The U.S. agency that pays the government’s electric bills excused itself from its role in key hearings critiquing the Pepco-Exelon merger Wednesday, angering critics who had looked at the General Services Administration as the best hope to stop the deal.
Environmentalists and good-government groups have opposed the merger as bad for ratepayers and the environment. They saw the GSA and its deep bench of federal lawyers and technical experts as the only party remaining that had not supported the merger and also had the capabilities to effectively question the $6.4 billion merger.
After D.C. Mayor Muriel E. Bowser (D) and others in the city government reversed their positions and backed the merger in the fall, the District’s Public Service Commission launched an expedited second review — condensing its evaluation into weeks, instead of months — and said it would issue a final decision early next year.
The GSA, which purchases power for U.S. government buildings — and therefore buys more energy in the nation’s capital than anyone else — had effectively become the voice of American taxpayers in the mega-merger.
The GSA expressed opposition to the expedited review in October, but then it did not take a position on the merger before a key deadline in that review last month. On the day of the deadline, a top GSA official held private conversations with a senior negotiator for Bowser, who has sought to corral support for the deal. But that GSA official, Deputy Administrator Adam Neufeld, said the private talks did not influence the federal agency and said the GSA would fight in other, more appropriate arenas against any rate increases that could cost taxpayers.
“The short-circuited timeline meant that we were doing a lot of work up to the last minute — to make sure we had the most reasoned, articulate response,” Neufeld said. “We were unable to get a good enough document for this whole agency to stand behind.”
The GSA further confounded opponents of the merger Wednesday when it asked to be excused as the PSC began a crucial, two-day hearing on the merger.
The GSA is an official party to the proposed deal, accounting for some 35 percent of all commercial electric accounts in the District. But the night before the PSC hearing, it sent a letter to the commission requesting that its lawyers be excused from attending — a break with 18 months of being closely engaged in the process.
“The United States General Services Administration does not anticipate presenting evidence or cross examining witnesses at the Hearing,” the letter read.
Opponents called the move a dereliction of duty by the GSA and said it was the latest example of onetime critics becoming passive as Pepco and Exelon have stepped up an aggressive lobbying campaign for the merger.
“It’s shocking that the GSA stopped having an opinion about this terrible merger at the very last moment,” said Mike Tidwell, director of the Chesapeake Climate Action Network. “Previously and correctly, the GSA was opposed to the merger.”
In an interview Wednesday, Neufeld said he could not immediately offer an explanation for the GSA’s attorneys not attending the hearing. But he disputed that the agency’s attorneys’ critical comments in filings over the past year amounted to opposition, noting that technically the GSA had remained a neutral party.
Neufeld said the agency still intended to file late comments at some point, although they will no longer carry legal weight with regulators. He also said the agency would fight expected rate increases by the combined utility company if it seeks them next year.
The GSA’s decision to stand down at the two most important points in the merger case breaks with years of precedent by the agency, filings with D.C. regulators show.
It also runs counter to the GSA’s aggressive work as recently as this summer to elevate complaints about its utility costs — even outside official cases of proposed rate increases. GSA took a proposed surcharge on its bills for undergrounding certain lines to improve reliability to the U.S. Justice Department and got the Obama administration’s legal department to agree that the surcharge amounted to an illegal tax by the District on the federal government.
During previous rounds of hearings on the Pepco-Exelon merger, the GSA had also repeatedly questioned if the deal might perpetuate a rate structure that District regulators have acknowledged discriminates against federal taxpayers. The government and other large commercial energy users in the city now partially subsidize residential electric rates in D.C. at a cost to federal taxpayers of tens of millions annually, according to GSA estimates.
The GSA had also internally debated if it should demand a rate freeze for the federal government in the course of the merger, potentially worth millions, as well as provisions that would have limited the combined company’s ability to profit off of microgrid projects planned in D.C., the agency said.
But the GSA declined to pursue either, or the other issues it had raised at the two most important points in the new merger review.
Anya Schoolman, founder of the Community Power Network, a small nonprofit organization that has told the PSC it will not have the resources to question Pepco and Exelon on its own in the new review process, attended Wednesday’s hearing and said she was sorely disappointed by the lack of critical review.
“GSA leaving — this has just killed us,” Schoolman said.
Without the GSA, none of the principals that had intensely questioned the deal previously were party to Wednesday’s hearing. That began to form an official record on the merger without the criticism that led the PSC to reject the merger in August.
In that ruling, the PSC said the deal was bad for D.C. ratepayers and for the city’s stated goal of encouraging development of renewable energy.
The deal was revived this fall by D.C. Mayor Muriel E. Bowser (D) under pressure from the utility companies and nonprofit organizations in the city that receive millions in philanthropic donations from Pepco.
Aides to Bowser secured concessions from Pepco and Exelon totaling about $70 million in temporary rate credits for residential customers and for city funds for green energy projects.
That won the support of the city’s advocate for ratepayers and Bowser urged, and the PSC agreed, to reopen the case, and to review the merger anew on an expedited basis.
But the deal had almost nothing in it for the government or federal taxpayers.
While the full motivation of top officials at the GSA for standing down on the merger remains unclear, a D.C. official said the decision followed a round of lobbying by the District.
Tommy Wells, the District’s director of energy and environment and a negotiator for the mayor on the deal, said he exchanged phone calls and text messages with Neufeld and spoke with another GSA official — senior adviser Anthony Costa — about a pilot project that the adviser was particularly interested in and that could be cleared to proceed under the merger.
Wells said he and Neufeld talked on the day of the filing deadline and that he made a two-part argument for the GSA to not to intervene further.
First, Wells said he noted that the agreement between the mayor’s office and the utility companies included a reference that it would not stop the PSC from beginning to address the agency’s perceived discrimination against federal ratepayers. Second, he said he made the case that pilot projects in the settlement for microgrids “would be good for” the GSA.
Wells said he and Costa had repeatedly discussed the potential for the GSA to get involved in such a project, potentially involving a new public-private partnership around a steam generation plant owned by the GSA and connected to the Smithsonian Institution.
“I put something in there, I tried to get something in there for everybody,” Wells said. “I told them we could prioritize you for one of these microgrids. . . . I do think they would be interested in that. . . . We are very interested in helping.”Costa referred questions to an agency spokeswoman.
Neufeld said the GSA would continue to work with the city on microgrids. He played down the significance of the private discussions with the mayor’s office.
Neufeld said he spoke with Wells as part of a broad final review of the GSA’s position on the merger before deciding whether the GSA should file comments before the deadline. The conversation lasted only a few minutes and was not the determining factor in the agency’s decision not to file, he said.
Rather, Neufeld said points that Wells raised added to a list of internal concerns that top agency officials already had about being able to finalize an agency position on the merger under the abbreviated timeline of the review.
Neufeld also said the GSA would continue to fight rate increases.
“The merger in its own right does not raise rates,” he said. “We haven’t changed our position in any way about rate increases.”
In the end, Wells said he came to the opinion that the GSA did not want to be the lone holdout in the deal, which has already been approved by regulators in four states and the Justice Department.
“I think they were reluctant to be the last ones, after the city went along,” Wells said.