DC should municipalize its energy utility and embrace public power

Published July 1, 2023

This piece was adapted from a speech delivered outside Pepco HQ as part of MDC-DSA’s Walking Tour of Plutocratic DC: Power and Capitalism. 

Welcome to the headquarters of Pepco, your favorite — and only — electric utility in DC. You may know them from sending them your money the first of every month, but you may not know about some of their other activities: such as jacking up the rates you pay, strong-arming the city government into approving a merger that enriched the investor class, bankrolling DC’s police force, and exacerbating climate change.

Pepco's Corporate lair in downtown Washington

You may have heard the term “rentier capitalism” before — Pepco  could be considered even more of a rentier than a literal landlord or a royal family paid for all the petroleum in their country. Pepco depends on government regulations and approval to be a rentier over our electricity bills. But this is also its vulnerability: we can take command and redirect Pepco’s energy and money for the public good.  

Pepco is a regulated monopoly. In other words, DC residents have no choice but to purchase their electricity from Pepco. Consider, for instance, that every month I pay $50 or more to Pepco for my one-bedroom apartment. Some of you may pay much more if you live with roommates or families. No matter who you are, we all depend on this private company for this essential public service. 

The DC Public Service Commission oversees Pepco’s operations and supposedly guarantees that consumers receive service at reasonable costs. However, these regulations don’t stop Pepco from making a hearty profit at DC ratepayers’ expense: After Pepco made $380 million in profit in 2020, it was granted a $108.6 million rate hike while holding $25 million in debt from 1 in 6 District residents.

As is too often the case, it is DC’s most vulnerable residents who suffer the most from Pepco’s for-profit model. Pepco’s high energy rates and unforgiving payment policies leave many residents in a cycle of late payments and under constant threat of shutoffs. A staggering 83.5% of low-income residents owe utility debt, according to Pepco’s own 2021 data. It’s not as if Pepco needs this debt to be paid back to make a profit: Pepco’s parent company Exelon paid nearly $4 billion in total dividends to shareholders over the past three years, compared to the total of just $78 million in utilities debt held by customers across five states and DC over the same period. Preventing these power shutoffs would have cost just a fraction of Exelon’s profits. And since the pandemic-era moratorium on utility shutoffs ended last spring, DC residents are once again at risk of having their power cut so that Pepco makes a buck.

And Pepco won’t stop raising rates. On June 4, 2021, the DC Public Service Commission caved to Pepco’s pressure and approved a $108.6 million rate increase falling squarely on the shoulders of DC residents. To put that into perspective: this rate hike will increase consumer utility bills an average of $41 every single year by 2025. The DC Office of the People’s Counsel strongly condemned the rate hike as “excessive” and “unprecedented.” 

We already have a cost of living crisis in DC, and Pepco wants to make it worse: We're already paying too much in rent, too much for our healthcare, too much for our water and our gas, and Pepco wants to keep raising their rates on us. 

Pepco is owned and controlled by a multinational corporation at the expense of the public good

One of the most powerful corporate interests in the District is Pepco’s parent company, Exelon. If you’ve seen a Pepco service truck around town, you’ll notice that Pepco is described as “an Exelon company.” Exelon became the biggest electricity company in the United States when they bought Pepco for $6.9 billion in 2016. This merger is an illustrative example of the interwoven and often nefarious relationship between philanthropy, policing, and government in DC. 

Pepco's newest logo following its purchase from multi-national utility holding company, Exelon.

The Pepco-Exelon merger should not have happened. When it was first proposed in August 2015, DC regulators said it wasn’t in the public interest. The DC Council and other notable public figures, including the Maryland Attorney General, publicly opposed the merger for several public interest reasons: The merger would harm service reliability, raise utility bills, and skimp on providing renewable energy to meet DC’s sustainability goals. At the time, Exelon was a large electric utility in the upper Midwest and Pepco was the main electric utility in this region and in other parts of the Mid-Atlantic. The merger created an even larger corporation with the potential to wield its monopoly across the entire northern US, and everybody knew it.  

