Pepco Holdings and Exelon Make Filing to Provide Several Pathways to Secure Merger’s Significant Benefits for Pepco Customers
In a filing to the Public Service Commission of the District of Columbia
today, Pepco Holdings Inc. (NYSE: POM) and Exelon Corporation (NYSE:
EXC) proposed three approaches, any one of which, if approved, would
prevent the loss of more than $78 million in direct benefits for the
District and Pepco customers, and allow the companies to complete the
merger. The proposals offer the Commission considerable flexibility in
determining how the funds are allocated to ensure the merger is in the
public interest. The companies asked the Commission for a decision by
April 7.
“We’re prepared to deliver the benefits of our original merger
settlement or to accept all of the terms the Commission concluded would
place the merger in the public interest,” said Exelon President and CEO
Chris Crane. “We have also offered a third option that aims to balance
the alternate terms the Commission offered in its Feb. 26 order with the
views of some of the settling parties on the issue of rate credits to
residential customers.”
The merger settlement Pepco Holdings and Exelon reached with the DC
government and others in October 2015 set aside $25.6 million to offset
residential customer rate increases through March 2019. However, in its
Feb. 26 order, the Commission removed that set-aside and concluded that
the Commission should determine how those funds will be allocated across
customer classes in the next Pepco rate case.
“The Commission and the settling parties are in agreement that the value
of the overall benefits we have committed to the District is appropriate
-- it’s essentially a question of how those benefits are allocated for
the District,” said Joe Rigby, chairman, president and CEO of Pepco
Holdings. “To safeguard these benefits for the District and its
residents, we are putting before the Commission several options that
will allow the merger to move forward.”
Alternative Proposal
The alternative proposal in the companies’ filing addresses the settling
parties’ concerns by reallocating a portion of the total customer
benefits for a $45.6 million fund – $25.6 million would preserve the
original merger settlement’s rate credits for residential customers,
including low-income households, to offset rate increases through March
2019, and $20 million would be used at the Commission’s discretion for
purposes including rate credits for customers (including commercial
customers), additional low-income customer assistance or grid
modernization.
“This alternative proposal provides flexibility in determining a path
forward for the merger, addressing the guidance the Commission provided
in its order and the desire to protect District residents, including
those most in need, from rate increases,” Crane said. “And it maintains
the full $78 million in benefits for the District and Pepco customers
agreed to in the original settlement.”
Like the revised settlement the Commission has proposed, this
alternative proposal preserves most of the benefits of the original
settlement that will make electricity more affordable, reliable and
sustainable for customers and support local jobs and the local economy,
including:
-
An immediate credit of more than $50 on the electric bill of every
household in the District,
-
Forgiveness of all residential customer accounts over two years old,
-
Fewer and shorter power outages for Pepco customers,
-
Significant financial penalties to Exelon and Pepco if they do not
meet higher reliability goals,
-
Seven megawatts of new solar energy in the District,
-
Practices that will make it easier for customers to install solar
panels,
-
A commitment to purchase 100 megawatts of wind energy in PJM,
-
More than $5 million for workforce development programs in the
District,
-
A commitment to hire more than 100 union workers and other job
commitments in the District,
-
A commitment to move the headquarters of several key Exelon functions
to the District,
-
Enhancement of workforce and supplier-diversity programs, and
-
A guaranteed $19 million in contributions over 10 years to nonprofits
that serve the District’s most vulnerable residents.
Merging with Exelon also will lower Pepco’s costs, and Pepco will pass
the money it saves on to consumers through rates lower than they would
be if the merger does not occur -- an estimated $51 million in savings
over the first decade alone.
Pepco Holdings and Exelon have secured necessary regulatory approvals
from the Federal Energy Regulatory Commission as well as commissions in
Virginia, New Jersey, Maryland and Delaware, The District of Columbia
Public Service Commission is the last remaining approval required.
The companies requested the Commission reach a decision on the filing by
April 7 so as not to delay the delivery of the merger’s significant
benefits to District residents.
For more information about the merger, visit www.phitomorrow.com.
About Exelon Corporation
Exelon Corporation (NYSE: EXC) is the nation’s leading competitive
energy provider, with 2015 revenues of approximately $29.4 billion.
