Nuclear robber barons, riding radioactive white elephants: PSC approves Exelon takeover of Pepco, against the will of D.C.!
Does D.C. stand for "Den of Corruption"? With a radioactive twist?
As reported by the Washington Post, in the latest shocking reversal -- of its own vote just a few weeks ago -- a 2-1 majority of the District of Columbia Public Service Commission (PSC) has approved Exelon Nuclear's takeover of Mid-Atlantic electric utility Pepco.
See the D.C. PSC press release announcing the split decision.
D.C. PSC Chairman, Betty Ann Kane, voted against Exelon's takeover of Pepco for the third time since August. In her Dissenting Opinion (see Appendix A to the PSC Order, pages 33-35 of 65 on the PDF counter), Kane wrote this remarkable passage:
Based on its merits, I find that while the proposed changes address some of my concerns, many others remain. Most importantly, none of the revisions to the 142 terms of the proposed acquisition change the fundamental inherent conflict which has led me on two prior occasions to find that the proposal is not in the public interest. There are many promises and a lot of money being offered. Expensive wedding gifts are nice. But all the wedding gifts in the world can't make a bad marriage good. (emphasis added)
Kane concluded her Dissent:
Unlike a rate case, the sale of Pepco won't be reviewed by the Commission and can't be adjusted every few years. It is gone forever. The stated motive of the sellers is to increase PHI [Pepco Holdings, Inc.] shareholder value. The motive of the buyers is to add regulated revenue to prop up Exelon's failure to pay dividends to its shareholders. However the needs of Pepco's customers and the District are for a safe, reliable, modern electricity delivery distribution system at a just and reasonable cost. I vote No. [emphasis added; internal citations omitted]
"Exelon's failure to pay dividends to its shareholders" is due to its five uncompetitive atomic reactors in IL, as well as Ginna in NY. In that very real sense, Exelon's takeover of Pepco's captive ratepayer base, across multiple Mid-Atlantic states and D.C., amounts to a massive, "life support" subsidy for age-degraded, failing, dirty, dangerous, and expensive nuclear power plants, that would otherwise likely close.
The PSC vote caught even trade press publications like Utility Dive by surprise, which just hours earlier had predicted the merger was likely going down to defeat, after a united Washington, D.C. city elected leadership had expressed its opposition to the latest takeover terms.
Exelon will pay $6.8 billion to take over Pepco, paying a large premium to Pepco shareholders for their stock holdings. Exelon has reportedly spent an additional $200-300 million, on such things as lawyers, lobbyists, and pull-out-the-stops PR campaigns, to secure the merger. Within minutes of the PSC's ruling announcement, Pepco shares increased in value by 25-30%, as reported by TheStreet.
Indeed, leading Exelon takeover opponent, D.C. Council Member Mary Cheh, stated to reporters moments after the D.C. PSC announced its ruling at its HQ hearing room in downtown D.C., that Exelon Corporation, and Pepco shareholders, were the sole beneficiaries of this bad decision, while D.C. ratepayers will be harmed.
The 2-1 DC PSC majority ruling defies the will of D.C.'s mayor, attorney general, and Office of People's Counsel, as well as its water department, and other parties to the proceeding, including member groups of the PowerDC public interest and environmental coalition.
Even the federal government -- the largest consumer of electricity in D.C. -- urged the PSC to reject Exelon and Pepco's latest proposal, citing dissent from D.C.'s local elected and appointed leadership, as well as the very narrow constraints of the PSC's previous rulings, requiring unanimity amongst all "Settling Parties," which is lacking. This begs the question, was this highly irregular, acrobatic D.C. PSC split-decision approval of Exelon's takeover of Pepco even legal?!
While the GSA is an important intervenor in the merger docket, it did not sign onto the settlement deal itself, saying it did not have time to review the deal before the merger docket was reopened.
This is quite an indictment of the D.C. PSC process. If the U.S. federal government General Services Administration (GSA), an official party to the proceeding, with a large budget and full staff of competent financial, legal, and technical experts, can't keep up with this D.C. PSC proceeding's roller coaster ride, how are D.C. ratepayers, non-profit groups, etc. supposed to?! This process has thus lacked essential, adequate openness, transparency, and accountability.
