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DC Regulators Approve $6.8B Exelon-Pepco Merger

March 23, 2016
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The proposed merger of Exelon Corp. and Pepco Holdings Inc. (PHI) appears to have ended its regulatory roller coaster ride through the nation's capital with the deal's approval Wednesday by the District of Columbia Public Service Commission (PSC).

The $6.8 billion merger was nearly derailed by a disagreement among stakeholders over a $25.6 million customer base rate credit proposal included in the settlement agreement (see Daily GPIFeb. 26). But in the end, all participating parties agreed to PSC-authored revisions to that proposal, according to an order approved by the PSC.

The PSC's green light was the last regulatory approval needed to complete the merger, an Exelon spokesman told NGI. Both Exelon and Pepco spokespersons said the companies needed to take a closer look at the order before commenting.

The order comes six months after Exelon and PHI reached a settlement agreement with DC opponents to their planned merger (see Daily GPI, Oct. 7, 2015). The settlement with the DC government, the Office of the People's Counsel, the Office of the Attorney General of the District of Columbia and others included a package of benefits to DC ratepayers and residents.

But last month the PSC said the Nonunanimous Full Settlement Agreement and Stipulation was "not in the public interest," in a 270-page opinion and order.

Exelon, PHI and the other settling parties did not establish that the $25.6 million customer base rate credit proposal was fair and consistent with PSC policy, the regulators said. An alternative included in the PSC order accepted the funding level of $25.6 million to be used for a customer base rate credit, but defers the decision on how the funds will be allocated and for what period of time until the next base rate proceeding.

The PSC also included in its revisions stipulations that Exelon not be the developer of a proposed solar generation facility in the District, and that the merged company fund pilot projects for grid modernization and energy efficiency for moderate- and low-income customers.

"The Commission specifically concluded that the merger will benefit ratepayers and the District because it includes, among other benefits, a $72.8 million Customer Investment Fund, including $25.6 million in rate base credits; $11.25 million in funds for energy efficiency and energy conservation programs, especially for low and limited income residents; and $21.55 million to promote the District’s sustainability agenda through pilot projects to modernize the electric distribution grid to accommodate more distributed energy resources." the PSC said. "These benefits, among others, would not be available to District ratepayers if the Merger is not approved."

The order was approved by a 2-1 vote.

The merger, which would create the top Mid-Atlantic electric and gas utility with close to 10 million customers, would combine Exelon's three electric and gas utilities -- Chicago's Commonwealth Edison Co., Baltimore's BGE and Philadelphia's PECO -- and PHI's three electric and gas utilities -- New Jersey's Atlantic City Electric, Delaware's Delmarva Power and Washington, DC, and Maryland's Pepco.

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