Maryland regulators today narrowly approved a $6.8 billion merger between Pepco and Chicago-based Exelon with conditions that include improved electricity reliability and rate credits for homeowners.
The merger will put all of Pepco Holding Inc.’s utilities in four states and Washington, D.C., under the control of Exelon. Delmarva Power, which is owned by Pepco Holdings Inc., is also part of the merger deal.
The deal was already approved by federal regulators and regulators in New Jersey and Virginia.
The five-member Public Service Commission approved the deal, though commissioners Harold Williams and Anne Hoskins issued a dissenting opinion.
In it, they argued the increased reliability standards and two conditions Montgomery County asked the commission to require— microgrid development and the creation of recreational trails under large transmission lines—could result in Exelon attempting to raise rates later on.
“The Majority has thereby handcuffed the Commission in the future rate cases of Pepco and Delmarva and essentially sanctioned massive budgets without appropriate review,” Williams and Hoskins wrote.
In March, Exelon and Pepco promised Montgomery County new energy efficiency programs, five megawatts of solar power generation and recreational trails under transmission lines.
In exchange, the county agreed to support the utility companies’ merger bid in front of the commission. Conditions of the commission’s approval include a $100 rate credit for Pepco residential customers and $43.2 million for energy efficiency programs.
Pepco will remain headquartered in Washington, D.C., and will continue to operate in Montgomery County.
Attorney General Brian Frosh opposed the merger, and some on the County Council criticized County Executive Ike Leggett for not getting more out of the settlement agreement.
“We recognize that with these settlement agreements, there is strong public support for the merger, especially by Prince George’s and Montgomery County governments,” read the commission’s majority opinion.
The majority opinion also said Exelon’s track record should help improve Pepco’s much-criticized reliability performance. Some who testified against the merger brought up Pepco’s bottom-quartile performance rating compared to other utilities around the country.
“While we retain our authority to enforce penalties and other corrective actions for these service reliability shortcomings irrespective of the merger, the conditions on which we base our approval of this transaction are inextricably linked to the proven results-oriented management capabilities of the Exelon companies,” read the majority opinion. “Put more simply, they have a track record of excellence, and we are conditioning assurances to help ensure they can get the job done.”