It appears that Exelon's previously pledged, even token commitments towards renewables, efficiency, micro-grids, etc. -- to sweeten the deal -- are now at risk. At least a portion of those funds will now likely be re-directed to cushion the blow of major rate hikes for D.C. residents, many of whom barely get by on fixed incomes, that could hit as early as this summer.
D.C. Mayor Muriel Bowser, who had recently supported Exelon's takeover, so long as Exelon's planned 45% rate hikes would not hit till 2019 (after her 2018 re-election campaign), recently reversed herself and opposed the Exelon takeover.
(Incredibly enough, under the previous terms that Mayor Bowser supported, Exelon was planning to charge interest on its coveted, accumulating rate hike, which would then have been applied in 2019!)
D.C. Mayor Bowser released a short statement in response to the D.C. PSC approval of the Exelon takoever of Pepco:
“It appears the Public Service Commission favors government and commercial ratepayers over DC residents. Instead of a three year rate increase reprieve that we negotiated, it appears that DC residents will be hit with a rate increase as soon as this summer.”
But the mayor's previous support had created a Frankenstein's monster, that got out of her control. The question now that the D.C. PSC proceeding roller coaster ride is apparently over, and this juggernaut has been set loose on the region, is how much damage will be done to Washington, D.C., including ratepayer pocketbooks (especially for those on fixed incomes, such as low income households, seniors, etc.), and local laws and policies envisioning a clean, green, sustainable energy future?!
D.C. Office of People's Counsel (OPC) Sandra Mattavous-Frye expressed deep concern "that residential consumers are losing out on the guaranteed rate protections OPC has sought since this case began two years ago," and added:
"Despite the Commission's perplexing approval of a proposal that OPC and most of the other settling parties rejected, the Office of the People's Counsel is fully prepared to continue to aggressively advocate for ratepayers and fight to ensure that rates remain affordable for consumers, particularly for our most economically vulnerable residents...".
D.C. Attorney General, Karl A. Racine, also restated his opposition to the now-approved Exelon takeover of Pepco:
“As we have previously stated, the only Pepco-Exelon merger agreement we believe is in the public interest is the agreement our office originally helped to negotiate, along with the Office of People’s Counsel and the Mayor’s office, last fall. We do not believe the agreement the Public Service Commission approved today provides enough benefits or protections for residential, including low-income, ratepayers.”
As warned by Beyond Nuclear and many others for the past many months and even years of this D.C. PSC proceeding, Exelon will now gouge ratepayers not only in D.C., but from NJ to DE, MD, and VA, across Pepco's service territory. The public utility commissions in those states had already blessed the highly controversial merger. So too had FERC (Federal Energy Regulatory Commission) and DOJ (U.S. Department of Justice). D.C. was the last chance to stop it.
Opponents to the merger now have 30 days to file a motion for reconsideration with the D.C. PSC.
Those steady Mid-Atlantic ratepayer funds will almost certainly be funneled by Exelon to Illinois, to help prop up five dirty, dangerous, expensive, and uncompetitive atomic reactors that otherwise might have closed for good. Exelon may even try to foist its astronomically expensive nuclear decommissioning bills on its newly acquired, far flung empire of captive ratepayers.
Exelon's Ginna nuclear power plant in upstate NY would also likely already have been shut down, but for pricey surcharges being shouldered by Rochester Gas & Electric customers. AGREE is leading the resistance to that particular Exelon Nuclear bailout at ratepayer expense.
Thus, from NY to MD, PA to IL, Exelon Nuclear's fleet of two-dozen age-degraded atomic reactors is gouging ratepayers, like a herd of radioactive white elephants.
Exelon, the only company to be expelled from the American Wind Energy Association, is now no longer "just" the largest nuclear utility in the country, it is the largest electric utility in the country, after its highly controversial takeover of Pepco.
PowerDC has released the following statement:
"We are profoundly disappointed and saddened that the DC Public Service Commission has ignored the clear opposition to the proposed Exelon-PEPCO merger voiced by the District’s elected officials, community and business leaders, and residents.
"By approving the merger, the PSC has exposed our city to decades of higher rates, weakened its own ability to guide our city’s energy future, and helped ensure that DC will fall behind the rest of the US on clean, efficient energy.
