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 reject 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 engaged 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 reconsideration. 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.
The mayor’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.
Aaron C. Davis contributed to this report.