Electricity Markets

Pepco/Exelon merger gets final green light

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In a turnaround from their stance a month ago, utility regulators in Washington on March 23 approved a newly revised merger plan filed by Washington-based Pepco Holdings Inc. and Chicago-based Exelon Corp. In a 2-1 vote, a divided District of Columbia Public Service Commission gave its approval to the $6.8 billion deal, finding it to be in the public interest.

The merger settlement agreement approved by the Washington utility regulators includes a $26.5 million package of rate credits for Pepco customers. It also will allow the PSC to determine how to allocate those benefits.

This was the last hurdle to the deal, and Exelon announced later the same day that it had carried out its acquisition of Pepco, saying that the effort to integrate the companies was "well underway." The merger had previously been approved by the Federal Energy Regulatory Commission, the Department of Justice, and by utility regulators in Maryland, Delaware and New Jersey.

The chairman of the PSC, Betty Anne Kane, again voted against the merger, as she had in previous votes. "There are many promises and a lot of money being offered," Kane said in her dissent to the March 23 vote approving the merger. "Expensive wedding gifts are nice. But all the wedding gifts in the world can't make a bad marriage good."

Washington Mayor Muriel Bowser also had opposed the merger as favoring commercial ratepayers over residential customers.

"It appears the Public Service Commission favors government and commercial ratepayers over D.C. residents," Bowser said in a statement. "Instead of a three-year rate increase reprieve that we negotiated, it appears that D.C. residents will be hit with a rate increase as soon as this summer."

On Feb. 26, the PSC voted 2-1 against an earlier settlement agreement on the merger. Commissioner Joanne Doddy Fort had raised objections to Pepco's rate structure, saying that it forced commercial ratepayers to subsidize residential customers. Fort proposed revisions, one of which was to allow the PSC to decide how to allocate the rate credits.

The Exelon-Pepco merger creates "the largest publicly held utility in the country," the Washington Post said.

Chris Crane will continue on as president and CEO of Exelon. Joseph M. Rigby retired March 23 as president and CEO of Pepco Holdings and was replaced by David M. Velazquez.