Mayor, Muriel Bowser, and agreed to by several other parties. To which the whole room cheered.
• And then immediately after, the commission offered amended terms by a 2-1 vote. If all of the parties accept the terms within two weeks, the PSC would automatically approve Exelon’s purchase of Pepco, with no further review or vote required.
This set off a lot of speculation about how quickly or easily the deal would be approved. We are happy to report that hasty judgments that Exelon would quickly achieve victory are far from true. If even one of the nine parties backs out, the deal could be dead, or be subject to further review.
NIRS and the PowerDC coalition are encouraging DC residents to write to Mayor Bowser, DC Attorney General Carl Racine, and People’s Counsel Sandra Mattavous-Frye, urging them to reject the PSC’s terms and, effectively, back out of the settlement.
And there are plenty of reasons for them to do it. But first a little refresher on why this is so important for those concerned about clean energy and a nuclear-free, carbon-free future.
Exelon is by far the largest nuclear power plant operator in the country, running 23 reactors in six states and holding an ownership stake in two others, plus five shutdown reactors. Over one-fourth of Exelon’s reactors are unprofitable and losing millions of dollars each year, placing them at imminent risk of retirement. Given that nuclear power is the core of Exelon’s business, it is under pressure to boost its bottom line by whatever means necessary.
Hence, the company is pushing legislators and regulators from Illinois to New York to DC to deliver massive subsidies for nuclear power plants. And it has stepped up its attacks on renewable energy in the same fashion: blocking renewable energy legislation in Illinois for the last two years, and trying to kill federal renewable energy programs.
But Wall Street has also been telling Exelon it needs to shift away from nuclear power. And that is why, in 2014, it offered Pepco a deal it couldn’t refuse: to buy out the company and its shareholders to the tune of $6.8 billion, 25% more than the company’s stock was worth. Pepco was literally the best option for Exelon: with 2 million captive ratepayers, and adjacent to utilities it already owned in Pennsylvania and Maryland, Pepco would give Exelon an unprecedented regional monopoly.
The problem: people in Maryland and DC have been fighting for renewable energy and real climate justice policies for years. They knew Exelon would be a disaster for consumers and the environment alike. And with vigorous grassroots organizing and legal interventions, we won round one. After Maryland only narrowly approved the deal (with over 50 pages of conditions), DC’s Public Service Commission rejected it in August, pointing out Exelon’s long track record opposing renewable energy, the loss of local control with a utility headquartered in Chicago, and the company’s inherent conflict of interest in selling its nuclear power at the highest price possible.
That set off a desperate effort by Exelon and Pepco to seek out a settlement with the city government. The Mayor’s decision to go along with Exelon at the same time that Pepco gave the city $25 million for a soccer stadium and Exelon hired the chairman of her political action committee as a lobbyist have raised serious concerns about corruption (see the timeline below). If Exelon’s takeover of Pepco were the clean energy equivalent of the Titanic, then the equivalent of rearranging the deck chairs rather than heading to the lifeboats.
The terms offered by the PSC are actually worse – even for the Mayor and other officials who joined the settlement:
• $28 million in bill credits intended to lessen the impact of Exelon rate hikes until 2019 on residential customers are now out the window. PSC says it will apply the credits to all customers (businesses and government). Residential customers would see their bills go up long before the Mayor’s re-election campaign in 2018.
• $9 million toward low-income customer assistance, also gone.
• Other monies that the Mayor would have had the discretion to spend on renewable energy projects (or not) would now be under the PSC’s authority, to prevent the Mayor from diverting them to other budgetary purposes.
These happen to be the very terms district officials were using to justify their support for the deal. Without them, Exelon’s rate hikes mean nothing but misery to district ratepayers. That would have been the case long-term anyway, but now the Mayor and others will be exposed to the political repercussions of supporting Exelon. So it is really down to whether Exelon’s corporate influence is more powerful than the threat of an angry electorate.