“Our organizations and the citizens we represent will fight Exelon every step of the way to ensure that DC and the region do not suffer the same fate as Exelon’s other customers. And we will hold the PSC accountable for its actions in the months and years to come. The fight is not over.”
By clearing the path for Exelon to take over Pepco, the D.C. Public Service Commission has abdicated its responsibility to put the public interest before corporate profits. We are deeply disappointed that the commission discarded its well-informed and publicly supported position to reject the takeover.
This is a huge loss for consumers, a discouraging setback for the institutions entrusted to protect them and a sad commentary on how things are done in the District.
Interviewed by WAMU, D.C. PSC Chairman Betty Anne Kane, who cast the dissenting vote against the takeover, warned that the decision undermines D.C. laws and regulations that envision a clean, green, sustainable energy system.
To learn more about Exelon's takeover of Pepco, and other nuclear utility money grabs at ratepayer and taxpayer expense, visit Beyond Nuclear's Nuclear Costs and Nuclear Subsidies website sub-sections.
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As reported by the Baltimore Sun:
The deal gives Exelon the steady, regulated earnings of Pepco to help offset losses at its aging fleet of nuclear power plants across the country. It also follows a trend of consolidation within the U.S. utility industry as power companies face tepid electricity demand, low energy prices and rising costs to upgrade old equipment and comply with pollution regulations.
The Baltimore Sun also reported on remaining resistance to the takeover in Maryland:
Opponents of the deal in Maryland expressed disappointment that the D.C. commissioners removed what had been the merger's final hurdle.
Maryland Attorney General Brian E. Frosh "remains fundamentally opposed to the merger, because he believes it does not benefit consumers and it stifles efficiency, innovation and the adoption of alternative energy sources," spokesman David Nitkin said in an email.
Frosh plans to review the commission's ruling and determine any next steps.
Paula Carmody, the Maryland People's Counsel, said she expects the deal to come back to the Maryland Public Service Commission for further review. A clause in the Maryland commission's terms with Exelon and Pepco allows it to seek further benefits for utility customers in the state if the companies agree to more generous terms elsewhere.
"We will be pursuing all that we can on behalf of our customers to make sure they at least have equal benefits," Carmody said.
The Maryland PSC approved the deal in May based on conditions that included $100 bill credits for customers of Pepco in Maryland's Washington suburbs and its subsidiary Delmarva Power on the Eastern Shore. It was not immediately clear how the D.C. commission's terms compared with those imposed in Maryland, Carmody said.
Opponents of the deal plan to continue pursuing a legal challenge to Maryland's approval of the merger, Carmody said.
Last June, the Office of the People's Counsel, Maryland's consumer advocate, along with the Sierra Club and Chesapeake Climate Action Network, filed a lawsuit challenging the decision in the Circuit Court of Queen Anne's County, which is served by Delmarva Power. After a judge there rejected the lawsuit, the groups appealed to Maryland's Court of Special Appeals.
Exelon owns Constellation Energy/Baltimore Gas and Electric. Its headquarters in downtown Baltimore has been the frequent scene of protests, including against this takeover of Pepco, as well as the successful resistance of the proposed new Calvert Cliffs Unit 3 atomic reactor on the Chesapeake Bay, now cancelled. Exelon has shown its true colors after taking over Constellation Energy/Baltimore Gas & Electric several years ago. It has sought multiple, significant rate increases, all blessed by Maryland's Public Service Commission.
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Forbes coverage of this story includes:
In dissenting in February, Chair Betty Ann Kane wrote, “Exelon is not merging with Pepco, rather, it is acquiring it. The result is a structure by which Pepco would be owned and controlled in a manner that does not advance the public policy and law of the District of Columbia.”
The article also reports:
So, why is Exelon even interested in buying Pepco? To gain entrance into the Northeastern markets where Pepco serves and to improve its cash flows, which have been hurt by cheap natural gas that has eaten into its nuclear energy sales.
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Michael Mariotte, President of NIRS, has commented on Exelon's takeover of Pepco:
New on GreenWorld. Exelon: now the nation's largest electric utility http://safeenergy.org/2016/03/24/exelon-now-the-nations-largest/
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.”
Mariotte's blog includes this further questioning of the takeover approval's legality:
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 [see here Dissenting Opinion, Attachment A, pages 33-35 of 65 on PDF counter],
“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.”