Headquartered in Chicago, Exelon does business in 48 states, the
District of Columbia and Canada. Exelon is one of the largest
competitive U.S. power generators, with more than 32,700 megawatts of
owned capacity comprising one of the nation’s cleanest and lowest-cost
power generation fleets. The company’s Constellation business unit
provides energy products and services to approximately 2 million
residential, public sector and business customers, including more than
two-thirds of the Fortune 100. Exelon’s utilities deliver electricity
and natural gas to approximately 8 million customers in central Maryland
(BGE), northern Illinois (ComEd) and southeastern Pennsylvania (PECO).
Follow Exelon on Twitter @Exelon.
About Pepco Holdings Inc.
Pepco Holdings Inc. is one of the largest energy delivery companies in
the Mid-Atlantic region, serving about 2 million customers in Delaware,
the District of Columbia, Maryland and New Jersey. PHI subsidiaries
Pepco, Delmarva Power and Atlantic City Electric provide regulated
electricity service; Delmarva Power also provides natural gas service.
PHI also provides energy efficiency and renewable energy services
through Pepco Energy Services. For more information, visit online: www.pepcoholdings.com.
Cautionary Statements Regarding Forward-Looking Information
Except for the historical information contained herein, certain of the
matters discussed in this communication constitute “forward-looking
statements” within the meaning of the Securities Act of 1933 and the
Securities Exchange Act of 1934, both as amended by the Private
Securities Litigation Reform Act of 1995. Words such as “may,” “might,”
“will,” “should,” “could,” “anticipate,” “estimate,” “expect,”
“predict,” “project,” “future,” “potential,” “intend,” “seek to,”
“plan,” “assume,” “believe,” “target,” “forecast,” “goal,” “objective,”
“continue” or the negative of such terms or other variations thereof and
words and terms of similar substance used in connection with any
discussion of future plans, actions, or events identify forward-looking
statements. These forward-looking statements include, but are not
limited to, statements regarding benefits of the proposed merger,
integration plans and expected synergies, the expected timing of
completion of the transaction, anticipated future financial and
operating performance and results, including estimates for growth. These
statements are based on the current expectations of management of Exelon
Corporation (Exelon) and Pepco Holdings, Inc. (PHI), as applicable.
There are a number of risks and uncertainties that could cause actual
results to differ materially from the forward-looking statements
included in this communication. For example, (1) conditions to the
closing of the Merger may not be satisfied, (2) problems may arise in
successfully integrating the businesses of the companies, which may
result in the combined company not operating as effectively and
efficiently as expected; (3) the combined company may be unable to
achieve cost-cutting synergies or it may take longer than expected to
achieve those synergies; (4) the merger may involve unexpected costs,
unexpected liabilities or unexpected delays, or the effects of purchase
accounting may be different from the companies’ expectations; (5) the
credit ratings of the combined company or its subsidiaries may be
different from what the companies expect; (6) the industry may be
subject to future regulatory or legislative actions that could adversely
affect the companies; and (7) the companies may be adversely affected by
other economic, business, and/or competitive factors. Other unknown or
unpredictable factors could also have material adverse effects on future
results, performance or achievements of the combined company. Therefore,
forward-looking statements are not guarantees or assurances of future
performance, and actual results could differ materially from those
indicated by the forward-looking statements. Discussions of some of
these other important factors and assumptions are contained in Exelon’s
and PHI’s respective filings with the Securities and Exchange Commission
(SEC), and available at the SEC’s website at www.sec.gov,
including: (1) Exelon’s 2015 Annual Report on Form 10-K in (a) ITEM 1A.
Risk Factors, (b) ITEM 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations and (c) ITEM 8. Financial
Statements and Supplementary Data: Note 23; (2) the definitive proxy
statement that PHI filed with the SEC on August 12, 2014 and mailed to
its stockholders in connection with the proposed merger (as supplemented
by PHI’s Form 8-K filed with the SEC on September 12, 2014); and (3)
PHI’s 2015 Annual Report on Form 10-K in (a) ITEM 1A. Risk Factors, (b)
ITEM 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations and (c) ITEM 8. Financial Statements and
Supplementary Data: Note 15. In light of these risks, uncertainties,
assumptions and factors, the forward-looking events discussed in this
communication may not occur. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the
date of this communication. Neither Exelon nor PHI undertakes any
obligation to publicly release any revision to its forward-looking
statements to reflect events or circumstances after the date of this
communication. New factors emerge from time to time, and it is not
possible for Exelon or PHI to predict all such factors. Furthermore, it
may not be possible to assess the impact of any such factor on Exelon’s
or PHI’s respective businesses or the extent to which any factor, or
combination of factors, may cause results to differ materially from
those contained in any forward-looking statement. Any specific factors
that may be provided should not be construed as exhaustive.
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