WASHINGTON — The decision by D.C. regulators to reject a proposed merger between Pepco Holdings and Chicago-based Exelon Corp. puts the $6.8 billion deal in jeopardy.
So where does that leave power consumers? Here are answers to some common questions Pepco customers might have.
Q: What happens now?
Nothing in the short-term. Rates won’t change and Pepco will continue to be the power company for its current D.C. and Maryland customers. The two companies have 30 days to appeal the D.C. Public Service Commission’s decision.
Q: Could rates change if the deal doesn’t go through?
Pepco, Exelon or any other company have to seek approval for a rate increase through the state public service commissions, which allows for public input, before any rates would change.
Q: What are the companies involved in the deal?
Pepco Holdings Inc. serves almost 2 million customers in D.C., Maryland, New Jersey and Delaware. The deal would have also sold subsidiaries Pepco, Delmarva Power and Atlantic City Electric.
Exelon’s Constellation business provides “energy products and services” to more than 2.5 million customers. The energy provider also owns utilities BGE, ComEd and PECO, which combined serve another 7.8 million customers in Maryland, northern Illinois and southeastern Pennsylvania, according to the company.
Generally speaking, Exelon creates energy and owns power plants, including numerous nuclear power plants. Pepco delivers electricity and maintains the wires and substations that transfer the power to homes and businesses.
Q: Why did Exelon want to merge with Pepco?
Pepco is a highly valued, although smaller company and allowed Exelon to extend its reach in the Mid-Atlantic.
Q: Why did D.C. reject the merger?
The deal faced overwhelming opposition in the District from council members, the Advisory Neighborhood Commissions, the people’s counsel — which advocates for D.C. consumers — and from ordinary citizens, many of whom have been critical of Pepco in the past.
The primary reason is that regulators found no evidence that ratepayers would benefit from the merger. All the benefits would appear to go to Exelon.
The regulators stated “ Pepco will become a second-tier company in a much larger corporation whose primary interest is not in distribution, but generation.”
Bottom line: The companies failed to demonstrate to the regulators that the merger was in the public’s best interest.
Q: Why did Maryland agree to the deal?
In May, the Maryland Public Service Commission approved the merger, but with a long list of conditions that had to be met — 46 in total.
The conditions state that the newly combined company would have to set aside money for energy efficiency programs, meet performance standards and give residential customers a $100 credit.
Q: What other concerns were there regarding the deal?
Regulatory control, jobs and environmental concerns were other factors playing against approval.
With such a large company, it would be difficult for state regulators — as noted by D.C. Public Service Commission Member Betty Anne Kane — to apply pressure to ensure the company sets fair rates, provides reliable service and offers a mix of energy sources.
People’s Counsel Sandra Mattavous-Frye cited the ability to push Pepco to provide green jobs and renewable energy sources as reasons the District did not support the merger.
“All those are things that are still available, that we can push Pepco, in its present position, to move forward on,” she said.
D.C. council members and even officials in neighboring Maryland also feared that Exelon would try to raise rates should it acquire Pepco.
And Montgomery County Councilman Roger Berliner has said previously that Exelon “has a track record of supporting its nuclear power plants at the expense of renewable and distributed energy resources.”
Q: Did anyone support the merger?
The Greater Washington Board of Trade calls the District’s rejection of the merger “regretful” and a “missed opportunity.” The decision “does nothing to improve the reliability desperately needed throughout this region,” the organization’s chairman Anthony Pierce said in a statement.
The organization also says that the decision will prevent the region from accessing resources that could increase reliability, expand innovation and provide additional support following major storms or service disruptions.
Q: Where are Pepco Holdings current customers?
According to Pepco Holdings, here is the breakdown:
Pepco MD 543,889
Pepco DC 271,162
Pepco total 815,051
Delmarva Power MD 201,949
Delmarva Power DE 307,942
Delmarva Power total 509,891
(Delmarva gas 127,652)
Atlantic City Electric 545,642
Pepco Holdings total 1,998,236
WTOP’s Kate Ryan contributed to this report.
