WASHINGTON, D. C. – Attorney General Karl A. Racine announced today that he has filed a brief with the D.C. Court of Appeals challenging last year’s decision by the District’s Public Service Commission (PSC) to approve a merger between Exelon and Pepco Holdings, Inc. on terms of the PSC’s choosing. The brief asks the court to direct the PSC instead to approve the merger on the terms that the Attorney General and others had negotiated with the companies to promote the public interest.
The PSC rejected a proposed settlement agreement with the utilities that had been negotiated by the District, the Office of People’s Counsel, D.C. Water, the Apartment and Building Association of Metropolitan Washington, several other parties which would have provided a number of important benefits for District residents.
That agreement, which OAG helped negotiate, protected residential ratepayers in the District from rate increases through the end of March 2019 and offered millions of dollars in other community benefits. The Attorney General and other District government officials objected to the alternative merger terms the PSC proposed and approved last year because it did not offer the same protections and benefits to District residents.
“Rather than accepting this carefully negotiated and balanced settlement agreement that we believe provided maximum benefits to District residents, the PSC proposed alternative terms for the merger against the opposition of the District and most parties involved,” Attorney General Racine said. “The agreement that the Mayor, our office, and the Office of the People’s Counsel helped broker was the product of an arduous negotiation process with the public interest in mind, but the PSC’s actions denied District residents the benefits of that process.”
Original Agreement’s Benefits
Benefits of the agreement originally reached included a $25.6 million fund to offset any increases to the distributional portions of residential customers’ bills until April 2019, and $32.8 million to be added to existing special funds created by the D.C. Council and administered by the District’s Department of Energy and Environment for energy efficiency and conservation and for assistance to low- and limited-income ratepayers.
PSC-Approved Merger Terms
The alternative terms for the merger the PSC approved, among other things, removed these key provisions of the settlement agreement and, instead, made any relief for residential customers in rate increases depend on the outcome of the PSC’s next rate case, which could diminish this offset for residential customers. Moreover, the alternative terms removed those funds that were to be added to programs administered by DOEE and, instead, placed most of them in an escrow account for programs for renewable energy and grid modernization under the control of the Commission.
Commissioner Willie Phillips dissented because he believed that the negotiated settlement agreement was in the public interest and that the PSC overstepped its authority in insisting on alternative terms because the role of the Commission was simply to determine whether the merger subject to the terms of the settlement agreement was in the public interest. He remarked that after the Commission laid out how the deficiencies in an earlier proposal, which it had rejected, could be corrected, the majority of the Commission “effectively moved the goal post in order to reject the settlement.”
The District has asked the Court to reverse the PSC’s orders rejecting the settlement agreement as a basis of the merger and imposing alternative terms. The District argues that those alternative terms simply displace terms of the settlement agreement that already satisfy the factors that the PSC uses to determine whether a merger is in the public interest. Moreover, some of the alternative terms are affirmatively illegal—notably, those establishing funds for renewable energy and grid modernization under the PSC’s control. The provisions giving the PSC control over renewable energy programs contravene the legislative decision of the Council in enacting the Clean and Affordable Energy Act, which terminated the PSC’s role over renewable energy programs and to transfer the administration of these programs.
The District’s brief (attached) further argues that, by establishing these funds outside of the appropriations process, the PSC has violated a key provision of the Home Rule Act that requires all District agencies, including the PSC, to deposit public moneys in the General Fund or a special fund established by the Council.
The District’s has asked the Court to reverse the PSC decision rejecting the merger under the settlement agreement and order the PSC to enter an order approving the merger under these terms or, at minimum, to remand the case to instruct the PSC to fully and clearly explain its actions.