5 Questions for the CEO Trying to Take Over Pepco
March 30 marks the beginning of evidentiary hearings in Washington, D.C. on the controversial proposed acquisition of Pepco by Exelon.
The nearly $7 billion proposed acquisition, announced in April of last year, would give Exelon a near monopoly in the region and shower shareholders with a $1.8 billion windfall at the expense of Pepco customers and the District’s clean energy goals.
The hearings offer the opportunity for intervening parties to directly question Exelon and Pepco senior executives on the proposed deal. The first day of hearings will be occupied by cross-examination of Exelon’s CEO, Chris Crane.
Here are five questions Crane should be asked:
1) Will you direct Exelon to use its political heft and influence to lobby against policies and initiatives that promote clean energy in the District?
With its ambitious clean energy goals and burgeoning rooftop solar movement, the District needs to know where Exelon stands.
Exelon is notoriously hostile to renewable energy – because renewable energy directly competes with the company’s fleet of nuclear reactors – and not shy about it. The company has been a leading voice against federal incentives for wind energy – leading to the Exelon’s ouster from the American Wind Energy Associations board. [i] At the state level, this overt opposition to clean energy plays out through direct lobbying to defeat bills like the modest community renewable bill introduced in Maryland last year (HB 1192)[ii] or the bill that would have enabled energy generation using poultry litter as a feedstock (SB 521).[iii] Notably, Pepco did not oppose either one of these efforts.
Another way is through direct lobbying to boost nuclear power, often at the expense of renewable energy. Last year, Exelon lobbied for a resolution (HR 1146) before the Illinois General Assembly that would have allowed the company’s nuclear plants in that state to receive “clean energy credits” just as solar and wind do. This essentially would have shifted support away from those renewables in favor of Exelon’s nuclear fleet, which comprise 52 percent of its generation assets.[iv]
2) How many Pepco employees will lose their jobs as a result of the takeover?
Exelon plans to fire Pepco workers. Crane told reporters when the deal was announced last year that he plans “a reduction in the number of employees” at Pepco to create “synergies”.[v]
Backlash against the potential job losses forced Exelon to pledge not to fire any Pepco workers within the first two years of the merger and make a “good faith” commitment to hire more than 100 union workers in Washington, D.C., in the first two years after the deal is sealed. Evidentiary hearings in Maryland revealed that those new job commitments were actually additional hires to fill positions that will become vacant due to retirement.[vi]
3) Why is this deal designed to line the pockets of shareholders and executives while shortchanging customers?
Pepco shareholders are the big winners if this takeover is pushed through. Exelon is paying more than twice Pepco’s value, which would give Pepco shareholders a $1.8 billion windfall.[vii] And shareholders aren’t the only ones who stand to gain from this deal. According to testimony of the D.C. government’s expert witness, John Wilson, Exelon intends to finance the deal on the backs of ratepayers and even walk away with an annual $50 to $56 million surplus, which Exelon plans to pocket instead of using to lower customer rates.[viii]
Meanwhile to appease regulators tasked with protecting customers in this deal, Exelon has offered a Customer Investment Fund that would give Pepco customers a one-time credit of $132, enough to cover only one electricity bill.
4) Will Exelon seek to tax customers to fund the corporation’s charitable donations?
A recent Chicago Tribune investigative report found that a portion of each utility bill issued by Commonwealth Edison, Exelon’s Illinois based utility, included electricity delivery rates that were used for charitable donations. The utility’s donations totaled $60 million over the past eight years, “millions of dollars” of which were directed to the “politically influential” with “power to aid the state’s largest utility” or to those with “close ties to executives of ComEd or Exelon.”[ix] Exelon even shuttled Illinois ratepayer-funded donations to out-of-state charities in Maryland and Pennsylvania.
ComEd spent $10,000 of ratepayer money to help fund a 2012 cocktail reception where its chief executive Anne Pramaggiore received a “Woman of Achievement” award. World Business Chicago, Mayor Emanuel’s economic development group and whose board Chris Crane serves on, received $736,000 from customer bills. Ratepayers paid $27,000 for a 2013 golf outing hosted by members of the Illinois Legislative Black Caucus, the newspaper found.[x]
We’ve already seen how Exelon leverages charitable giving in the District. Exelon used its promise to continue the same level of giving awarded by Pepco to “encourage” recipients to attend public hearings on the deal and read statements of support for the merger.
5) Why is Exelon unable to meet the District’s reliability goals?
Unlike Pepco’s current plan to reduce the number of power outages, Exelon’s commitment includes no targets for the next several years. Its proposal would not bind it to any reliability target until the end of 2020 – and even then, its goals are less stringent than the annual standards already proposed by Pepco, according to a brief filed by Maryland’s Energy Administration with the MD Public Service Commission. [xi]
Exelon expects customers to bear the costs of these little too little, little too late goals. In that brief, the Maryland attorney general noted that Exelon’s proposed reliability budget “is no more than a promise to seek Commission approval to raise rates even further if Exelon needs more money than it thought – which is likely.” [xii]
The hearing is open to the public and begins at 10 a.m. at the D.C. Public Service Commission – 1333 H Street NW. Come let Exelon now we watching.
Allison Fisher is the Outreach Director for Public Citizen Energy and Climate Program
[iii] Initial Post-Hearing Brief of the State of Maryland and the Maryland Energy Administration, March 3, 2015, Page 32.
[vi] Initial Post-Hearing Brief of the State of Maryland and the Maryland Energy Administration, March 3, 2015, Page 54.
[vii] Direct Testimony of Michael L. Arndt, December 8, 2014, Page 30.
[viii] Direct Testimony of John Wilson, November 3, 2014, Page 8.
[xi] Initial Post-Hearing Brief of the State of Maryland and the Maryland Energy Administration, March 3, 2015, Page 2.