The shareholders and managers that controlled Exelon and Pepco pulled out all of the stops to ensure that the merger was approved. First, and maybe worst, Pepco bludgeoned local organizations into publicly supporting the merger by threatening to withhold its charitable giving. At a press conference during the initial merger announcement, Pepco stated that if the merger wasn’t approved, its charitable giving — roughly $2 million a year in the District — could dry up.

Exelon, meanwhile, promised to keep donations flowing for at least the next decade if the merger was approved. This prompted more than 30 local organizations, including churches, to start lobbying regulators directly in support of the merger for fear they would lose a substantial part of their budget. This is an egregious example of the “nonprofit industrial complex” laundering the political needs of our local electric monopoly. 

Public opposition to the merger was fierce. While 1,500 DC residents, 27 Advisory Neighborhood Commissions (ANCs), 26 community organizations, and 4 Councilmembers opposed the merger publicly, Exelon countered with a list of businesses and organizations that supported the merger, a list that included almost exclusively entities that they funded. Near the top? The Washington DC Police Foundation. 

Pepco's power creep

The cozy relationship between the DC Police Foundation and Pepco goes way back. As early as 2013, a Pepco executive sat on the Foundation’s board of directors. Pepco donated to the Foundation in 2015 and continued their contributions after its open support for the merger. Exelon has continued to fund police foundations in DC and in other cities where it has subsidiaries. Today, Pepco’s Chief Executive Officer J. Tyler Anthony sits on the DC Police Foundation’s board of directors alongside familiar faces like Mark Tuohey, the attorney who oversaw the Pepco-Exelon merger negotiations when he served as District Mayor Muriel Bowser’s chief legal advisor. Pepco, DC’s leaders, the police―they’re all connected.

The DC Police Foundation is just one link in a chain that makes up Pepco’s broader effort to cultivate power and influence in DC politics and culture. Representatives of powerful corporations — including Geico, SunTrust, Verizon and PNC — that work with Pepco and prop up the DC Police Foundation also hold seats on powerful local boards, such as the Economic Club of Washington, the Greater Washington Board of Trade, and the DC Chamber of Commerce. This web of influence illustrates how Pepco can utilize corporate philanthropy and corporate-civic alliances to burnish its image and protect its interests without shifting its business model.

Despite these tactics, the first vote by the DC Public Service Commission declined the merger. Not to be deterred, Exelon then turned to DC Mayor Muriel Bowser and other city officials to strike a deal that included $78 million in payments: a one time payment of $39.6 million for residential ratepayers and another $39 million in payments to the DC government and other settling parties.

With Exelon’s money in hand, the DC Public Service Commission approved the merger on the second vote, thereby creating the largest utility in the United States and fundamentally shifting ownership, control, and decision making authority over our electricity to a corporation hundreds of miles away. Once the merger was approved, Exelon bought and stopped trading of all of Pepco’s stocks, effectively dissolving the company. This immediate payout was a blatant violation of Public Service Commission Rules that give affected parties 30 days to petition for reconsideration. But it was great for executives: Exelon handed a $1.6 billion windfall to Pepco’s shareholders, the lion’s share of which went to Pepco executives. Pepco’s CEO at the time cashed out nearly $7.5 million in Pepco stock.

The larger contours of this situation aren’t too different from what we’ve just seen at City Center — the cold, expensive luxury-branded tax shelter just down the road from Pepco’s lair. In both cases, decision-making over our public spaces and our workplaces has been surrendered to unaccountable and profit-hungry investors who can’t be bothered to care about how their actions impact people so long as they make their bottom line. The officials in DC’s government who give them a pass are in the same set of people who wouldn’t bat an eye at Pepco’s shady dealings―to them, that’s just the price of providing public services.

Now, 8 years later, everything the critics had said about the merger has played out. After the one-time $39.6 million payment the Mayor negotiated dried up, ratepayers were on the hook for rate increases that resulted from the merger. And these rate increases have been sharp. In June of 2016, right after the merger was approved, Pepco requested a 5 percent rate increase, increasing utility bills by an average of more than $4 per month. This was the first rate increase request since 2013. And rates have been increasing ever since: in December of 2017, rates increased by an average of $7.50 per person per month!

