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Statement of Christine Hines, Consumer and Civil Justice Counsel, Public Citizen’s Congress Watch Division

Public Citizen applauds the Consumer Financial Protection Bureau (CFPB) for adding consumer narratives to its online complaint database. Now, consumers will be able to report to the public firsthand their experiences with financial services and products, allowing others to read the shared details.

This follows in the tradition of a number of other government agencies, such as the Consumer Product Safety Commission, that operate public complaint databases to help people report on and research product risks.

Consumer narratives will add to the CFPB’s already robust complaint database, which has handled more than half a million complaints. Firsthand experiences will provide a fuller picture of incidents in the marketplace and help others make more informed decisions when evaluating financial services, including services such as mortgages, auto loans and other lending products.

Consumers’ own words also will help to uncover patterns of potentially predatory conduct in financial services, such as unlawful debt collection practices. The quicker the risks to the public interest are exposed, the less likely it is that more members of the public will be harmed by the unfair or abusive practices. We expect that under its policy, the bureau will operate the complaint database while safeguarding consumers’ personal information.

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flickr-by-kristihn_a-(Meringue-Bake-Shop)-votingExpect quite the spectacle next week in the Corporate Congress. On Thursday and Friday, the U.S. Senate is holding a “vote-o-rama,” in which senators will weigh in on hundreds of budget amendments introduced in rapid succession. Although the chances of any of these making it into law are slim to none, lawmakers of both parties view the vote-o-rama as a chance to promote their agendas and force members on the other side of the aisle to take uncomfortable votes.

We don’t know exactly what amendments will be considered, but we expect them to include attacks on the regulatory system, gifts to the fossil fuel industry, attempts to block citizen access to the courts (a favorite proposal of big business interests), measures to water down Dodd-Frank Wall Street reforms and more.

As always, Public Citizen’s team of Congress watchers will be following the action.

In addition, the concentrated attack on the regulatory system continues. Generally, pro-corporate lawmakers are putting forth measures that would undermine the standards and safeguards that protect American workers and families from harm. The measures would bury federal agencies under a host of new procedural and analytical requirements, and paralyze their work, as well as jeopardize our food, air, water, homes, workplaces and pocketbooks.

To that end, at 10 a.m. Tuesday, March 24, the U.S. House of Representatives’ Judiciary Committee will consider several dangerous regulatory measures:

o H.R. 348, the “Responsibly And Professionally Invigorating Development (RAPID) Act of 2015,” which would make it easier for companies to acquire permit approvals without addressing critical environmental, health and safety concerns. This would increase the likelihood of future disasters like the BP spill;
o H.R. 712, the “Sunshine for Regulatory Decrees and Settlements Act of 2015,” which would weaken the ability of citizens to prod federal regulatory agencies to follow the law; and
o H.R. 1155, the “Searching for and Cutting Regulations that are Unnecessarily Burdensome (SCRUB) Act of 2015,” which would establish a new bureaucracy empowered to dismantle long-established public health and safety standards.

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On Wednesday, the Kojo Nnamdi Show focused on the controversial takeover of local utility, Pepco, by Chicago-based mega-utility Exelon. The show featured critics of the deal – Abbe Milstein, founder of Powerupmontco, and Tyson Slocum, director of Public Citizen’s Energy Program – who debated proponents of the merger – Jim Dinegar, president and CEO of the Greater Washington Board of Trade, and Wendy Stark, deputy general counsel for Pepco Holdings Inc.

Listen to the debate here.

With an assist by Maryland Attorney General, Brian Frosh, who called into the show to highlight the fundamental issues informing the state’s staunch opposition to the deal, critics made it clear that this deal is not in the public interest, but rather designed as a windfall for Exelon and Pepco shareholders and a safety net for a company plagued by a fleet of uneconomic nuclear reactors.

However, proponents were able to slip in some erroneous claims about the effects of the proposed takeover on area ratepayers. Let’s set the record straight.

