Exelon Corp. is taking a second bite at the merger apple with Pepco Holdings Inc., unveiling late yesterday a settlement with the District of Columbia government that addresses concerns that led regulators to turn down the merger this summer.
"It’s another turn in this twisted saga," said Glenrock Associates analyst Paul Patterson.
"But it looks like it attempts to address many of the issues in the August Order that denied the merger application. We’re sort of in uncharted territory. You usually try to reach these things before you have an order, but it breathes new life into it," he said.
The three-member Public Service Commission of the District of Columbia unanimously rejected the $6.8 billion merger in August, concluding that the deal is not in the public interest and citing Exelon’s size and presence as one of the nation’s largest merchant generators as impediments to Pepco’s "ability to adapt" to changes in the electricity industry (EnergyWire, Aug. 25).
Under the settlement, Exelon will more than double direct benefits to customers by providing $72.8 million for bill credits, low-income assistance, renewable energy and energy efficiency programs in an attempt to offset distribution rate increases for residential customers through March 2019.
Exelon pledged to build up to 10 megawatts of solar energy and up to 100 MW of wind power and to develop at least four new microgrids.
The company also promised to "reduce the frequency and duration of power outages" or face "significant financial penalties if it fails to do so."
The settlement "was specifically shaped to address the concerns of the Public Service Commission in its order," with more than 120 commitments, said Donna Cooper, Pepco region president, during a conference call with media.
Signing onto the settlement agreement are the Office of the People’s Counsel and the Office of the Attorney General of the District of Columbia, as well as the Apartment and Office Building Association of Metropolitan Washington, the District of Columbia Water and Sewer Authority, the National Consumer Law Center and the National Housing Trust.
Paul Bonney, Exelon senior vice president, said "we do no expect [the process of review] will be mirroring the process that we went through because we have the benefit of the record that been established in the proceeding to date."
Exelon’s filing yesterday asks the PSC to act "during a posture of reconsideration" that the company has already asked for, Bonney said.
The parties proposed "a schedule, which would have a commission decision rendered somewhere around three months from today. In the alternative, then we would make a new filing and would have a commission decision in the three to five months time frame," he said.
"The new package of benefits includes commitments to provide bill credits, low-income assistance, fewer and shorter outages, a cleaner and greener D.C., and investment in local jobs and the local economy," Exelon and Pepco said.
"The District deserves a healthy utility company that guarantees affordability, reliability and sustainability for residents and ratepayers," said District of Columbia Mayor Muriel Bowser in a statement. "We kept the conversations with Pepco and Exelon alive, because we knew we had to do better for the District. My team negotiated a deal that puts District residents and ratepayers first — by delivering a public utility that is cost-effective, dependable and environmentally sound."
Tyson Slocum, director of Public Citizen’s Energy Program, said the new deal does "nothing at all to change the fundamental failures of this merger to satisfy the public interest standards of the D.C. Public Service Commission."
It does "nothing to limit Exelon’s influence over the regional market. I don’t see how the amended deal can satisfy the clear concerns" when regulators rejected the merger in August, he said.