More recently, Pepco proposed increasing its fixed monthly charge on residential customers to $22, which would be the one of the highest in the nation. This is rentier capitalism, where all of Pepco and Exelon’s profits come from being in a position where we can’t negotiate. They know it too: This pricing power is why they fought so hard for the merger. 

Pepco impedes energy justice

In addition to holding our wallets hostage, Pepco is also holding us back from achieving our climate goals. DC has some of the most ambitious climate plans in the nation, including the goal of 100% renewable energy by 2032 through the Clean Energy DC Act. However, the continued consolidation of our utilities to companies that put profits, CEO paychecks, and fossil fuel infrastructure first stand in direct opposition to climate action that the District must urgently take.

Pepco and Exelon have been loud and proud in their opposition to public interest in stopping climate change. During merger proceedings, Exelon testified that it would lobby against progressive policies like community solar and net metering. Meanwhile, they have opposed net metering policies favorable to renewable energy in their home state of Illinois and lobbied against wind energy tax credits. 

The failure of Exelon and Pepco to support the buildout of renewable energy infrastructure is grossly apparent when you take a look at its energy generation mix. In 2021, Pepco supplied DC residents with an energy mix that was only 6% renewable, and the remaining 94% from nonrenewable sources like natural gas and coal. Pepco hides its violation of DC’s Clean Energy Act by paying compliance fees and purchasing renewable energy credits, which does nearly nothing to green our region. Pepco is buying indulgences rather than creating a green energy future. 

What’s more, Pepco remains painfully slow at approving rooftop solar interconnection requests while charging residents up to $20,000 for the service. Last year, DC’s Attorney General and the Office of the People’s Counsel found that Pepco overcharged more than 6,000 rooftop solar customers in DC alone! And out of the 100,000 low-income DC households that are intended to install solar power through the DC Solar for All program, Pepco has only managed to serve 364 households. Pepco’s systematic mismanagement of the community solar program was so egregious that DC’s attorney general filed a complaint against them last year. The lack of ambition to meet renewable energy goals or achieve equity in rooftop solar distribution―all while rates rise for residents and Exelon executives get richer―is shameful. 

The case for public power

DC residents deserve better than Pepco, Exelon, and other companies that put profit over people. Here's an alternative: an energy democracy through public ownership of DC’s electric utility―a publicly controlled power company directly accountable to the people it serves.

Public power allows us to do three things that Pepco won’t. First, we can take control of where our energy comes from, starting the process of divesting from fossil fuels and securing more renewable energy for DC residents. We must do our part to fight climate change, and we deserve a utility that will work with us, not against us, to achieve a greener grid.

Second, rather than send billions of dollars in dividends and executive compensation to investors who don’t care about us, we can lower utility bills for all residents, cancel utilities debt, and end shutoffs. Access to energy is a human right, and we ought to start acting like it. 

Third, we can have a say in our city’s future. We can ensure environmental justice by giving communities control over substation placement and infrastructure development. We can ensure decent working conditions for power sector workers. And, most importantly, the utilities that serve us will be answerable to us, not to Wall Street. We believe in public ownership because we trust our neighbors to better understand and defend our needs than some faceless cabal of dividend hunters.

Taking control of our electric utility is possible, but it will require a concerted, multi-year effort in order to achieve. Focused political and electoral pressure on the DC Council can motivate legislation that takes power out of Pepco’s hands. As the conservative bloc on the DC Council slowly erodes in the face of a bold and united left in the city, so too does Pepco's control and influence over power in the District. There is a model: The socialists of New York have already charted a model for passing landmark utility socialization through its multi-year effort to pass the the Build Public Renewables Act.

The DMV fight against Pepco and Exelon is being wired by the We Power DC Coalition, which had been approved by the membership of the Metro DC DSA as a priority campaign for 2023. With the funding and infrastructural support afforded by the DSA's support and incorporation, the dedicated and growing cohort of local organizers are charging up to shock Pepco and Exelon out of the city.

If you’re interested in getting involved in We Power DC's collective movement, show your support by signing the public power pledge at wepowerdc.org. A better DC is possible. A greener DC is possible. And we’re helping fight for it.

Learn more about DC's public power campaign:

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