DC residents: click here to call Mayor Muriel Bowser and tell her to prioritize her constituents over the expansion of Exelon's monopoly. Exelon all-but-promises it will raise your electricity bills if it merges with Pepco, and will likely limit your authority to choose renewable energy options! For the dirty details, read on...
Anyone who closely follows the world of political influence and hears the term "free markets" has come to understand that the phrase is not the sacred, concrete concept that its proponents make it out to be.
Here is Washington, DC, you tend to hear "free markets" used as a talking point by lobbyists who are protecting their clients from the natural competition that newer, more innovative industries pose to established industries. Rather than unrestricted competition for all, this beltway definition of "free markets" means "free for the company paying me, but not for anyone else."
The utility industry illustrates this perfectly, especially here and now in Washington, DC. Exelon, a Chicago-based utility holding company valued at over $28 billion, seeks to become the nation's largest utility company by giving our smaller, regional utility, Pepco, an offer it can't refuse.
Right now, the fight is focused on DC. Delaware and Maryland will also need to decide to reject or approve the proposed merger. Exelon's ultimate goal: force Pepco's customers, including the people of Washington, DC, to subsidize Exelon's expensive nuclear power plants in other states. DC residents have until May 26 to submit comments to the Public Service Commission.
The situation is juicy enough to make veteran reporters drool. Exelon's proposed merger is unpopular with:
- DC residents, who don't want their electricity bills increased by DC regulators overpowered by a bully conglomerate like Exelon that dumps millions into politics,
- The Tea Party, whose activists don't like anti-competitive monopolies that block homeowners from being able to make the choice of installing solar panels and selling excess electricity into the grid,
- And me, the Greenpeace guy who wants civilization to protect itself from climate change and nuclear plant accidents, who also doesn't want to be forced to pay an intruding utility company for its failing businesses.
Exelon wants to buy out Pepco's shareholders by offering $6.8 billion. That's $2 billion more than Pepco's actual value. DC would have to follow the federal government and some neighboring states who have already sold their constituents to Exelon. (See Dave Robert's prudent post for Grist, which I'll be referencing throughout).
The problem for Exelon is duping the DC community into buying the idea that this deal is good for them. Because it isn't.
At the heart of the proposed merger is Exelon's desire to add a stable revenue source to its operations, by buying up Pepco's electricity transmission and distribution operations. Unlike Exelon, Pepco doesn't generate electricity. Its operations transmit electricity throughout the region and distribute it to customers' homes, which offers a predictable revenue source set by regulators, rather than by competitive electricity markets. Dave Roberts explains:
"Exelon Generating Company's fleet is dominated by nuclear power - 81 percent of Exelon's total electricity in 2013 was nuclear. [...] Exelon Generation Company provides about 60 percent of Exelon's revenue. Now that it's going sideways, the parent company needs more stable revenue streams. And so, like many large U.S. utilities, Exelon is looking to shift resources from its merchant generators to its distributions utilities, where revenue, though smaller, is stable and predictable, because rates are established by public utility commissions (PUCs) for set periods of time."
Nuclear power was a bad bet for Exelon's shareholders. Exelon has made hug cuts to its operating income, the dividends it pays out to shareholders (down 40% in 2013, in stark contrast to its major competitors), and segments of the company have had their credit ratings downgraded by Moody's. (Seriously, read Dave Roberts' article).
That sucks for Exelon, but tough luck! DC residents are taking every opportunity to remind DC politicians that we aren't responsible for helping Exelon's shareholders, from all over the world, correct those mistakes. At least, we shouldn't be, but our fate is in the hands of DC's Public Service Commission (PSC).
The DC PSC is hearing from residents in unprecedented volumes. The DC People's Counsel Sandra Mattavous-Frye told the PSC in plain English, "The merger is not in the public interest." At a DC PSC hearing, Ms. Mattavous-Frye dismantled dishonest rumors from Exelon and Pepco, claiming the merger would increase electricity reliability for customers who have been affected by blackouts in recent years.
