December 4, 2015—This past August the District of Columbia's Public Service Commission (PSC) voted unanimously against the merger of Pepco Holdings with the Chicago-based Exelon Corporation. The PSC was the last hurdle for the $6.8 billion merger, which had already been approved by the Federal Energy Regulatory Commission, the U.S. Department of Justice, and the states of Maryland, Delaware, and New Jersey. However, the merger of the two companies is not dead yet, as the PSC is considering a revised merger agreement.
Commission Chairman Betty Ann Kane explained the August decision by stating:
"…the public policy of the District is that the local electric company should focus solely on providing safe, reliable and affordable distribution service to District residences, businesses and institutions. The evidence in record is that sale and change in control proposed in the merger would move us in the opposite direction."
The mayor of D.C., Muriel E. Bowser, echoed the commission's reasoning at the time. She said that , "Moving forward, we want to ensure that D.C. utility ratepayers receive quality service, that we maintain and grow jobs in the District, and that we keep D.C. on our continued path toward sustainability."
Following the August decision, Exelon and Pepco jointly released a statement saying they were disappointed with the PSC's decision. They countered that they did believe the proposed merger was in the public's interest and promised to appeal the PSC's ruling.
In early December, the PSC opened detailed hearings on a revised Exelon-Pepco deal, and the PSC chairperson and several of her fellow members have been painstakingly re-analyzing the merger to determine if they will reverse their previous decision. In an effort to follow the District's public policy to focus on safe, reliable and affordable distribution services, the PSC hearings have delved in meticulous detail about topics such as workforce development, wind credits, synergies, and microgrids.
According to recent reports, the utilities were able to convince D.C. Mayor Bowser to reverse her opposition to the merger by offering $78 million in benefits to the city and including more ratepayer assistance, solar-energy subsidies, and job guarantees. However, the PSC has raised questions over how jobs would be guaranteed, how the ratepayer assistance would work, and how money Exelon proposed for use for alternative energy would be used.
The merger also still faces opposition from several public interest groups including the D.C. Solar United Neighborhoods (DC SUN) and PowerDC, citing Exelon's “extensive history of opposing renewables.” DC SUN worries that the Pepco/Exelon merger will lead to higher prices and lower quality of service to D.C. residents and restrict the ability of citizens to build new, alternative electricity technologies. Randall Speck, a lawyer with DC SUN, urged the commission to “not be misled by the essentially trivial, short-term payments that Exelon can easily afford to make…” during his opening statement at the hearings.
Analysts, environmentalist groups and industry experts from across the U.S. will continue to keep an eye on the proceedings in Washington D.C. because of the landmark impact the hearings may have on mergers in the future. The PSC is expected to come to a decision sometime early in the first quarter of the 2016. The commission will begin deliberations on the revised merger after the public comment period ends on December 18.
To read more about how the original merger fared in other states, please see this article in the Clearinghouse's June 2015 newsletter.
Sources: D.C. Public Service Commission, LIHEAP Clearinghouse, Exelon Press Release, DC SUN, Power DC, Media Sources