Exelon: now the nation’s largest electric utility

Exelon has long been the nation’s largest nuclear power utility. Now it is the nation’s largest electric utility, period.

Yesterday, the Washington, D.C. Public Service Commission, which had twice rejected the proposed merger of Exelon and D.C.’s local utility Pepco, voted 2-1 to approve the merger.  Within hours, Exelon and Pepco had filed the necessary paperwork to close down Pepco and have it subsumed by Exelon.

The vote was shocking. Last month, the PSC had again rejected the merger,  but proposed terms that it would find acceptable enough that it would approve the merger without another vote if all parties agreed to them. Only Pepco and Exelon agreed to the terms; D.C. Mayor Muriel Bowser, the People’s Counsel, the federal General Services Administration and the rest of the intervenors in the case rejected the terms.

Yesterday, the PSC approved the merger on its terms anyway–to the great joy of portions of the D.C. business community, which, as the Washington Post reported, “lobbied hard for the merger.”

The Post also reported that rate increases can be expected to occur immediately–as early as this summer. The entire point of the merger, from Exelon’s standpoint, is for the company to take the tidy and essentially guaranteed profits from the regulated and lucrative Pepco market and use them to resume payouts to its shareholders, which were suspended because of losses from Exelon’s failing nuclear power business. In other words, DC ratepayers will be bailing out Exelon’s nuclear losses. But Exelon isn’t willing to settle for simply tidy profits; thus the prospect of immediate rate increases and many more to come in ensuing years.

Ratepayers in other states, where Exelon has been seeking bailouts for its uneconomic reactors, shouldn’t expect any kind of relief however. Exelon will certainly continue pressing for large bailouts everywhere it has reactors; while there may a limit to its corporate greed, that hasn’t been proven yet.

The ramifications of the decision go well beyond D.C. however. A vote to deny the merger would have overturned earlier votes by FERC and regulators in Maryland, Delaware and New Jersey, all states in which Pepco has at least some presence (in Maryland, quite a large presence) to approve the merger. It would have scuttled the entire deal. You can see why the big business community’s lobbying was intense.

It’s possible, however, that Exelon and Pepco may have been a little premature in filing the papers to dissolve Pepco and become one big dysfunctional family. Opponents of the merger still have the opportunity to challenge the vote, and at least some of them, including Power DC–the umbrella group, including NIRS, that has led the opposition–are examining the available options. But whether the resources are available to mount an effective challenge is an open question.

PSC Chair Betty Ann Kane, who steadfastly opposed the merger throughout the process, hinted in her dissenting opinion that the merger itself may be illegal. Wrote Kane,

“Indeed, developments in the record since my “No” vote on February 26, 2016 give me even stronger reasons to find that the takeover of the District’s electric distribution company by a multi-faceted vertically integrated generation-focused holding company, as proposed in the order before us, benefits Pepco and Exelon shareholders but does not provide sustainable benefits to District ratepayers, places Pepco within a structure that is contrary to District law and policy, and should be rejected.”

The long PSC process–it first voted to oppose the merger last August–has been tainted by the whiffs of potential scandal involving various parties throughout. And while the majority of the PSC spelled out its thinking on the merger itself in its final decision,  the final vote, which was scheduled, cancelled, and re-scheduled in rather helter-skelter fashion at the last minute, raises questions that the decision does not address. The PSC needs to be more transparent and clear and explain what happened in these past few weeks and how it determined to approve the merger over the opposition of nearly every party involved.

When we last wrote about the merger following February’s PSC vote,  we included a timeline of major events leading up to the decision. But subsequent research revealed that we left some key items out, so here is the full timeline of events known of to date:

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.

Sept. 30 2015: Exelon hires FreshPAC chairman Chico Horton to lobby city officials (Horton’s disclosure filing). It is the first time that Horton or the law firm he works for (Graves, Horton, Askew & Jenkins, LLC) has ever filed a lobbyist registration in the District of Columbia.

Sept. 30: DC files eminent domain for land at Buzzard Point—the last land acquisition necessary for the DC United soccer stadium project to proceed–with $21 million from the Pepco naming rights deal.

Oct. 1: FreshPAC receives its largest number and total amount of contributions at a fundraiser.

Oct. 6 – Mayor Bowser signs the settlement with Exelon and Pepco.

Oct. 10: FreshPAC receives another large haul in contributions from businesses.

Oct. 16: Exelon files with PSC its request for expedited review of the settlement agreement with Mayor Bowser.

Oct. 20: DC City Council introduces PAC reform bill.

Nov. 7: Mayor goes to China with FreshPAC donors. Mayor Muriel Bowser makes a high-profile visit to China, to encourage international investment in the District of Columbia. She brings with her representatives of two businesses whose owners made contributions to FreshPAC on October 1.

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.

Michael  Mariotte

March 24, 2016

Permalink: https://www.nirs.org/exelon-now-the-nations-largest/ ‎

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