Political power and financial might: energy lobbyists in the US

JP Casey 4 May 2020 (Last Updated April 30th, 2020 13:44)

US energy firm Exelon has been swept by a raft of controversies, from state investigations to private lawsuits, based around its alleged breaking of lobbying laws and failure to disclose its political connections. We consider the court case, and what this could mean for lobbying efforts in an industry with an entrenched history of industry involvement in politics.

Political power and financial might: energy lobbyists in the US
The state capitol of Illinois, where Exelon and ComEd are said to have overstepped their boundaries. Credit: Teemu08

Lobbying is an integral part of the US energy industry. Research group Open Secrets reports that over $124.6m was spent on lobbying efforts in oil and gas alone in 2019, with two-thirds of lobbyists former government employees, establishing a strong connection between the oil industry and the political and economic power of the federal government.

Until recently, the energy industry has largely avoided scrutiny. This has changed in recent months though, with the state of Illinois launching investigations into utility company Exelon, and its subsidiary Commonwealth Edison (ComEd), for failing to disclose the extent of its lobbying projects, and unlawful connections with some of the state’s most powerful political figures.

The scandal has tanked the companies’ value, threatened the enaction of green energy legislation, and highlighted the web of connections between the power industry and the powerful in Illinois, throwing both Exelon’s future, and the power supply of the state, into uncertainty.

Allegations against Exelon

Despite broad legal support for lobbying practices, a number of regulations remain in place in the US, on both a state and federal level, and Exelon and ComEd are alleged to have violated the latter’s laws. The companies share a power base in Illinois, where ComEd is the largest electric utility and Exelon operates six nuclear plants, but have allegedly failed to comply with state law that requires lobbyists to register with the state government.

Illinois legislation notes that “it is a violation of this Act to engage in lobbying or to employ any person for the purpose of lobbying who is not registered with the Office of the Secretary of State”. The clause is part of the state’s efforts to limit the direct influence of private lobbying over political affairs, alongside stipulations that officials in non-elected positions in the state government are prohibited from engaging in lobbying. The Exelon allegations, however, suggest that these restrictions may have completely failed to separate these institutions.

An investigation spearheaded by local radio station Wbez 91.5 Chicago has highlighted the role of Jay Doherty, an influential and well-established ComEd lobbyist who is president of the City Club of Chicago, a popular club that the station called “a regular stop for Illinois’ top politicians”. Doherty claimed to have received $530,000 from ComEd from 2011 to 2018 to promote its interests to those linked to his club, but Wbez reported that the actual figure was closer to $3.1m.

The station also implied the involvement of Martin Sandoval, a Democratic senator. One of Sandoval’s former campaign workers leads Power Washing Pros, a cleaning company based in Illinois, that received more than $277,000 in lobbying funding from ComEd.

The station also suggested the involvement of senator Martin Sandoval, a Democrat whose former campaign worker leads a power-washing company based in Illinois, that received more than $277,000 in lobbying funding from ComEd. While Sandoval himself has not been implicated in the allegations, there appears to be an entrenched relationship between Exelon and the state’s Democratic party that has gone all but unreported.

Furthermore, Exelon’s lobbying efforts have been linked to House Speaker Michael Madigan, the Democrat who has held the top office in the state’s house of representatives for all but two years since 1983. Wbez alleges that of the 23 lobbyists Exelon admitted to paying in 2019, 15 have links to Madigan, eight employ former Madigan employees, and five employ retired state legislators who had worked with the House Speaker, further solidifying the relationship between party and power company.

These relationships are all the more significant considering the future of power in Illinois. The state is currently considering its clean energy future, with a split between companies such as Exelon, which have backed the Clean Energy Progress Act, and business groups such as the Illinois Clean Jobs Coalition, which have supported the Clean Energy Jobs Act. While both bills target 100% reliance on clean power, by 2032 and 2050 respectively, the latter, critically, does not include nuclear power in its definition of clean power, instead aiming for all of the state’s power to come from renewable sources, such as wind and solar.

This is a vital distinction for Exelon, which has invested considerably into nuclear power. The company operates 22 reactors in four states, including Illinois, and 60% of its total power generation is attributed to these facilities. In Illinois itself, the company’s nuclear plants produced more than 90% of the state’s carbon-neutral energy in 2019, a state of affairs that could put Exelon in a position to single-handedly make or break the Clean Energy Progress Act. Should the state commit to this bill over the more radical Clean Energy Jobs Act, Exelon would wield significant political power, and it is understandable that the power company is eager to protect its interests in this field.

State investigations and legal conflicts

The state government has been investigating Exelon’s conduct for nearly a year, with the Illinois Northern District Attorney’s Office calling for a subpoena regarding information on the company’s lobbying activities last July. This was followed up by a second subpoena from the office in October, calling for information on Exelon’s interaction with a number of individuals, including Sandoval. Legal processes then came to a head in December when Joshua Flynn, who had bought shares in Exelon prior to the reveal of the state’s subpoenas, sued the company, citing “materially false and misleading statements issued” while under investigation.

Flynn had purchased shares in the company prior to the publicisation of its legal troubles, resulting in him becoming “damaged upon the revelation of the alleged corrective disclosures”, according to documentation from the lawsuit. While the lawsuit is likely primarily motivated by personal interest, the court documentation notes that Flynn is representing “all other similarly situated”, creating a conflict between Exelon and its shareholders over its reporting during the period.

The impacts of the lawsuit have been severe for Exelon, with shares falling 4.57% in a day in October following the departure of Anne Pramaggiore, CEO of Exelon Utilities and former president and CEO of ComEd. The move was believed to be related to the second subpoena, which started a series of share losses for Exelon, ultimately seeing the share price fall by a total of 2.83% between October and November.

These losses in both finances and personnel are ominous portents for Exelon, and by extension could embroil the Illinois Democratic Party, which has held a number of key offices in the state for several years in corrupt activity. Since 2019, the governor, lieutenant governor, secretary of state and attorney general have been Democrats, and the latter two positions have been blue since 1999 and 2002 respectively.

A culture of lobbying

The investigation has also shone a light on the entrenched nature of lobbying in the energy industry more broadly, and how political work can be influenced by private interests beyond just the offshore sector, where lobbying is known to be commonplace. In 2016, the US Bureau of Ocean Energy Management published a number of studies into the possible environmental and economic effects of opening up more of the Gulf of Mexico to offshore drilling work; eight of the nine economic analyses cited came from “sources with ties to the oil and gas industry” , with four directly funded by oil and gas firms or lobbying partners.

There is some optimism that offshore companies and their lobbying groups could bow to increasing public pressure. Last November, Kathy Mulvey of the Union of Concerned Scientists noted that “BP and Shell in 2015, and Exxon Mobil in 2018, [left the American Legislative Exchange Council] because its positions were not consistent with their own stated position on climate change.”

However, while lobbying is well-documented in the offshore industry, the relative lack of coverage of lobbying in the power industry means the sector could be some ways off this kind of gradual change. Both Exelon and ComEd have refused to give comments about the future of their lobbying efforts and ties to the Illinois democrats, beyond acknowledging the existence of the Flynn lawsuit and state investigations.

There is no obvious precedent for this kind of lobbying controversy in the US energy sector, and with political power and legislative action at stake, there is no indication that the scandal will be resolved any time soon.