Maryland’s attorney general, several environmental groups, some local governments and ratepayers are protesting a merger between Exelon and Pepco that would create one of the mid-Atlantic’s largest power generation and transmission utilities but could also stymie efforts to make energy greener and less expensive in the region.
Exelon, based in Chicago, already owns Baltimore Gas and Electric and operates the Conowingo Dam. Its plan to take over Pepco, which operates largely in the Washington suburbs of Prince George’s and Montgomery counties and has some business in Delaware and New Jersey, would make the company the largest power supplier by far in Maryland, controlling 85 percent of the state’s market. Pepco is the parent company of Delmarva Power, which serves much of Maryland’s Eastern Shore.
So far, the Maryland Attorney General, the Maryland Energy Administration, the suburban counties that Pepco serves and green energy companies have filed formal protests against the merger with the Maryland Public Service Commission. Exelon will need the commission to approve the deal. The commission will likely make a decision in early May. The Federal Regulatory Energy Commission has already approved the merger. So has New Jersey.
Exelon addressed some concerns and entered into a settlement agreement with Montgomery and Prince George’s counties as well as solar companies, trail enthusiasts and housing groups. The settlement included a $50 million investment in green energy. It also included bill credits for customers facing economic challenges, increased service reliability and energy efficiency, and agreement to develop more solar power in the District of Columbia suburbs. Exelon also entered into a settlement agreement with customers in Delaware and New Jersey, a company spokesman said.
It isn’t nearly enough, said Mike Tidwell, executive director of the Chesapeake Climate Action Network.
“Exelon is proposing nothing real on clean energy and energy efficiency. They will work to thwart clean energy in the future. They are not big promoters of clean and renewable energy. Eighty percent of their generation comes from nuclear plants.”
Exelon officials say the reputation that they are anti-green is undeserved. Exelon is one of the few companies that responded positively to the EPA’s proposed carbon emission guidelines. The agency’s Clean Power Plan would cut emissions from carbon 30 percent from 2005 levels.
Exelon executives criticized their competitors for stating such reductions couldn’t happen in a letter to EPA Administrator Gina McCarthy.
“While there is no doubt that these arguments will be reasserted in many of the comments that you will receive today, the industry data developed over the last six months demonstrates that their doomsday predictions are simply not correct.,” the executives wrote. “Indeed, this new data released by the nation’s grid operators has shown that the industry can immediately begin to control carbon pollution while maintaining electric reliability and at a cost in line with the typical increases that utilities themselves have charged customers over the past year.”
Exelon has made some decisions in recent years that have left the impression it opposes green energy, though. It operates several wind farms and has made big investments in solar energy, but it opposed “net metering” in communities around the District of Columbia. Current law allows homes with solar panels to sell power back to the grid, but Exelon insisted they still had to pay some fee to maintain the grid so that other customers who could not afford solar panels would not bear all the costs of grid maintenance. Exelon also took a stand against wind subsidies in Illinois because it made their nuclear plants less competitive.
Exelon owns 23 nuclear power plants. Pepco, on the other hand, has divested itself of power generation plants and owns only the wires that transmit the power. For years, it has been bedeviled with complaints about reliability, though the company has made improvements in recent years because of government and citizen pressure. Since it took over BGE, Exelon has improved the reliability, and restored power quickly after major storms.
“Improved reliability is really at the core (of this merger),” said Melissa Sherrod, Vice President of Corporate Affairs for Exelon. “There is an opportunity to leverage resources, and apply them where they re needed most.”
More than half of Exelon’s energy comes from nuclear power. Nuclear plants are expensive to operate, and inexpensive natural gas from fracking in Pennsylvania and West Virginia has made such energy a tougher sell these days. Though some environmentalists prefer nuclear energy to coal-fired plants, others are concerned about accidents, spills and disasters like the one at Three Mile Island.
Tidwell said his concern was not specific to Exelon, but to any company that holds a monopoly or near-monopoly in a state. In Virginia, for example, Tidwell said green energy is a harder sell than it has been in Maryland because Dominion is the dominant player and is focused on natural gas.
Even though Montgomery County Executive Isiah Leggett approved the settlement with Exelon, the county council still passed a resolution urging the commission to “mitigate serious risks to the public interest” by insisting, at a minimum, that rate increases be kept in check and clean energy be promoted.
Maryland Attorney General Brian Frosh was even less willing to mitigate his concerns. In a brief his staff filed jointly with the Maryland Energy Administration, Frosh said the state would derive no benefit from the nearly $7 billion deal, other than a $54 dollar per customer credit.
“The proposed acquisition introduces substantial potential harms to Pepco and Delmarva customers and to the State as a whole, which are not subject to meaningful mitigation. It likewise fails to offer adequate, tangible, incremental benefits to customers. The State urges the Commission to deny the application,” the brief said.
Frosh questioned Exelon’s job promises, its assurances that it would improve reliability, and the company’s lukewarm commitments to green energy and energy efficiency. The brief notes Exelon has only done what the law required, a development that is “not surprising” because renewable energy is a departure from their central generation model. The brief states several times that the state should reject the merger, and that it can’t be mitigated.
It’s unusual for the public service commission to flat-out reject a merger proposal, but the commission could put enough restrictions on it that Exelon would choose not to go through with the deal.
The deal could also fail for other reasons. In 2005, Florida Power and Light announced it was buying BGE. The next year, amid concerns about major job losses, the parties called off the merger.
Exelon is accustomed to concessions in exchange for permission. It made many when it acquired Constellation, the parent company of Baltimore Gas and Electric in 2011. Among them: a commitment to fund a $75 million manure-to-energy plant. Maryland is still trying to bring that plant to fruition.
Sherrod says Exelon “respectfully disagrees” with the Attorney General. She says the merger will lower rates, and that Exelon has long been committed to renewables. She added that, when the company merged with Constellation, Exelon initiated many of the settlement discussions. She said the company would be willing to settle with additional parties as the plans move forward.
“Of course,” she said, “Our philosophy is that we are always willing to come to agreement.”