Fresh merger worries for Exelon as DC group files to acquire Pepco assets
- Washington, D.C. utility regulators are facing new questions on Exelon's proposed $6.8 billion acquisition of Pepco. Last week, a non-profit group in the city filed its intention to acquire Pepco's assets in the District as an alternative to the merger that would create the nation's largest utility.
- DC Public Power, a non-profit formed earlier this year to explore alternatives to the proposed merger, claims that converting Pepco into a public utility could beget up to $1 billion in public benefits over 20 years, more than the $78 million in benefits proposed under Exelon's recent settlement.
- Retail energy provider WGL Energy Services also filed with the PSC, raising concerns over the merger's impact on electric competition in the District and over whether a merged Pepco would be allowed to own generation resources.
D.C. Public Power (DCPP) added another wrinkle to the Exelon merger saga last week when it filed with regulators in the nation's capital to acquire Pepco's assets in the city and form a publicly-owned utility.
Leaders of the non-profit, who opposed Exelon's bid to buy the mid-Atlantic utility, say a public power company could generate nearly $1 billion in savings while preserving the wires-only utility model and facilitating the creation of a customer-centric electricity grid.
“DCPP's proposal severs the investor-owned model that is irreconcilable with the District’s goals for distributed power, micro-grids, maximization of alternatives, energy efficiency and innovation,” said Michael Overturf, president of DCPP’s board, in a statement. “It replaces it with a public interest ownership and governance model that will deliver over $1 billion in cost savings to ratepayers, exceeding anything Exelon can offer.”
Freedom from federal taxes and dividend payments could "unlock" up to $150 million a year in savings, DCPP leaders said, according to RTO Insider. Even with about $60 million in debt subtracted, non-profit leaders pointed out the amount is significantly more than the $78 million promised by Exelon in its settlement.
DCPP leaders approached Exelon officials with an offer to acquire Pepco's assets after D.C. regulators rejected an initial merger proposal in August, Greentech Media reports. The non-profit offered to acquire Pepco's D.C. assets and leave the Chicago-based company to serve Pepco customers in Maryland, Virginia, Delaware and New Jersey — states where the merger has already been approved.
Exelon reportedly rejected that proposal for being too complicated. Earlier this month, it announced a settlement deal with D.C. Mayor Muriel Bowser that it hopes will push D.C. regulators to approve its acquisition on appeal.
Any serious consideration of the DCPP acquisiton proposal would be a dramatic reversal in case proceedings, but questions are being raised over the settlement by other entities as well. Last week, WGL Energy Services, a retail electricity provider, filed with regulators to inquire whether the settlement might allow Pepco to own and rate base generation facilities. Although the deal with the mayor's office requires the company to purchase 100 MW of wind and 10 MW of solar from third parties, Energy Choice Matters reports it also states that Exelon may ask regulators to rate base microgrid projects the utility agreed to build in the settlement.
As a result of the appeal process, analysts now expect the merger proceeding to stretch into 2016.
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