Dive Brief:

• Exelon's bid to acquire mid-Atlantic utility Pepco and become the largest power company in the nation came under new scrutiny this week as a key federal agency filed comments in the case and new connections with a Washington, D.C. political action committee were uncovered.
• On Wednesday, radio station WAMU reported that Exelon paid the head of FreshPAC — a now-shuttered political action committee that supported D.C. Mayor Muriel Bowser (D) — to lobby the mayor's office as it was negotiating a settlement agreement Bowser's administration announced in October. The PAC was shut down last month with the mayor calling it a "distraction."
• The General Services Administration (GSA) — the agency that manages the U.S. government's power purchasing and the largest energy consumer in the capital — filed testimony with the D.C. Public Service Commission (PSC) on Thursday urging regulators to reject the deal. The merger subsidies residential ratepayers at the expense of federal taxpayers and should not be found in the public interest, the agency argued.

Dive Insight:

Earlier this month, proponents of the $6.8 billion Exelon-Pepco merger were heartened when the GSA, one of the leading skeptics of the original merger proposal, removed itself from regulatory hearings on the acquisition. The agency had expressed concern about the merger approval process in October, but then missed a key November deadline to file comments with regulators and did not provide testimony in hearings this month.

At the time, GSA staffers wrote in a blog post that D.C. regulators did not give the agency enough time to evaluate a settlement proposal reached between Exelon, the mayor's office and a group of merger intervenors before hearings began. The GSA remained concerned about the merger, they wrote, and could weigh in on the process further down the line.

The agency made good on that promise this week, filing a brief with regulators that pushed them to reject the merger unless it can provide a better deal for U.S. taxpayers. While it is an "initial brief," and not a formal opposition filing, the Washington Post reports the move pleased merger critics. 

"We're super excited," Anya Schoolman, the head of DC Solar United Neighborhoods and an outspoken merger critic, told the paper. "I did not see it coming."

Merger opponents were less surprised at the other big development in the case this week — the revelation that Exelon had hired the head of a pro-Bowser PAC to lobby the mayor's office for a settlement deal. After regulators rejected an initial acquisition proposal from Exelon in August, Utility Dive was first to report that the Bowser administration and the company had reached a deal to increase the utility's financial investment in the District in exchange for public mayoral support. 

Opponents have called for an ethics investigation of the mayor for her office's role in crafting the deal, pointing out that it coincided with a $25 million contribution that Pepco made to the District government to help offset the costs of building a new stadium for D.C. United, the city's Major League Soccer team. Exelon and Pepco say the contribution had nothing to do with the merger, but have neither confirmed nor denied claims from critics that they were expected to contribute to FreshPAC as a condition of the settlement deal. Soon after the allegations, the PAC's organizers shut down operations.

Now, WAMU reports that Earl "Chico" Horton III, the head of the same PAC, was tapped by Exelon for a key role in the negotiations with the mayor's office on the settlement deal. In a filing with the city's Board of Ethics and Government Accountability, Horton wrote that he was hired to lobby the Bowser administration on the proposed merger. Exelon declined to tell the radio station how much it paid Horton, but reportedly sent the following statement:

"Like many corporations, Exelon engages consultants to educate policymakers and the public about the company's views and priorities. Naturally, we engaged consultants in the District to help us educate people about the enormous affordability, reliability and sustainability benefits our merger with Pepco will provide District residents and to help us understand their priorities. These activities are funded entirely by shareholder dollars."

Horton's filing is only a registration form, and more information on Horton's involvement could come in January, according to WAMU, as D.C. requires lobbyists to file activity reports twice a year.

Horton is not the first prominent District figure hired by Exelon to help push through its merger. After initial rejection, the company recruited popular former mayor Anthony Williams to publicly call for Bowser, his former mentee, to support the merger.

The stakes in the merger proceeding are high for Exelon, which is seeking the predictable income of Pepco's utility business to hedge against risks from a generation fleet that includes many older nuclear plants running on the verge of being unprofitable in PJM markets.

Last year, Crain's reported that Exelon CEO Chris Crane told analysts the company could finance its entire dividend for shareholders with its regulated businesses if the Pepco merger were approved — no small benefit for a company that cut its dividend 41% the year before.

The merger has already been approved by FERC and state regulators in Maryland, Virginia, Delaware and New Jersey, leaving D.C. as the final hurdle befor the deal can close. A final decision from regulators is expected in the first half of next year.