Brief

Updated: DC PSC approves Exelon-Pepco merger

Dive Brief:

  • In a 2-1 vote on March 23, the D.C. Public Service Commission (PSC) approved the proposed $6.8 billion merger between Exelon and Pepco. PSC Chairman Betty Ann Kane was the lone dissenting vote. 
  • The Commission approved the merger under the new conditions outlined after they rejected a settlement deal struck between the companies, the mayor's office and other merger stakeholders. At the time, the PSC said the deal would result in automatic approval if the four new conditions were adopted by all the settlement parties.
  • The D.C. mayor, residential ratepayer advocate and attorney general all announced their opposition to the new conditions and settlement terms. In a March 7 filing, Exelon and Pepco asked the PSC to consider the merger on its merits, despite not receiving support from all parties. The PSC approved the merger on the merits.
  • The commission order is slated to go into effect after a 30 day period in which parties can file for reconsideration. If any petitions are filed, the commission's order on the merger will be stayed until regulators evaluate them.

Dive Insight

The final decision from D.C. regulators comes after nearly two years of highly-contentious proceedings and negotiations on this utility mega-merger. The approval comes as a major blow to opposition parties, but it's a big win for Exelon, which will now become the largest electric utility in the U.S. by customer base.

The merger took many twists and turns to get to this point. After receiving approvals from all the other agencies it needed to finalize the merger, including FERC and four mid-Atlantic states, Exelon met its stiffest opposition in Washington, D.C. (You can find a quick timeline of the merger saga here.)

The D.C. PSC rejected the initial merger deal in August, citing an "inherent conflict of interest" between Exelon's business model and the city's clean energy goals. Exelon appealed the decision and, soon after, reached a settlement with the administration of D.C. Mayor Muriel Bowser, winning their support for the deal under certain conditions.

In February, regulators rejected that settlement deal brokered between the companies, merger stakeholders and the District government. Instead, Commissioner Joanne Doddy Fort outlined new conditions on the deal that would result in the merger's automatic approval if all of the parties adopted them.

These were the series of fixes Fort proposed:

  • Allocation of the $25.6 million for rate relief in the CIF would be deferred until Pepco’s next rate case.

  • The provision that designates Exelon as the developer for the D.C. Water solar facility would be eliminated, and Pepco would commit to interconnect any facility the water treatment agency installed through its own procurement process.

  • The companies would create an escrow fund with two sub accounts to hold $32.8 million of the $72.8 CIF promised by Exelon. One account would put $21.55 million toward innovative pilot projects for the distribution grid; the other would contribute $11.25 million for energy efficiency and conservation initiatives focused on multi-family housing and low and limited income residents.

  • Provisions regarding Pepco’s role in developing public purpose microgrids would be eliminated as premature.

After Mayor Muriel Bowser (D) and the city's ratepayer advocate rejected those terms, the companies filed a new proposal on March 7. But that proposal garnered opposition from the ratepayer advocate as well, and the General Services Administration — the power purchaser for the federal government — filed with the commission asking them to reject the deal.

Exelon responded by filing for additional relief, outlining three options for merger approval and asking the commissioners to approve one of them on the merits. On Wednesday, the commission assented, approving a merger deal that includes the conditions outlined in the February order, despite the opposition of settlement parties. 

Merger opponents expressed disappointment with the PSC division. 

"By approving the merger, the PSC has exposed our city to decades of higher rates, weakened its own ability to guide our city’s energy future, and helped ensure that D.C, will fall behind the rest of the U.S. on clean, efficient energy," POWER DC, a coalition of merger opponents, said in a statement. “[W]e will hold the PSC accountable for its actions in the months and years to come. The fight is not over.”

Pepco spokesperson Vince Morris said the company is reviewing the PSC order.

"Once we've had a chance to do so, we will have more to say about what it means and our next steps," he said in a statement.

Pepco stock surged nearly 30% following news of the approval. Exelon stock only rose slightly, coming back to where it started the day. 

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Filed Under: Regulation & Policy
Top image credit: Utility Dive