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The District has a chance to stop Pepco, the local unreliable power company, from being bought by Exelon, the one power company in the nation that could make the homegrown outfit look good. So where’s the D.C. Council?
The Exelon acquisition has inspired activists to make Power D.C., a group who want the merger quashed or changed. Organizers have a long list of dream terms: a Pepco headquarters that stays in the D.C. area; rate cuts for seniors and the poor; solar panels for District government buildings; even WiFi from light posts in the poorest wards. But before they’ll get close to any of those, they’ll have to overcome Pepco’s deep ties in both the mayor’s office and the Council.
The acquisition, as it stands since it was announced last April, is a crummy deal for anyone who isn’t a Pepco or Exelon shareholder. People’s Counsel Sandra Mattavous-Frye told a Council committee last month that the current deal would mean a “woeful imbalance of risks and benefits” for ratepayers. She’s not the only person who thinks so. Ward 3 Councilmember Mary Cheh worries that Exelon’s business position would make the firm less likely to support the District’s renewable energy goals, since that could bring down the cost of electricity.
A study of the purchase from the Institute for Energy Economics and Financial Analysis found that the deal from Chicago-based Exelon, which overvalues Pepco by $2.5 billion based on the utility’s assets when the bid was announced, will pressure the company to raise rates on District customers. And then there’s Exelon’s aging nuclear plants, the largest fleet in the country, which could be financed by rate increases here.
“The deal, if it goes through, would expose customers to rate increases aimed at supporting Exelon’s struggling business model,” the report reads.
Exelon didn’t respond to a request for comment.
The Council doesn’t have an official role in approving the purchase, which will go in front of the District’s Public Service Commission. But a Council statement on the acquisition could help shift the PSC against the deal, or at least secure some more benefits for the District.
The potential purchase puts At-Large Councilmember Vincent Orange in an awkward spot. Not only does he run the Council committee that oversees the PSC and the People’s Counsel, but he worked for Pepco for three years as the company’s vice president for government affairs.
After losing his Ward 5 Council seat during a disastrous 2006 mayoral bid, Orange worked for Pepco from 2007 to 2010. In 2007, Washington City Paper reported that he might have violated rules against former city employees lobbying their colleagues when he tried to convince councilmembers not to back one of Cheh’s power plant bills. Orange claimed at the time that he wasn’t lobbying, and nothing came of it.
Orange came back to the Council in 2011, meaning he has a chance to muddy the Council debate over the acquisition. So far, he’s doing great. When Cheh planned a hearing on the environmental impact of the merger, Orange threatened to exclude Pepco, Exelon, and District agencies from his own hearing if they went to hers. (In fairness, this could also be chalked up to Orange’s oft-territorial approach to committee management.)
Despite being paid by Pepco for three years to literally influence the government, Orange hasn’t recused himself from holding committee hearings on the merger. In an email provided to LL by Orange, Council general counsel David Zvenyach writes that Orange doesn’t have to recuse himself as long as he doesn’t have a financial stake in the company. Orange’s 2014 disclosure form didn’t list any stock in the utility.
Even stranger, Orange is the landlord to one of Pepco’s top executives. When Orange went to Pepco, he took his former committee clerk, Donna M. Cooper. She’s continued to rise at the power company, most recently becoming Pepco’s regional president.
Cooper lists her residence at a house owned by the at-large councilmember in the 4300 block of 12th Place NE (Orange lives elsewhere). In August, she listed the address on a donation to Muriel Bowser’s mayoral campaign. It remains her residential address on her voter registration. Cooper and Pepco declined to comment.
For his part, Orange refused to explain the nature of his relationship with his former staffer or whether she pays him rent. He doesn’t list any financial agreement with Cooper on his disclosure form, but he does list the house. District utility customers hoping their at-large councilmember would look out for their interests in the deal face an ugly situation: either a top Pepco exec pays him rent every month, or they’re cozy enough that she doesn’t have to.
At least one councilmember does unquestionably have a personal interest in Pepco’s future. In a May 2014 financial disclosure, D.C. Council Chairman Phil Mendelson reported owning shares in Pepco worth $17,000.
In another sort of acquisition, Mendelson could just sit back and watch that stock turn into Exelon stock. But because Exelon is paying cash for Pepco shares—an attractive proposition for Pepco investors, since Exelon’s stock has been in a long-term fall—Mendelson will have to take just a lump of cash. Using Mendelson’s 2014 valuation, the 25 percent premium paid to stockholders would net him around $21,250 if the deal goes through.
“He can’t not get it,” says John Capozzi, an activist with Power D.C. “He can’t say, ‘I want stock in Exelon.’”
Mendelson tells LL that he’s following Zvenyach’s advice to not “personally or substantially” participate in Council work on the merger. If the Council votes on a resolution about the purchase, Mendelson plans to recuse himself. Ironically, Mendelson’s recusal could rob opponents of the deal of a potential ally.
Meanwhile, the executive branch has its own ex-Pepco lobbyist in Beverly Perry, Bowser’s senior advisor. A top government affairs exec for Pepco until she retired last year, Perry played a key role in Bowser’s transition as a go-between with Vince Gray’s administration even before Bowser won the general election.
Now, as Bowser’s advisor, she’s one of the new administration’s highest-paid appointees. Bowser hasn’t taken a public position on the takeover yet, but LL wouldn’t be surprised if her senior advisor still felt fondly towards the company. Since Perry hasn’t been in the government long enough to file a financial disclosure form, it’s not clear whether she owns Pepco stock.
A senior administration official tells LL that Perry has recused herself from discussions of the merger. Of course, the fact that LL couldn’t get someone to put their name on that claim shows that it won’t be easy to see whether Perry really doesn’t offer Bowser advice on the purchase.
That’s one part of Pepco’s resources that won’t make it onto the balance sheet, and that ultimately might make it seem like Exelon isn’t overpaying by so much: former ties to councilmembers and other city government employees. In the District, that’s not such a bad asset to have.
Update, 11:10 a.m.: Bowser spokesman Michael Czin confirms that Perry will recuse herself from Pepco-Exelon discussions in the mayor’s officer.
Photo by Darrow Montgomery