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PSC rejects Pepco-Exelon merger, but leaves window open PSC rejects Pepco-Exelon merger but leaves window open
(35 minutes later)
District regulators rejected a controversial merger of Pepco and Chicago-based Exelon for a second time on Friday, but they left the companies a narrow path forward with new conditions, setting off yet another scramble to try to create the nation’s largest electric utility.District regulators rejected a controversial merger of Pepco and Chicago-based Exelon for a second time on Friday, but they left the companies a narrow path forward with new conditions, setting off yet another scramble to try to create the nation’s largest electric utility.
In the latest twist in the mega-merger, the D.C. Public Service Commission said a $70 million grab-bag of benefits to D.C. that was negotiated chiefly by Mayor Muriel E. Bowser’s office would not adequately compensate ratepayers. In the latest twist in the mega-merger, the D.C. Public Service Commission said a $70 million grab bag of benefits to D.C. that was negotiated chiefly by Mayor Muriel E. Bowser’s office would not adequately compensate ratepayers.
Among the conditions the PSC proposed was keeping all of the money in escrow to figure out how to best help Pepco customers. Bowser and others had supported directing tens of millions to areas, including enviromental projects and workforce-training programs. Among the conditions the PSC proposed was keeping all of the money in escrow to figure out how to best help Pepco customers. Bowser (D) and others had supported directing tens of millions to areas including environmental projects and workforce training programs.
While that may not matter to Pepco or Exelon if the total compensation remains unchanged, it still endangers the entire $6.8 billion deal. That’s because about 10 parties must now agree all over again to the package of benefits to the nation’s capital, including the mayor’s office, the District’s attorney general, its chief advocate for ratepayers, and a group representing commercial apartments. The PSC gave all of those groups 14 days to make a decision. While that may not matter to Pepco or Exelon if the total compensation remains unchanged, it still endangers the entire $6.8 billion deal. That is because about 10 parties must now agree all over again to the package of benefits to the nation’s capital, including the mayor’s office, the District’s attorney general, its chief advocate for ratepayers, and a group representing commercial apartments. The PSC gave all of those groups 14 days to make a decision.
Paul Elsberg, a spokesman for Exelon, said the company had begun carefully reviewing the new conditions.Paul Elsberg, a spokesman for Exelon, said the company had begun carefully reviewing the new conditions.
“The commission’s order prescribes new provisitions that we and the settling parties must carefully review to determine whether they are acceptable.” Elsberg said that after that review and discussions with the mayor’s office and others, that Exelon “will have more to say about what it means and our next steps.” “The commission’s order prescribes new provisions that we and the settling parties must carefully review to determine whether they are acceptable,” he said.
The PSC’s decision gave some in the room whiplash Friday, with opponents of the deal first standing and cheering at the announced rejection, and then later bemoaning that the deal could still go through. Elsberg said that after that review and discussions with the mayor’s office and others, Exelon “will have more to say about what it means and our next steps.”
PSC Chairwoman Betty Ann Kane proposed a motion to reject the merger, which passed 2 to 1. Then the commission voted on a plan to give the companies terms for eventual approval, that also passed 2 to 1, but this time with Kane dissenting. The PSC’s decision gave some in the room whiplash Friday, with opponents of the deal first standing and cheering at the announced rejection and then later bemoaning that the deal could still go through.
She said that like in August, when the commission first rejected the plan, she still sees an “inherit conflict of interest” in putting the city’s electricity distribution in the hands of an out-of-town nuclear power generator. PSC Chairman Betty Ann Kane proposed a motion to reject the merger, and it passed 2 to 1. Then the commission voted on a plan to give the companies terms for eventual approval. That also passed 2 to 1, but this time with Kane dissenting.
She said that, as in August, when the commission first rejected the plan, she still sees an “inherit conflict of interest” in putting the city’s electricity distribution in the hands of an out-of-town nuclear-power generator.
“The fact remains unchanged from the original application that the takeover of Pepco will entangle the company in an ownership structure that is an inherit conflict of interest and that it takes it in the opposite direction from its sole focus of being a distribution company that is required” under District law, Kane said.“The fact remains unchanged from the original application that the takeover of Pepco will entangle the company in an ownership structure that is an inherit conflict of interest and that it takes it in the opposite direction from its sole focus of being a distribution company that is required” under District law, Kane said.
Commissioner Willie L. Phillips, who dissented in the rejection, introduced a set of terms for the merger to still go forward and won the backing of Commissioner Joanne Doddy Fort.Commissioner Willie L. Phillips, who dissented in the rejection, introduced a set of terms for the merger to still go forward and won the backing of Commissioner Joanne Doddy Fort.
A senior official in Bowser’s office who agreed to speak only on condition of anonymity said he was confident all of the parties could accept the new terms. A senior official in Bowser’s office who agreed to speak only on the condition of anonymity said he was confident all of the parties could accept the new terms.
