Public Service Commission says $8.6 billion Pepco-Exelon merger is a no-go
The D.C. Public Service Commission (PSC) announced yesterday that it would not approve a proposed merger between Pepco Holding Inc. (ticker: POM) utilities and Exelon Corp. (ticker: EXC). According to the companies, the deal would bring together Exelon’s three electric and gas utilities – BGE, ComEd and PECO – and Pepco’s electric and gas utilities – Atlantic City Electric, Delmarva Power and Pepco – to create a Mid-Atlantic electric and gas utility with a rate base of approximately $26 billion.
The companies announced a definitive agreement to combine on April 30, 2014, in an all-cash transaction valued at $6.8 billion. The combined utility would service about 10 million customers in the northeast United States.
During the PSC’s meeting, board member Betty Anne Kane said that it was not enough for the companies to prove that the deal was not harmful for the public; they had to prove the public would benefit from it as well, reports WTOP. “We found no benefit to District ratepayers in a new management structure that did not include the Pepco president, thereby diminishing the influence of Pepco,” she said. “Pepco would become a second-tier company in a much larger organization whose primary interest is production, not distribution.”
The rejection from the D.C. PSC could kill the utility merger, unless a deal is reached. Pepco and Exelon had already received approval from shareholders, the Maryland PSC, New Jersey, Delaware, and from the Federal Energy Regulatory Commission (FERC) to go forward with their merger.
“We are disappointed with the Commission’s decision and believe it fails to recognize the benefits of the merger to the District of Columbia and its residents and businesses,” said a release from the companies. “We continue to believe our proposal is in the public interest and provides direct immediate and long-term benefits to customers, enhances reliability and preserves our role as a community partner. We will review our options with respect to this decision and will respond once that process is complete.”
The companies have 30 days to ask the commission to reconsider their decision.