In April 2014, Exelon, the nation’s largest nuclear power generator, made a $6.8 billion offer for Washington D.C.-based Pepco. Exelon – which already owns Illinois ComEd and Baltimore G&E – would become the largest electric utility in the country, with nearly 10 million customers.
Shareholders, federal regulators, and many state utility commissions have approved the deal. But in August, the D.C. Public Service Commission unanimously rejected it, finding little public benefit. Now, just three months later, amid allegations of corruption, D.C. Mayor Muriel Bowser has settled with Exelon and the D.C. Commission has been asked to reconsider.
In this episode of Local Energy Rules, D.C. resident and executive director of the Community Power Network, Anya Schoolman, joins John Farrell to talk about why the merger is being reconsidered, the allegations against Mayor Bowser, and how the takeover seems like another story of energy monopoly at work.
The Atom Bombed
The takeover bid comes at a harrowing time for Exelon, says Schoolman. It is the nation’s biggest nuclear power generator, but in recent years, business has lagged. As cheap natural gas and wind out-competed its nuclear holdings, Exelon’s stock fell from $91 in April 2008 to about $30 today.
Rather than compete against cheap wind and natural gas on the open market, Exelon has made moves to buy regulated utilities. In this case, it would acquire Pepco and its profits, guaranteed by state commissions. If the deal is completed, nearly 67% of Exelon’s income will come from captive ratepayers, up from just 17% in 2008.
Exelon’s hard times are not unique. Schoolman notes that other electric utilities with expensive, legacy power plants have sought bailouts in Ohio and West Virginia. Earlier this year, Exelon backed legislation in Illinois to get a $1.6 billion bailout for its un-competitive nuclear plants.
So What Changed?
“Pepco will become a second tier company in a much larger corporation whose primary interest is not in distribution, but in generation,” said the DC Public Service Commission in August when they first denied Exelon’s merger. “At a time of change in the energy field, Pepco’s ability to adapt will be constrained by an increased management bureaucracy. We are also concerned about the inherent conflict of interest that might inhibit our local distribution company from moving forward to embrace a cleaner and greener environment.”
But then she heard the actual results.
The utility offered more money to offset prospective rate increases, but with no guarantee Exelon won’t raise rates above these offset levels. The new money is just a drop in the bucket of this $6.8 billion deal and half the money promised locally goes to DC government programs that Schoolman says have failed to handle money well in the past.
The Name of the Game
Then there’s the soccer stadium. 10 days before the new commitments were filed, Pepco gave the D.C. government $25 million for the naming rights to its new soccer stadium. The money will be used for eminent domain to build the stadium, and will be the largest land development deal of Mayor Bowser’s administration.
“There’s something larger going on here,” says Schoolman. A number of prominent outlets are calling the deal #SoccerGate.
Already, citizen groups have seen Exelon and Pepco pulling strings in Bowser’s government to win approval.
It’s not just about D.C. and Pepco. Rather, “they’re making a play for the PJM grid [the East Coast-based energy market where Exelon and others sell power competitively],” Schoolman says. Already, Exelon has gamed the market by withholding capacity during a recent auction, costing its Northern Illinois ratepayers approximately $100 per year. Now as they acquire more property within the market, they increase their voting power and ability to further change the market rules.
“The problem is [the PJM market is] so complicated and the [DC] commission feels it’s out of the scope of their review,” she says. “There’s a huge story here about the consolidated behemoths that are changing the rules of the grid.”
This is the 28th edition of Local Energy Rules, an ILSR podcast with Director of Democratic Energy John Farrell that shares powerful stories of successful local renewable energy and exposes the policy and practical barriers to its expansion. Other than his immediate family, the audience is primarily researchers, grassroots organizers, and grasstops policy wonks who want vivid examples of how local renewable energy can power local economies.