The Maryland Public Service Commission approved Exelon Corporation’s $6.8 billion proposal to purchase Potomac Electric Power Company and Delmarva Power & Light (Pepco) today in a split 3-2 vote.
“In this Order we approve the merger of Exelon and Pepco Holdings, Inc. because, simply put, the evidence demonstrates that Delmarva and Pepco will be better utilities because of the merger, and that the statutory requirements are satisfied,” read the decision.
Commissioners in favor of the deal determined it was in the public interest, citing the potential for faster outage recovery and cost savings for customers through improved operational efficiencies. However, they also set 46 conditions to which Exelon and Pepco must agree, including increased reliability targets.
Exelon will also be required to provide to Delmarva and Pepco customers with $109.2 million in “Customer Investment Fund benefits,” made up of $66 million for residential rate credits and $43.2 million for energy-efficiency programs.
“We are pleased that the Maryland Public Service Commission has approved our merger,” Exelon Corporation and Pepco Holdings Inc. said in a combined statement. “However, the Commission’s order modifies a number of the proposed conditions and we must carefully review it in its entirety.”
UPDATE: On May 18, Exelon and Pepco announced they accept the terms of the merger order from the Maryland Public Service Commission.
“After a thorough review of the order, we have concluded that it is constructive, but the conditions it imposes -- including those to which the companies already committed in our settlement -- will also be challenging. It poses some stringent conditions that will be difficult to fulfill, but all of us at Exelon accept the challenge and commit to proving ourselves in an expanded role in Maryland," said Chris Crane, Exelon president and CEO, in a statement.
Both Pepco and Exelon saw their stocks rise with news of the approval.
Groups lobbying against the proposed merger argue it will increase rates, pointing to two rate increases in Baltimore Gas & Electric territory since Chicago-based Exelon purchased the Maryland utility’s parent company, Constellation, in 2012.
Critics say the merger will also stifle competition between neighbor utilities and cement the old utility model, rather than facilitating a move to a cleaner, distributed energy future -- pointing to Exelon’s past lobbying efforts against renewables.
“Instead of handing control of our electricity to a mega-corporation based in the Midwest, community leaders, regulators and lawmakers should work to ensure that we modernize the way we produce and use electric power,” said Tyson Slocum, director of Public Citizen’s Energy Program. “Our region’s electricity system should maximize cost-effective opportunities for households, small businesses and churches to lead the fight against climate change by generating their own electricity through rooftopsolarpanels.”
New Jersey and Virginia have already approved the Exelon-Pepco merger, and stakeholders reached a settlement agreement in Delaware, clearing a path for approval. The final decision now rests in the hands of the D.C. Public Service Commission (PSC). If approved, Exelon will become the largest utility in the U.S. in terms of customers served.
"The two dissenting MD commissioners laid out the concerns perfectly when they said, 'The proposed merger fails...by causing unmitigated harm in three principal areas: it will undermine competition; it will increase rates, challenging affordability for many consumers; and it will eviscerate economic protections due to a weakened and compromised corporate governance structure,’” said Anya Schoolman, executive director of DC Solar United Neighborhoods, a community-led solar advocacy group.
“But for one vote, the Maryland Commission could have set the region on a radically different path,” Schoolman added. “Now it is up to DC to act in the interests of the region's ratepayers.”
PSCs rarely reject utility mergers -- there have been just two instances in which that has occurred in the United States in the last 30 years. In a few cases, stakeholders have walked away because the conditions were too strict.
Opposition groups believe the conditions laid out by the Maryland PSC are not strict enough to protect consumers or the region's clean energy future. However, they hoped the terms would have been strict enough to make Exelon walk away.