By Suzanne Herel

D.C.’s largest consumer of electricity, the federal government, is urging the Public Service Commission to reject Exelon’s proposed $6.8 billion acquisition of Pepco Holdings Inc. unless the applicants revise their settlement to provide benefits for non-residential customers.

“The terms of the settlement agreement are not consistent with the public interest because there are no direct benefits … for commercial customers, and the [customer investment fund] benefit for residential ratepayers is less than face value,” the General Services Administration said in an initial brief filed Dec. 16.

It also called for a two-year rate freeze and a cap on Pepco’s cost recovery on the development of four proposed microgrids.

“While the $25.6 million residential base rate credit is provided to cover base rate increases occurring from the merger closing through March 31, 2019, residential rates will increase during that period, and the terms of the settlement agreement anticipate that the credit may be insufficient to cover all residential increases approved during that period,” GSA said, predicting that any benefit would be offset by an ensuing “rate shock.”

To blunt a rate hike, GSA proposes a two-year freeze of distribution rate cases, through Dec. 31, 2017.

GSA noted that the effects of the settlement stretch beyond the district. Federal customers, which represent 25 to 30% of Pepco’s annual distribution and load delivery revenue, pay their utility bills with money from taxpayers in all 50 states and the district.

In response to GSA’s filing, Exelon and Pepco released a joint statement saying, “All customers, including the GSA, will benefit from merger commitments now before the commission, including improvements in service reliability, investment in sustainability and the economy of the district and synergy savings that will go back to customers through rates that are lower than they would be absent the merger.”

GSA: Comments Should Count

GSA’s comments came after the deadline for the agency to become a legal part of the case. But it asked the PSC to afford it as much weight as those from other intervenors, pointing out that it was given party status in the beginning of the proceedings and participated in settlement conferences ordered by the commission.

It also had filed a motion against re-opening the case after the applicants submitted a settlement agreement reached with Mayor Muriel Bowser’s administration and opposed the truncated rehearing schedule, saying it didn’t give the non-settling parties enough time to prepare an informed response.

Regardless of deadlines, comments continue to pour in to the PSC, which has said the case has received the most public input of any in the commission’s more than 100-year history.

Among them are more than 40,000 signatures of district residents that Exelon and Pepco collected in support of the merger as well as resolutions from neighborhood groups opposing the deal.

The merger, which would create the nation’s largest utility, was rejected in August by the D.C. PSC after being approved by FERC and regulators in Delaware, Maryland, New Jersey and Virginia.

In early October, the applicants reapplied with a settlement supported by former critics — Bowser, People’s Counsel Sandra Mattavous-Frye and Attorney General Karl Racine — that included $78 million in public benefits. (See Mayor’s Settlement Puts DC PSC on the Spot in Exelon-Pepco Deal.)

Bowser Comes Under Scrutiny

Last week, Bowser’s reversal was hit with a new volley of criticism when radio station WAMU reported that the head of a political action committee formed by her supporters had been hired by Exelon to lobby city officials to support the merger.

FreshPAC was able to skirt fundraising limits due to a loophole in D.C. law. It was disbanded in November after being accused of creating a “pay-to-play” political environment.

Records show that Exelon hired the committee’s chairman, Earle “Chico” Horton III, as a lobbyist on Sept. 30. The settlement was made public Oct. 6.

The Washington Post editorial board called on Bowser to release emails and other materials documenting the negotiations that went into the settlement.

“There is nothing illegal, or all that unusual, about companies hiring lobbyists with connections they think will serve their interests,” the Post wrote. “But what is legal is not always right, and the fact that someone who was raising thousands of dollars to advance the mayor’s interests was at the same time carrying water for a company that wanted something from the government is more than unseemly.”

The PSC is expected to render its decision in early 2016. (See Exelon, Pepco Make Final Case for Merger in DC PSC Hearings.)

A decision also is pending on an appeal of the Maryland Public Service Commission’s 3-2 vote approving the merger.

On Dec. 8, the Office of the People’s Counsel and the Sierra Club argued before Queen Anne’s County Circuit Judge Thomas Ross that the merger was not in the public interest. He is expected to issue an order on or around Jan. 8.