Bowser’s choice on Pepco deal may fore­tell D.C.’s energy path

The Washington Post Sunday - - METRO - robert.mccart­ney@wash­post.com

Dis­trict Mayor Muriel E. Bowser’s ul­ti­mate de­ci­sion on the con­tro­ver­sial $6.4 bil­lion Pepco merger will be an im­por­tant test of how far she wants to go in gov­ern­ing as a pop­ulist who stands up to wealthy, pow­er­ful in­ter­ests even if do­ing so disrupts busi­ness as usual in the city.

It also will help de­ter­mine whether the Dis­trict puts it­self in the vanguard of cities and states push­ing the na­tion’s largest elec­tric util­i­ties to em­brace so­lar power and other emerg­ing “green” tech­nolo­gies.

Bowser’s ad­min­is­tra­tion is close to strik­ing a deal with Chicago-based Ex­elon, the na­tion’s largest nu­clear energy pro­ducer, to try to sal­vage its takeover of Pepco. Bowser is ne­go­ti­at­ing now be­cause reg­u­la­tors at the Dis­trict’s Public Ser­vice Com­mis­sion stunned lo­cal busi­ness lead­ers and drew na­tional at­ten­tion by vot­ing 3 to 0 in Au­gust to re- ject the merger.

It is ex­tremely rare for reg­u­la­tors to kill such deals out­right over con­cerns about the po­ten­tial im­pact on the en­vi­ron­ment and con­sumers. Ex­perts in the field said they could not re­mem­ber a sim­i­lar de­ci­sion, partly be­cause reg­u­la­tors are fre­quently cozy with the in­dus­tries they’re over­see­ing.

Bowser (D) has op­posed the merger, say­ing Ex­elon didn’t pro­vide ad­e­quate guar­an­tees on af­ford­abil­ity, re­li­a­bil­ity and en­vi­ron­men­tal sus­tain­abil­ity.

But now her top aides are en-

gaged in pri­vate talks with Ex­elon and Pepco, seek­ing to ham­mer out a more at­trac­tive deal that the mayor could en­dorse. A Dis­trict of­fi­cial, who spoke on the con­di­tion of anonymity be­cause the ne­go­ti­a­tions are con­fi­den­tial, said they have made “real progress.”

The com­mis­sion could still re­ject a set­tle­ment, but that would be­come harder if Bowser changed sides. The merger has al­ready won ap­proval from the fed­eral gov­ern­ment and reg­u­la­tors in Mary­land, Vir­ginia, Delaware and New Jersey.

En­vi­ron­men­tal­ists and con­sumer groups are skep­ti­cal that Bowser’s team will ex­tract enough con­ces­sions to over­come their strong op­po­si­tion. In par­tic­u­lar, they say, Ex­elon is wed­ded to an old-fash­ioned busi­ness model that dis­cour­ages ex­pan­sion of rooftop so­lar in­stal­la­tions and other energy-sav­ing in­no­va­tions.

In crit­ics’ eyes, Ex­elon’s large in­vest­ments in nu­clear gen­er­at­ing plants give the com­pany a built-in in­ter­est in max­i­miz­ing elec­tric use over the long term.

“We want the util­ity to work as a col­lab­o­ra­tive part­ner with the Dis­trict to fa­cil­i­tate the in­te­gra­tion of re­new­ables,” said Anya School­man, ex­ec­u­tive di­rec­tor of DC So­lar United Neigh­bor­hoods. “That is what Ex­elon is not will­ing to do. They want a cash cow. They want to milk us dry.”

That ar­gu­ment car­ried weight with Dis­trict reg­u­la­tors, whose for­mal rul­ing ex­pressed con­cern that Ex­elon’s con­flicts of in­ter­est could in­hibit the city “from mov­ing for­ward to em­brace a cleaner and greener en­vi­ron­ment.”