Yes, the blackouts have been inconvenient at best, but this is a sweetheart deal for Pepco and a desperate move by Exelon. Exelon's executives will say anything to bail out their nuclear power plants, and Pepco executives will say anything to make it that extra $2 billion come through.
Exelon's Byron nuclear power plant is one of several the company is considering closing due to high costs. Image: Nuclear Street
Exelon's Failed Nuclear Investments are Exelon's Problem...Until it's Your Problem.
At some point, most big companies make bad investments that lead to sagging income. Exelon squandered billions of dollars on expensive nuclear power plants that face competition from cheaper [fracked] natural gas, wind energy, and distributed generation solar power.
Because of how electricity markets operate in this country (it's complicated), clean energy isn't just competing with Exelon's dirty energy on a kilowatt by kilowatt basis. Solar, wind and other renewables drive down the price of wholesale power, which impacts Exelon by lowering its profit. When power can be purchased by less expensive providers, Exelon's nuclear energy is low on the list for grid operators choosing who to buy from in competitive markets.
Adding to the shadiness, Exelon relies on massive public subsidies to keep its nuclear fleet afloat, and that still isn't enough to make it cost-competitive with other energy sources. Exelon's solution? Attack subsidies for the wind industry, which unlike fossil fuels and nuclear has not enjoyed decades of massive taxpayer subsidies and tax breaks.
For a hint of how seriously Exelon takes consumer wellbeing when engaging in such politics, check out their effort to undermine fixes to Illinois renewable energy standard that could save ratepayers an estimated $280 million by 2017, and attempts to make its nuclear operations qualify for clean energy credits, which should be saved for genuinely renewable energy sources.
Any DC resident who supports the District's plan to reduce energy use and increase clean energy options should be wary of what Exelon and Pepco are saying.
On a personal note, my household pays Pepco through Ethical Electric, a company that lets us choose clean energy sources. In addition to ensuring we're supporting energy sources that don't poison people and manipulate the global climate system, we avoid supporting companies playing dirty politics.
In contrast, a look at Exelon's immense political expenditures in both state and national politics isn't encouraging. The energy giant spends millions to help elect candidates, and millions more on lobbyists to hustle those candidates for favorable policies.
Then there are the trade associations, with more lobbying and public relations. Exelon is a member of the Edison Electric Institute (EEI) and Nuclear Energy Institute (NEI), which they pay to run public relations campaigns convincing us to support Exelon's attempts to raise our bills. Exelon has sent tens of millions of dollars to EEI, NEI and other groups opposing clean energy (see Exelon's spending for 2012, 2013).
In this manner, Exelon fights against renewable energy policies at every turn, enlisting lobbyists and front groups backed by the billionaire Koch brothers to help dig in its heels. Even DC charities appear to have been bribed by Pepco to help support the merger, ironically supporting extra financial burden for different communities they support here in DC.
This flies in the face of Exelon's pledge to take "responsibility" for tackling climate change, not to mention its purported commitment to "strengthening and enriching the communities where we operate."
Who knew? Raising the electricity bills of your new customers to bail out your failed business is "enriching" them! Thanks a lot, Exelon!
If you, as a ratepayer in DC, Delaware or Maryland, do not feel responsible for fixing Exelon's mistakes:
- Add your voice if you live in Washington, DC - call the Mayor's office and tell her to reject the merger before May 26!
- Delaware is waiting for DC to decide, but go ahead and submit a comment to your regulators now!
- Read why Maryland's Attorney General is opposing the Exelon-Pepco merger, as is Maryland's Office of the People's Counsel, despite Exelon's attempts to buy off the people of Maryland.
- For more about how the current structure of our electricity grid incentivizes utility monopolies, and bad deals like the proposed Exelon-Pepco merger, check out Dave Roberts' Utilities for Dummies series.
Crossposted from Greenpeace's EnvironmentaLIST blog on the Exelon Pepco merger.