DC Sierra Club Applauds District’s Denial of Pepco-Exelon Merger
PSC Order is Win for the Grassroots; Clear Victory for Clean Energy & Environment
This morning, in a victory for the environment and after months of deliberation, the DC Public Service Commission (PSC) issued a decision denying the request of the Exelon Corporation to purchase DC’s sole electric utility, Pepco.
The DC Chapter of the Sierra Club has fought the proposed merger given concerns that it would harm DC ratepayers, do little to advance DC’s environmental and clean energy goals, and was not in the public interest. Leveraging the power of grassroots support, the DC Chapter of the Sierra Club, along with a cross section of DC-based organizations, formed POWER DC, a coalition that worked to educate, organize, and fight back against Exelon’s takeover of the local utility.
According to the PSC, this “proceeding has generated more interest and more active participation by parties and interested persons than any other proceeding in the Commission’s more than a century of operations.”
“This is a major victory for the grassroots,” said Matthew Gravatt, Chair of the DC Chapter of the Sierra Club. “The Sierra Club’s work to highlight the environmental and community impacts of the proposed merger were a key part of this win.”
“DC has made a commitment to the preservation of environmental quality and the expansion of clean energy options; the PSC’s decision and the outpouring of public support is proof that clean energy and the environment are on the minds of District residents,” said Gravatt.
The PSC decision to deny the takeover states the merger is not in the public interest at “a time when our city’s leadership, at the urging of many residents, has mandated that the District must pursue a cleaner and greener future that includes more renewable energy resources and more distributed generation.”
Additionally, the PSC expressed its concern “about the inherent conflict of interest that might inhibit our local distribution company from moving forward to embrace a cleaner and greener environment.”
Larry Martin, past DC Chapter Energy Committee Chair, and expert witness against the merger in the evidentiary hearing, said “our focus on the environmental outcome of the decision hung on a provision unique in DC – that PSC decisions need to consider conservation of natural resources and preservation of environmental quality.”
Said Martin: “We made an excellent case that Exelon’s record on energy efficiency and renewables was incompatible with DC’s commitment to reduce greenhouse gas emissions and promote clean, renewable energy and efficiency.”
The Sierra Club is the oldest, largest and most influential grassroots environmental organization in the country. The Washington, DC Chapter comprises more than 3,600 members and supporters in Washington, DC and is actively involved in local conservation, clean and renewable energy, smart growth initiatives, and local elections; the Chapter hosts a wide range of environmental and conservation focused events, and provides numerous volunteer opportunities.
On December 3, the DC Chapter's Energy Committee lawyers submitted a briefing to the DC Public Service Commission (PSC) on a rate case by Pepco to increase its charges to DC residents for electrical service. The Sierra Club, joined by Grid 2.0 Working Group, argued that Pepco should be required to upgrade its grid infrastructure to improve reliability and enable broad-scale incorporation of renewable power. We argued that global warming has increased the likelihood of more frequent storms and power outages, and that before the PSC grants any further rate increase, Pepco should be required to improve its electrical grid design to move away from large fossil fuel generating plants toware decentralized distributed power, and thus protect and preserve environmental quality.
Pepco's request, submitted in March of this year, was to increase its authorized rate of return to investors and increase charges to ratepayers by $52 million. Pepco made this request less than six months after the PSC granted it a rate increase in 2012, and they have already announced plans to seek another rate increase in 2014.
To support our argument, we cited a 2009 study conducted by the U.S. Department of Energy on Service Reliability for Electric Utility Customers, which concluded that planning decisions to achieve reliability must be "economically efficient" rather than simply "keeping the lights on". We argued that Pepco's existing grid is increasingly unreliable and lacks resilience to severe weather (remember the Derecho storm of 2012) or basic provisions for DC's most vulnerable residents during power outages. Moreover, the current “radial design” of the grid is poorly suited to incorporation of distributed and intermittent renewable power (for example from solar panels on roofs or residents and businesses).
We presented industry data that places Pepco in the bottom quartile of rankings on reliability among U.S. utilities over the past decade. In 2003, however, Pepco paid record high shareholder dividends and employee compensation packages while it initiated a program of spending reductions. In 2005, Pepco reduced its staff, its maintenance, as well as its budget for equipment replacement and tree trimming for infrastructure. We pointed out that by 2012, Pepco was employing 58% fewer linemen than it had in 1992. This neglect of its infrastructure has caused Pepco to fall behind the rest of the country, so that Washington DC experiences 70% more power outages, and lasting twice as long as most other major U.S. cities. We further argued "piecemeal" smart grid investments have been inadequate compared to other U.S. utility companies. We argued that to meet the requirement of being "just and reasonable", Pepco needs to incorporate important social goals into its program, such as lifeline rates (subsidized rates for low income households), and environmental surcharges.
According to DC's Clean and Affordable Energy Act, the PSC is required to consider the conservation of natural resources and the preservation of environmental quality. This, we argued, would include the public and environmental health effects of CO2 emissions from fossil fuel combustion, the consequent threat of global warming, and the disruptions associated with a warming climate. However, the PSC has not enforced that provision, as Pepco has not adopted a comprehensive plan to mitigate global warming through support of improved efficiency, conservation, and use of renewables in its grid.
We believe that it is proper for the PSC to issue a directive or Order putting Pepco on notice that its past reliability performance is unacceptable and that routine rate increases will not be granted without better coordination and improvements to its infrastructure. The PSC should create a Workgroup that will require the development of a comprehensive reliability investment plan with recommended actions to be completed before Pepco can request any further rate increases. Pepco has failed to maintain or improve its electric grid for too long without proper recourse, and it has failed to address the risks of global warming for the reliability of its services. Stronger, tougher oversight is necessary now to bring our city up from the depths of grid futility to a position it should be in as a world leader in grid reliability.