On the cru­cial ques­tion of re­duc­ing out­ages, where Pepco’s record has been no­to­ri­ously bad, the reg­u­la­tors said Ex­elon’s pro­posal “would pro­vide lit­tle mean­ing­ful fi­nan­cial in­cen­tive” to meet re­li­a­bil­ity stan­dards.

Both the Dis­trict gov­ern­ment and Ex­elon de­clined to com­ment on their on­go­ing ne­go­ti­a­tions. In a state­ment, Ex­elon de­fended what it called its “strong track records for sus­tain­abil­ity and en­vi­ron­men­tal stew­ard­ship.”

The reg­u­la­tors’ rul­ing so dis­pleased the Washington busi­ness com­mu­nity that it took the rare step of launch­ing a ra­dio and news­pa­per ad blitz urg­ing re­con- sider­a­tion. Lead­ers of some char­i­ta­ble or­ga­ni­za­tions added their voices, partly out of con­cern that a rejection could end Pepco’s phil­an­thropic do­na­tions.

Busi­ness lead­ers said they wor­ried that if the deal col­lapsed, Pepco’s Dis­trict oper­a­tions would be­come an un­wanted or­phan that no other com­pany would wish to buy.

They also warned against send­ing a neg­a­tive mes­sage about the Dis­trict’s at­ti­tude to­ward out­side in­vest­ment.

“There’s a big con­cern that we’re hang­ing out the ‘Closed for Busi­ness’ sign in the Dis­trict of Columbia,” said James C. Dine­gar, pres­i­dent of the Greater Washington Board of Trade.

He and other an­a­lysts, on both sides of the de­bate, said Bowser’s han­dling of the mat­ter would be telling.

Reach­ing a set­tle­ment “would be huge” for Bowser, Dine­gar said. “She has a lot of re­spon­si­bil­ity on this one.”

In her first nine months in of­fice, Bowser has pur­sued a mid­dle course be­tween lib­eral or pop­ulist poli­cies and pro-busi­ness ones. She has pushed ini­tia­tives both to help low-in­come res­i­dents and pro­tect the en­vi­ron­ment as well as to pro­mote eco­nomic de­vel­op­ment.

The­mayor’s sig­na­ture pro­grams have been aimed at end­ing home­less­ness and in­creas­ing funds for af­ford­able hous­ing. She has also won praise from the Obama ad­min­is­tra­tion for com­mit­ting to raise re­liance on wind power to pro­vide elec­tric­ity for city build­ings.

At the same time, busi­ness lead­ers have been pleased that Bowser gave the Ad­vi­sory Board Co. hir­ing in­cen­tives of up to $60 mil­lion to keep its head­quar­ters in the Dis­trict. They have ap­plauded her strong back­ing to build sports fa­cil­i­ties in the city, in­clud­ing a soc­cer sta­dium for D.C. United and a bas­ket­ball fa­cil­ity for the Wizards and Mys­tics.

The Dis­trict of­fi­cial who spoke on the con­di­tion of anonymity sug­gested that Bowser might have re­jected the orig­i­nal deal with an eye to­ward gain­ing lever­age over Ex­elon.

“We think they have to re­ally im­prove what they had in the first ap­pli­ca­tion. Maybe we were just shrewd enough to make them come back with a bet­ter deal,” the of­fi­cial said.

But en­vi­ron­men­tal ad­vo­cates, who said they had been briefed on con­ces­sions that the mayor was pre­pared to make, are wor­ried that Bowser is about to cave by fail­ing to pro­tect the city’s long-term com­mit­ment to al­ter­na­tive energy. Re­gional Memo is an oc­ca­sional fea­ture that an­a­lyzes pol­i­tics and pol­icy in the greater Washington area. Aaron C. Davis con­trib­uted to this re­port.

D.C. reg­u­la­tors say Ex­elon’s pro­posal “would pro­vide lit­tle mean­ing­ful fi­nan­cial in­cen­tive” to meet re­li­a­bil­ity stan­dards.

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