Wednesday, January 23, 2019

Environmentalists, Think Tank Urge Rejection of Exelon-Pepco Merger

By Ted Caddell


Mike Tidewell, director of the Chesapeake Climate Action Network (L), and Tyson Slocum, director of Public Citizen’s energy program (R), at an October 2014 press conference in Baltimore by activists opposing Exelon’s proposed acquisition of Pepco Holdings Inc. Already approved by FERC, the merger still must clear state regulators.

Environmentalists last week continued their campaign against Exelon’s proposed $6.8 billion takeover of Pepco Holdings Inc., with activists urging the D.C. Council to oppose the deal and a renewable energy think tank saying it would hurt both consumers and green energy.

At a council hearing Friday, environmentalists said Exelon power-generation investments would make it hostile to rooftop solar, unlike Pepco, which only distributes electricity. Approval of the deal is in the hands of the D.C. Public Service Commission but the council is an intervener in the regulatory proceedings and could influence regulators’ decision.

“They view renewable power and sustainability as a threat to their core business of selling electricity,” said Larry Martin of the D.C. chapter of the Sierra Club, according to a report in The Washington Post. “This merger is not contributing to the public interest.”

Mary M. Cheh, chair of the council’s Committee on Transportation and the Environment told the Post that the hearing had left her skeptical that the deal would benefit District residents.

No one from Pepco, Exelon, the PSC or the District’s Office of the People’s Counsel testified at the hearing. They are expected to appear at a hearing of the council’s Committee on Business, Consumer and Regulatory Affairs on Jan. 29.

Earlier last week, the Institute for Energy Economics and Financial Analysis joined the chorus of voices calling for rejection of the deal.

The Cleveland-based think tank, which supports reduced dependence on coal and other non-renewable energy resources, said in a Jan. 21 report that the merger would undermine D.C.’s renewable-energy initiatives.

It said the deal could mean higher rates for current Pepco customers because Exelon will need to earn returns to justify the $2.5 billion acquisition premium Exelon has offered.

Exelon “has been challenged in recent years by low wholesale power prices driven by cheap natural gas, reduced demand for power and the growth of renewable energy and energy efficiency,” wrote the report’s authors, Cathy Kunkel and Tom Sanzillo.

They wrote that if the acquisition is approved, Exelon will “acquire a stable earnings stream from Pepco’s regulated utilities that would help Exelon balance out the volatility of its merchant electricity generation business, which has proven susceptible to weakness in the competitive energy markets.”

“A merger with Exelon would also subject ratepayers to risks associated with Exelon’s aging nuclear fleet,” the report said. “Residents and businesses may be asked to accept rate increases and policy accommodations to assist Exelon with the management of aging nuclear plants.”

Exelon spokesman Paul Elsberg said the report contains some errors and draws incorrect conclusions.

“Customer rates will not increase as a result of the Exelon-Pepco Holdings merger and, in fact, by combining our companies, we will operate more efficiently and generate cost savings that will be passed on to customers,” he said Friday.

Elsberg said the two companies’ support for renewable energy will continue, noting that Exelon is the 11th largest U.S. wind producer and has made investments in solar, including the nation’s largest urban solar project in Chicago. “Our utilities will continue to facilitate customers’ installation of solar panels on their homes and businesses,” he said.

Kunkel said the study was not commissioned by any other group. She said the proposed merger drew the Cleveland think tank’s attention for several reasons.“IEEFA follows developments in the utility industry nationally,” she said Friday. “We see this case as part of a larger trend of major utilities moving increasingly towards regulated operations, and we also think it has important implications for renewable energy policy in the mid-Atlantic.”

The merger has already gained the approval of the Federal Energy Regulatory Commission and Virginia regulators. The staff of the New Jersey Board of Public Utilities has reached a settlement with Exelon that would give Atlantic City Electric customers $62 million in rate credits.

Exelon still needs the approval of Maryland, D.C. and Delaware. Public advocates in both states and the District have come out publicly against the merger under the current offer.

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