Electricity will NOT be More Reliable Under Exelon

Proponents of Exelon’s takeover of Pepco maintain that having the “biggest kid on the block” control your local utility means more resources to address outrages and reliability. In fact, this deal, if approved, would give the biggest kid on the block a near monopoly in the Mid-Atlantic region and limit the ability of customers and regulators to compare, for instance, several area utilities reliability targets. In a brief filed with the Maryland Public Service Commission, Maryland Energy Administration’s expert put it this way:

“Comparing one utility against another helps the Commission to identify the full range of viable options and judge whether the option the utility selected or proposed was reasonable. Indeed, differences in position can help the Commission identify and understand the different approaches that are available … competition is critical as a means of seeing and comparing the technical, economic and regulatory alternatives within the context of a specific regulatory issue.”

Exelon’s takeover of Pepco would mean the dominance of one perspective and one way of doing things: Exelon’s way.

And far from improving reliable, the Maryland Attorney General reports that Exelon’s reliability commitments are in some cases less stringent than the annual standards already proposed by Pepco. Exelon has no engineering plan supporting its reliability targets and Exelon will likely seek rate increases to cover the cost of its plan – a scenario BGE customers are all too familiar with. After being acquired by Exelon in 2012, BGE customers have had their rates hiked four times at Exelon’s request for “reliability improvements.”

Exelon’s Nuclear Generation DOES Puts Ratepayers at Risk

Stark, representing Pepco, insisted that Pepco ratepayers will be insulated from Exelon’s risky fleet of nuclear reactors.

And when questioned about a bill Exelon is pushing in the Illinois Legislature that would help prop up the corporation’s uneconomical nuclear plants, she said that in fact, that bill was about leveling the playing field for all alternative generation. It’s not. The bill, which Chicago Business reporters call the “Exelon-only” bill, would cost customers an additional $300 million a year to pay for nuclear plants that otherwise can’t compete in the market – and it’s a preview of how Exelon wields its influence on state lawmakers.

Not only does Exelon seek direct ratepayer subsidies for its nuclear generation, but we also expect it to try to limit customer access to energy saving programs and more affordable generation that compete with nuclear power. In hearings before the Maryland Public Service Commission, the commission staff’s own witness stated that Exelon CEO Chis Crane:

“consistently alludes to energy efficiency, demand response, distributed generation, renewable energy and net-metering as being counterproductive to Exelon’s bottom line … Considering that Exelon believes these technologies are incongruous and disruptive to its business, it is my interpretation that encouraging the growth of such programs would be fraught with constant battles both with the implementation of EmPOWER Maryland, but also in maximizing the bidding of these resources into the capacity markets to offset costs to ratepayers. “

The bottom line is that Exelon’s nuclear fleet is in financial turmoil. To address the failing economics of nuclear power, Exelon is pursuing schemes to prop up these plants, maximize their returns and shield shareholders from the risks associated with their continued operation – all of which is in conflict with the best interest of electricity customers.

Asking for a Higher Customer Investment Fund is Extortion?

Approval of the takeover is contingent on Exelon meeting each state’s merger criteria, which, in the case of Washington, D.C., and Maryland, include a demonstration that the proposed deal will benefit consumers. As a way to clear this hurdle, Exelon has offered each affected territory a Customer Investment Fund (CIF). This money is used to provide one-time direct rebates to customers and in some cases a portion can be earmarked for investment in low-income and energy efficiency programs.

Exelon’s initial offering amounted to a one-time rebate of approximately $50 a household. This month, Exelon raised the CIF to a one-time credit of approximately $100 per customer. The CIF across all three affected states – Delaware, Maryland and New Jersey – and the District of Columbia now totals about $247 million. The Maryland Attorney General believes that the CIF is inadequate and does not constitute a fair benefit to customers.

Consider this: Exelon is attempting to buy Pepco for $6.9 billion, with Exelon paying every Pepco shareholder $27.25 per share, which will result into a $1.842 billion windfall for Pepco shareholders.

What Exelon is offering Pepco customers is a fraction of the $1.842 billion windfall for Pepco shareholders under the proposed acquisition. If the CIF for Maryland customers were equal to the windfall for Pepco shareholders, the CIF would be $731 million – though no one is advocating for that amount. Even so, considering Pepco ratepayers paid for Pepco’s transmission and distribution assets, Pepco’s customers are clearly ill-served by Exelon’s proposed paltry CIF.