There are other significant terms, too, including forcing Exelon to bid out micro-grid and solar projects to competitive providers, rather than being able to own and profit from them itself. Exelon could probably live with that. Also, the PSC’s chair, Betty Anne Kane, issued a strong and principled minority opinion opposing the terms offered by the other two commissioners. Kane reiterated the view that the Exelon-Pepco deal is inherently flawed, both because of the inevitable loss of local control and Exelon’s fundamental conflict of interest in being both the utility and a major nuclear generator.
Before the PSC decisions, Exelon had said it would walk away from the deal if it wasn’t decided by March 4. Now we’ll see if that’s true.
And here is a timeline of Exelon’s and Pepco’s scandal-ridden effort to squeeze their rotten deal through. (Timeline compiled by NIRS and Chesapeake Climate Action Network from news reports and public documents.)
SUMMARY OF SCANDAL-PLAGUED EVENTS LEADING UP TO FINAL EXELON-PEPCO MERGER DECISION
April of 2015: FreshPAC launched. Close allies of the Mayor launch a highly controversial political action committee called FreshPAC. A quirk in DC campaign laws allows unlimited contributions to the super PAC from companies and businesses, including those with business before the Mayor and City Council. The PAC is highly criticized by the media, voters, and members of the City Council as a fund that appears open to abuse and pay-to-play politics.
August 25, 2015: Exelon-Pepco merger rejected. The DC Public Service Commission unanimously rejects the proposed Pepco-Exelon merger as a fundamental “conflict of interest.”
September 18, 2015: Pepco pays Mayor’s office $25 million in “Soccergate” deal. Pepco gives the Office of the Mayor $25 million in cash for vague naming rights of property adjacent to the proposed new soccer stadium at Buzzard Point. The structure of the deal is highly unusual. Researchers have not been able to find another deal like it in the country. Not only is all the money paid up front, at a very high price (proportionally more than the Verizon Center naming rights deal), but the brevity and minimized complexity of the two-page legal agreement is virtually unprecedented.
September 19, 2015: Exelon presents merger “settlement” financial terms the day after “Soccergate” payment. Documents released under the Freedom of Information Act show that, the very next day after the soccer deal, Exelon submits new financial information to the Mayor’s office for settlement purposes.
November 10, 2015: FreshPAC is disbanded after widespread criticism. Critics charged it represented a pay-to-play PAC that tarnished DC politics and the Mayor’s public integrity. Exelon continues to refuse to say whether it was asked to donate to FreshPAC while working with the Mayor’s office on a settlement that would give the company its prized $6.8 billion merger.
December 16, 2015: WAMU reveals that former FreshPAC chair registered to lobby for Exelon on the merger. News breaks that Chico Horton, the director of FreshPAC, registered to lobby for Exelon on the merger on September 30, 2015 – the same time that Exelon was negotiating a settlement with the mayor and while FreshPAC was still active and soliciting huge donations from businesses.
January 2016: Chico Horton, the Exelon lobbyist, says he did no “lobbying.” The former head of Bowser’s FreshPAC declares that he did no lobbying – zero – for Exelon during the intense autumn negotiations between Exelon and the Mayor’s office, despite registering as an Exelon lobbyist. Horton said he simply gave the company “strategic advice” that did not officially constitute lobbying.
February 2016: Documents indicate Mayor’s office misled the public on merger negotiations. Documents released under the Freedom of Information Act indicate that the Mayor’s office repeatedly misled the public as to who in her administration actually coordinated and led the merger settlement negotiations between the city and Exelon. The Mayor claimed and still claims that City Administrator Rashad Young and Tommy Wells, head of the Department of the Environment and Energy, led the negotiations. But FOIA documents show that they were informed of key settlement terms after the deal had been negotiated by others close to the Mayor. Who actually led those talks, and what connection to Exelon or Pepco the city negotiators might have had, is still not known. But it was not Wells or Young, as was claimed. Why the discrepancy?
February 26, 2016: PSC gives conditional approval to the merger. Little substantive changes were required on top of the Mayor’s wholly inadequate settlement. Opponents assert the merger is still a fundamental “conflict of interest” and the process was clearly influenced by big-money “pay-to-play” politics.
February 29, 2016
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