Photo by Justin Hoffman
We might have a new frontrunner for the Most Contentious Debate in D.C.: A proposed merger between energy companies Pepco and Exelon is drawing a healthy bit of criticism from the community.
A new analysis released today by the Institute for Energy Economics and Financial Analysis found that the deal “would expose customers to rate increases aimed at supporting Exelon’s struggling business model.” Furthermore, the analysis also concluded that the merger would “undermine” the District’s recent push towards green initiatives.
Under the merger, Exelon, which is the largest owner of nuclear power plants in the U.S., would acquire Pepco for a whopping $2.5 billion more than the net book value of their assets. Overpaying, the analysis says, would be bad news for D.C. residents because it would mean that Exelon “must earn returns high enough to justify the premium,” which means they’d raise the rates for customers in D.C.
The analysis outlines how Exelon’s business model is “struggling” and warns that they could significantly raise their rates for D.C. customers in order make up their losses. Furthermore, the analysis found that, with the merger, it would make it more difficult for the D.C. Public Service Commission to effectively regulate Pepco, thus threatening the city’s recent green and renewable energy initiatives.
Recently, opponents of the merger, which include over a dozen organizations and advocacy group, formed into a group called Power D.C. Their message is simple: The merger is no good for D.C.
“The merger reverses the District’s progress on local renewable energy and energy efficiency, and it moves decision making for the District’s grid from here in D.C. to a powerful corporation’s headquarters in Chicago,” the organizations of Power D.C. wrote in an open letter. “Exelon’s corporate interests are not aligned with the policy objectives of the District of Columbia, and Exelon’s acquisition of Pepco is not in the public interest.”
But not everyone is against the Pepco-Exelon merger. In a recent hearing, WAMU reports that many proponents of the merger, including representatives of many local businesses, are baffled by the opposition, saying that the merger could help boost the region’s energy capabilities, instead of hurting it.
“If people don’t like Pepco and they’ve been screaming and complaining about Pepco for years, here comes a remarkable solution to even vault us to the next level of reliability,” Greater Washington Board of Trade president and CEO Jim Dinegar said. “I actually just don’t get it. It makes no sense.”
You can read the full IEEFA report below:
