The invaluable Eric Lipton over at the New York Times has another excellent article pointing out to the many ways that well-connected companies benefit from government favors. This time, he looks at the case of an Illinois-based energy producer, Exelon Corporation.
The company’s ties with senior officials in the Obama administration are important and extensive: Board member John W. Rogers is a friend of the president, Obama adviser David Axelrod worked at Exelon as a consultant, and Rahm Emanuel helped create the company. Exelon executives and administration officials held a large number of meetings at the White House, and ultimately, the executive branch enacted a number of policies and regulations that favored the company at the expense of its competitors. Lipton, for instance, highlights:
In addition, Exelon, which provides power to more than 6.6 million customers in at least 16 states and the District of Columbia, was chosen as one of only six electric utilities nationwide for the maximum $200 million stimulus grant from the Energy Department. And when the Treasury Department granted loans for renewable energy projects, Exelon landed a commitment for up to $646 million allowing it, on extremely generous financial terms, to finance one of the world’s largest photovoltaic solar projects.
The loan that Lipton is talking about here is part of the Section 1705 loan programs that gave us failures such as Solyndra and Abound Solar. But the Exelon project is an example of a loan guarantee going to a company that would have likely been able to secure the funding on its own but not at the incredibly generous rates offered by the 1705 program. I have written several times in these pages about the multiple problems with the 1705 loan programs and I have testified before Congress twice so far on this issue. Unfortunately, this program, like many others, is a perfect example of the private sector and government working together at the expense of the American people.
The administration’s tightening of clean air rules was a particular boon, since it took aim at Exelon’s main competitors — coal-burning power plants in the Midwest and mid-Atlantic regions. In 2010, Exelon estimated it would earn an extra $400 million annually because the regulations would force dozens of coal-burning plants to close.
“We were the hyena looking for the dead stuff on the road,” John W. Rowe, Exelon’s recently departed chief executive, told Wall Street analysts this year.
While other nuclear and natural-gas-focused energy producers also stood to benefit, Exelon stands out for its size. Last December, the Justice Department approved its $7.9 billion merger with Constellation Energy of Maryland, despite objections from Maryland’s consumer advocate. Although Exelon agreed to sell three Maryland power plants, among other concessions, it still emerged as the nation’s largest unregulated electricity generator, meaning that in many of the states its rates are not set by government officials but by what customers will pay.
And of course, the benefits are mutual:
The ties go back at least to Mr. Obama’s tenure in the Illinois State Senate, when he befriended an Exelon lobbyist named Frank M. Clark. Exelon’s employees, including Mr. Clark, were among the biggest financial supporters of Mr. Obama’s United States Senate campaign, with donations also from Mr. Rowe, then the company’s chief executive, and others in the executive suite, campaign finance records show.
Exelon’s employees have contributed at least $395,000 to Mr. Obama’s federal campaigns. By far the strongest link is with Mr. Rogers, the Exelon board member and family friend. A college classmate of Michelle Obama’s brother, he was co-chairman of Mr. Obama’s inauguration committee and still occasionally plays basketball with Mr. Obama.
He is one of Mr. Obama’s biggest campaign donation bundlers, having raised more than $500,000, and has co-hosted several fund-raisers, including one in March that featured a performance by the Grammy-winning musician John Legend. (A spokesman for Mr. Rogers said he had not contacted Mr. Obama or any administration officials on Exelon’s behalf.)
Another Obama bundler is William A. Von Hoene Jr., who oversees Exelon’s legal and lobbying team out of Chicago, despite Mr. Obama’s rule against accepting contributions from lobbyists. Mr. Von Hoene is not a registered lobbyist, although records show he attended a White House meeting to push Exelon’s cause.
Unfortunately, this illustrates how business is done in Washington and around the country.
Thanks to Tad DeHaven for the pointer. On this issue, you should check out his very good Cato policy paper on corporate welfare in the federal budget, and how cronyism is a disturbing and bipartisan problem, but hardly a new one.