A former top executive for Peco Energy Co. told a federal jury yesterday that the utility never would have paid former State Sen. Vincent J. Fumo personally as part of deals in which it gave millions to a nonprofit that Fumo backed.

The ex-executive, Thomas P. Hill, helped Peco strike the secret arrangements with Fumo under which the power company gave $17 million to Citizens' Alliance for Better Neighborhoods starting in 1998.

Hill said the donations to the charity were made in deals in which Fumo dropped his opposition to Peco's business plans. He said Peco was never told that any of the money would flow to Fumo.

Fumo had initially opposed Peco's plans for a deregulated energy market and, later, its planned merger with a Chicago power company.

"We would not pay a public official" to resolve a disagreement with him, Hill insisted.

Nor would it pay someone to end opposition, he said.

"The company would not pay to make an individual go away," Hill testified at Fumo's corruption trial.

FBI agents and federal prosecutors scrutinized the donations as possible cases of extortion by Fumo.

But the sprawling indictment that resulted from their lengthy investigation did not charge him in connection with how he raised the money from Peco for Citizens' Alliance, a community-improvement group that his aides founded.

Instead, the indictment says that Fumo defrauded the nonprofit itself by using its treasury to finance political polls and its credit cards for personal spending sprees.

Fumo's lawyers have acknowledged the spending on Fumo's behalf. But they contend that he could legitimately collect the money - that it was akin to the fees paid professional fund-raisers who drum up gifts for charities.

Peco's donations to Citizens' Alliance were secret for years until The Inquirer published news of the deals in late 2003.

Yesterday, Hill explained that Fumo struck his bargain with Peco at a time when the utility was desperate to make sure customers would keep paying for the massive cost - up to $8 billion - of the Limerick nuclear plant in Montgomery County.

In the late 1990s, it was worried that the start of competition in electricity sales would leave the company at the utter mercy of competitors that didn't have such a massive investment in nuclear power.

Against that backdrop, Hill testified, the money given to Fumo's nonprofit didn't seem such a big deal.

"In the big picture of things, this was a relatively small amount," he said. "We were talking about multi-billions versus a few million dollars."

The main elements of the deal were cut in 1997, just between Fumo and Peco's chief executive and board chairman at the time, Corbin McNeill. "Both of them came out smiling," Hill recalled of one key meeting.

Under the plan, Peco was to be permitted to bill customers - even those who signed with a rival utility - for $6 billion of its Limerick costs.

That was a big win for Peco. In return, it agreed to freeze rates for several years. And it agreed to donate to Citizens' Alliance.

As it happened, state regulators later rejected the deal as too favorable to Fumo. A final round of negotiations in 1998 kept the rate freeze and the money for the nonprofit but slashed Peco's Limerick-related money by $700 million.

The rate caps are still in effect. They will expire Dec. 31, 2010.

After that, Peco spokesman Michael Wood said yesterday, the company projects it will need to keep pocketing the money now charged to recover the Limerick costs and impose other increases, too.

Though the defense contends that it was proper for Fumo to be compensated for raising the money from Peco, prosecutors argue that Peco's donation reflected Fumo's role as an influential elected official.

Contact staff writer Craig R. McCoy at 215-854-4821 or cmccoy@phillynews.com.