Yet Dinegar of the Greater Washington Board of Trade called the request by advocates for a strong Customer Investment Fund, akin to “extortion.” I guess we know whose interest Mr. Dinegar is looking out for. I couldn’t help but be reminded by another corporate apologist that came to the defense of BP in the wake of the Gulf oil disaster. After the Obama administration secured a $20 billion fund to pay for damages from the catastrophic oil spill, U.S. Rep. Joe Barton (R-Texas) apologized to then-CEO, Tony Hayward, saying “I think it is a tragedy of the first proportion that a private corporation can be subjected to what I would characterize as a shakedown.”

That said, even a $731 million fund would be unlikely to lessen the long-term effects of Exelon’s undue influence and control over the region’s energy sector.

Learn more and take action on the proposed takeover.

Statement of Robert Weissman, President, Public Citizen

Note: Today, U.S. Department of Health and Human Services officials announced they will step back from the controversial “lost pleasure” principle when calculating the costs and benefits of future regulations. Last year, economists incorporated the principle in their analysis of proposed rules for e-cigarettes and calorie counts on restaurant menus – unjustifiably reducing the projected benefits of the rules.

According to reports published today, the government is backtracking from one of the nuttiest ideas you’ll ever encounter. Experts had actually argued that, in proposing public health information programs, the government should take into account the “lost pleasure” that consumers experience as a result of smoking less or eating healthier. The monetary value assigned to this supposed loss was extremely high, such that it would undercut the benefits of some tobacco control rules by 70 percent.

Today, if reports are correct, the government has come to its senses, and will end or roll back reliance on the “lost pleasure” principle – which really amounts to a Healthy Choices Penalty.

Even within the narrow worldview of economists, the application of what is known as consumer surplus theory in public health cases was misguided. It has no application to information-providing, non-coercive programs, where consumers are making their own choices based on more fulsome information. It should not be applied to cases involving addictive products. And it requires an even-handed application of the “added pleasure” that comes from healthful living, both for consumers and for their families.

Before we wave goodbye to the Healthy Choices Penalty, we should recognize what it says about the rigor and ethics of cost-benefit analysis. What kind of analysis permits such offenses against common sense? How rigorous is this analytic approach if serious practitioners can find cause to reduce the benefits of an important public rule by 70 percent, only to be told that they got it wrong? What should be the role in our regulatory process for an analytic approach that seems so devoid of basic ethical considerations?

On March 12, Securities and Exchange Commission (SEC) Chair Mary Jo White publicly returned fire for the first time on the charge from outsiders and two of her fellow commissioners that her agency is soft on Wall Street.

Cut through her rhetoric, however, and what she seems to be implying is: “The SEC trusts Wall Street.”

Here’s the background. The Department of Justice has fined major Wall Street firms for serious violations. The firms have settled by paying billions of shareholder funds in penalties. These infractions trigger other sanctions, including the loss of certain privileges at the SEC. But the SEC has generally waived these sanctions. Commissioners Kara Stein and Luis Aguilar have in several cases voted against these waivers, arguing, among other reasons, that waivers dilute the deterrence effect of the automatic sanctions. Stein, Aguilar and White are three of the five commissioners of the SEC.

In a speech at Georgetown University on March 12, Chair White drew a line in the sand. These sanctions should not be viewed as deterrence. She explained: “It must be emphasized, however, that it would not be an appropriate exercise of our authority to deny a waiver to further punish an entity for its misconduct or history of misconduct, or in an effort to deter it or others from possible future misconduct, by letting stand an automatic disqualification where the circumstances do not warrant it.”

White undoubtedly penned these remarks well before the eve of the speech and advantaged the prodigious talent on the SEC staff to buttress her legal case. In the written speech the assertion just quoted contains a footnote to a rule the SEC approved in July 2013. White joined her four commissioners to approve this rule. In fact, however, the SEC’s explanation of its rule contradicts her point.

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