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PSC completes allocation of Exelon merger funds but questions linger over DEDO award

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The Delaware Public Service Commission allocated the final $4 million from the Pepco-Exelon merger to the state’s Energy Efficiency Investment Fund, ending a process in which one critic raised questions about whether the Delaware Economic Development Office should have been awarded another $6 million of proceeds from the merger.

PSC members voted unanimously on Oct. 18 to pay the $4 million to the fund after hearing arguments in favor of the plan from the Delaware Public Advocate.

The decision, which completes the allocation of an additional $27.1 million to Delaware as a result of “Most Favored Nation” funds from the March merger, leaves intact the PSC’s earlier decision to award $6 million to DEDO for supporting natural gas infrastructure – an initiative that was opposed by Jeremy Firestone, director of the University of Delaware’s Center for Carbon-free Power Integration, who has been a party to the talks.

Firestone argued that giving the funds to DEDO, which was not a party to the talks, fails to meet a statutory public-interest requirement, and risks an equivalent cut in funding from the General Assembly.

“Transferring $6 million to non-party DEDO for a jobs program also can hardly be considered to be within the confines of the public interest that this Commission is obligated and honored to uphold,” Firestone said in testimony to the PSC on Sept. 12.

He said it was unclear how the DEDO funding would create jobs, especially if the legislature took the opportunity to decrease the agency’s funding by the same amount.

Firestone cast doubt on the agency’s record of supporting the natural gas and electricity sector, arguing that it planned to subsidize the proposed but now-abandoned data center and gas-fired power plant at the University of Delaware, and subsidized the Bloom Energy fuel cell project, which he said has transferred costs to Delmarva Power ratepayers.

DEDO’s Director, Bernice Whaley, declined a request to be interviewed about the funding, and her office would not say specifically how the funds would be used.

“DEDO uses its financial resources to strengthen Delaware’s economy and grow employment through a variety of programs,” the agency said in a statement to Delaware Public Media on Oct. 20. “Because no final order has been issued, specific decisions concerning this funding have not been made at this time.”

The statement said DEDO did not participate in the discussion on allocating the funds but is “pleased” to receive the funding.

Delaware Public Advocate David Bonar, whose organization supported the DEDO funding, said his agency and others in the talks wanted to ensure that the merger funds went to a wide variety of recipients to advance the public interest.

Bonar said the DPA initially called for all of the additional merger funds to go to ratepayers in the form of lower electricity rates but finally agreed “in a spirit of compromise” to give some of the money to DEDO.

DPA, which represents consumers whenever PSC-regulated utilities seek changes in rates or the delivery of service, accepted that new natural gas infrastructure could have a beneficial effect for the state as a whole because it could help businesses with lower energy costs, Bonar said.

He rejected a proposal by Firestone to allocate $500,000 for the expansion of a network of electric vehicle charging stations – a proposal that was not supported by any of the other parties -- arguing that it would benefit very few people.

Not everyone got all they wanted from the allocation talks but the resulting compromise indicates the process succeeded, Bonar said. “If everybody comes away slightly disappointed, then it’s a good agreement.”

He defended the plan to develop natural gas infrastructure, saying that it currently exists only in some areas of New Castle County, but could benefit homes and businesses if a network of pipes was extended to the south of the state.

The DEDO funding will enable the design and implementation of the infrastructure to proceed over the next several years, he said.

DPA was persuaded to support giving some of the funds to parties other than ratepayers because ratepayers had already benefited from electric and natural gas credits, Bonar said.

“We felt that the ability to expand the rate base, and hopefully keep rates a little bit more stable, was the right thing to do,” he said.

Bonar dismissed as a “red herring” Firestone’s argument that the General Assembly might reduce DEDO’s funding by $6 million, saying that such a plan would be politically unpalatable to most lawmakers.

The DEDO funding was also supported in the talks by PSC staff; the state’s Department of Natural Resources and Environmental Control, and the Mid-Atlantic Renewable Energy Coalition (MAREC), a group of companies that promotes the use of renewable fuels.

The funds will be available for natural gas infrastructure in the Delmarva service area for the first three years, and are designed to support job creation “as it relates to obstacles and opportunities in the energy area”, according to wording agreed by the DPA, PSC staff and DNREC.  MAREC opposed the three-year restriction, a PSC document said.

Robert Howatt, executive director of the PSC, said the DEDO funding was initially backed by the Governor’s office, DNREC, and the PSC. “We suggested that $6 million to the economic development office would help to improve the state’s general economy, and if there’s jobs created, it’s beneficial to the citizens of Delaware to have a more viable and economically active community,” he said.

The money could have gone to any number of recipients but all would have to be in the public interest, Howatt said. “If you want to argue that economic development isn’t in the public interest, you can argue that, I guess.”

Among other areas that will receive merger funds, large industrial and commercial customers of Delmarva Power will get $8 million for energy-efficiency projects. That proposal was opposed by Firestone who argued unsuccessfully that the funds be allocated to low-income residential users of natural gas and electricity. He also argued that the DEDO funds should be used instead to help low-income ratepayers and boost to the Energy Efficiency Investment Fund.

Out of another $4 million earmarked for public-interest energy projects, Firestone advocated the sum should be cut to $3.5 million and that “public interest” should be limited to research or training programs on wind and solar power programs at state colleges.

At last week’s PSC meeting, Firestone lost his argument to allocate the final $4 million of merger funds to wind and solar research and EV charging stations.

But after the meeting, he called the commission’s vote a “fine decision” that was consistent with the panel’s mandate of energy efficiency, even though “it wasn’t what I was advocating.”

If the PSC had approved funds for electric vehicle charging stations, it could have helped to kick-start the EV industry, Firestone said. He argued that the industry is held back both by investor reluctance to install the stations until there are enough EVs to justify them, and by potential EV buyers being discouraged by a shortage of charging stations.

“This is really a quintessential area where government spending can do a lot of good to advance policy,” he said.       

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