But Anya Schoolman, head of DC Solar United Neighborhoods, which opposed the merger, said changes had been made throughout the complex agreement and it could take supporters days to feel confident they understand the ramifications of the PSC’s counteroffer. Anya Schoolman, head of DC Solar United Neighborhoods, which opposed the merger, said that changes had been made throughout the complex agreement and that it could take supporters days to feel confident they understand the ramifications of the PSC’s counteroffer.
Schoolman said a complicating factor could be that, politically, the PSC’s rejection amounted to a “slap” at the plan proposed by Bowser.Schoolman said a complicating factor could be that, politically, the PSC’s rejection amounted to a “slap” at the plan proposed by Bowser.
“This is a huge slap at the mayor’s office, saying keep your hands off ratepayers’ money,” Schoolman said of the ways Bowser (D) had proposed spending what money Exelon and Pepco had put on the table to win support in the District.“This is a huge slap at the mayor’s office, saying keep your hands off ratepayers’ money,” Schoolman said of the ways Bowser (D) had proposed spending what money Exelon and Pepco had put on the table to win support in the District.
Council member Mary M. Cheh (D-Ward 3), another opponent, said she felt dejected and that the deal would ultimately pass, calling the option for the companies to still move forward “a win” for Exelon and Pepco. D.C. Council member Mary M. Cheh (D-Ward 3), another opponent, said that she felt dejected and that the deal would ultimately pass, calling the option for the companies to still move forward “a win” for Exelon and Pepco.
The timeline will be complicated, however, the 14-day window would run past a March 4 deadline on which Pepco and Exelon had both agreed that either side could walk away, and in a recent earnings call with investors, Exelon’s chief executive said that if a deal was not done before then, the company would cut its losses and do just that. The timeline will be complicated, however. The 14-day window would run past a March 4 deadline on which Pepco and Exelon had both agreed that either side could walk away, and in a recent earnings call with investors, Exelon’s chief executive said that if a deal was not done before then, the company would cut its losses and do just that.
Exelon, however, has spent roughly a quarter billion dollars already on the merger and would have to sell bonds to cover those costs, so if an agreement is still within striking distance, analysts said they expect the March 4 deadline would not mean much. Exelon, however, has spent roughly a quarter-billion dollars already on the merger and would have to sell bonds to cover those costs, so if an agreement is still within striking distance, analysts said they expect the March 4 deadline would not mean much.
Another potential pitfall is if the PSC proposal would require any larger payout to the District. Any major changes would potentially put Exelon on the hook to match the offer to other states that have already signed off, including Maryland, New Jersey and Delaware.Another potential pitfall is if the PSC proposal would require any larger payout to the District. Any major changes would potentially put Exelon on the hook to match the offer to other states that have already signed off, including Maryland, New Jersey and Delaware.
In all, the PSC decision was another surprising setback for nuclear-energy giant Exelon, and for proponents of the deal who said the company’s deep pockets would bring capital and long-term stability to customers of Pepco, which has for many years struggled with a dismal record of reliability and in keeping the lights on D.C. suburbs after storms. In all, the PSC decision was another surprising setback for nuclear-energy giant Exelon and for proponents of the deal who said the company’s deep pockets would bring capital and long-term stability to customers of Pepco, which has for many years struggled with a dismal record of reliability and in keeping the lights on in D.C. suburbs after storms.
It was also more uncertainly for ratepayers in D.C. about whether the deal would be in their best interest. It also mans more uncertainty for ratepayers in D.C. about whether the deal would be in their best interest.
Exelon had promised to finish reliability improvements to Pepco’s system in D.C. and in Maryland, and would freeze rate increases for four years. After that, residents could have faced balloon increases of multiple years’ of increases at once. Exelon had promised to finish reliability improvements to Pepco’s system in D.C. and in Maryland and would freeze rate increases for four years. After that, residents could have faced balloon increases that were substantial.
And in Baltimore and other cities were Exelon has moved in, reviews of performance and customer service haver so far been mixed. And in Baltimore and other cities were Exelon has moved in, reviews of performance and customer service have been mixed.
Either way, the commission’s eventual decision could have lasting reverberations for Bowser, who had revived the deal last August after the Public Service Commission unanimously rejected it, saying it would hinder the capital city’s stated goal of encouraging more green energy production. Either way, the commission’s eventual decision could have lasting reverberations for Bowser, who had revived the deal in August after the PSC unanimously rejected it, saying it would hinder the capital city’s stated goal of encouraging more green energy production.
Bowser’s top aides held private negotiations with Exelon after the PSC’s rejection. She won concessions, convinced other critics to drop their opposition and then announced she would back the plan after earlier saying she had reservations. Bowser’s top aides held private negotiations with Exelon after the PSC’s rejection. She won concessions, persuaded other critics to drop their opposition and then announced she would back the plan after earlier saying she had reservations.
The mayor’s effort drew rebukes from local and national environmental groups, but also won her praise from the city’s business community, which has backed Pepco, whose shareholders would get a 25-percent premium on their stock value from the day the merger was announced. The mayor’s effort drew rebukes from local and national environmental groups but won her praise from the city’s business community, which has backed Pepco, whose shareholders would get a 25 percent premium on their stock value from the day the merger was announced.