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After months of back and forth, D.C.’s Public Service Commission on Wednesday approved a proposed merger between utilities companies Pepco and Exelon valued at approximately $7 billion, in a 2-1 decision.
The PSC’s approval order follows starts and stops for the deal, including negotiations by the office of Mayor Muriel Bowser, opposition from D.C. councilmembers and the Office of the People’s Counsel, and concerns raised by environmental groups that expressed constant skepticism towards nuclear-energy-based Exelon.
In their order, the commission settled on the second of three options for the deal, which they determined to be sufficiently in the public interest, in part due to an “incremental offset” in future electricity-rate rises:
The amount of the [Customer Investment Fund], $72.8 million, including the amount of the CIF that is available for base rate credits, $25.6 million, remains unchanged. These are all funds that will not be available to District ratepayers or the District if the Merger is not approved. The incremental offset as an additional tool to mitigate rate increases has been restored. While the placement of some of the CIF funds has changed, the funds will continue to be available to the District and other stakeholders to use for energy efficiency and energy conservation and usage programs, especially for low- and limited-income residents, and for projects that will help to modernize our distribution grid and enable it to accept more distributed resources in all areas of the District, thereby further promoting the District’s sustainability agenda.
But in her dissent, PSC Chair Betty Ann Kane writes that she does not believe the final deal does enough to benefits District residents. Describing Exelon as a “multi-faceted vertically integrated generation-focused holding company,” Kane says the merger is good for Pepco and Exelon shareholders—not others.
“Based on its merits, I find that while the proposed changes address some of my concerns, many others remain,” she explains. “Most importantly, none of the revisions to the 142 terms of the proposed acquisition change the fundamental inherent conflict which has led me on two prior occasions to find that the proposal is not in the public interest. There are many promises and a lot of money being offered. Expensive wedding gifts are nice. But all the wedding gifts in the world can’t make a bad marriage good.”
A Pepco spokesperson said in a statement that the company “must carefully review the Commission’s order. Once we have had a chance to do so, we will have more to say about what it means and our next steps.” An Exelon spokesperson sent the exact same statement.
Reaction to the deal on social media—and in the market—was swift:
This is the most important case in the the Public Service Commission’s history. And they got it wrong.
— Mary Cheh (@marycheh) March 23, 2016
Very disappointing decision by the DC Public Service Commission, which did not rule in the public interest.
— Elissa Silverman (@tweetelissa) March 23, 2016
In a tweet, the Office of the People’s Counsel, headed by Sandra Mattavous-Frye, said it would review the PSC’s decision “but has concerns about [the] weakening of protections for residents.” Power DC, a group opposed to the merger, said in a statement that “the fight is not over.”
Update 3 p.m.: Environmental organization Chesapeake Climate Action Network condemned the PSC’s decision in a release. Its director Mike Tidwell had this to say:
The Commissioners’ approval of the Exelon-Pepco deal, after it had lost the support of every other major party from the mayor to the People’s Counsel, defies logic and shows a stunning lack of judgment. It also defies the overwhelming will of D.C. citizens, neighborhood, faith, small business, social justice, and environmental leaders. While Exelon lobbyists are cheering, D.C. residents must now brace for big rate hikes and new roadblocks to clean energy.
He added that CCAN would work to “enact laws that keep Exelon from poisoning climate solutions along with our politics.”
Update 4:15 p.m.: Mayor Bowser criticized the PSC’s decision in a statement released on Wednesday afternoon: “It appears the Public Service Commission favors government and commercial ratepayers over D.C. residents. Instead of a three year rate increase reprieve that we negotiated, it appears that D.C. residents will be hit with a rate increase as soon as this summer.”
Update 7:15 p.m.: Pepco and Exelon put out a joint release hailing the merger and noting that the latter will “provide a package of direct benefits—including bill credits, reliability improvements, and other investments—worth more than $430 million” for ratepayers in D.C., Delaware, Maryland, and New Jersey. “This new era will bring a new level of service excellence and economic and environmental benefits to our customers, while maintaining our leadership and partnerships in our local communities,” David Velazquez, Pepco Holdings’ president and CEO said in a statement
Pepco will retain its D.C. headquarters. Those who have stock in Pepco Holdings will get $27.25 a share, per the release.
Meanwhile, D.C. Attorney General Karl Racine blasted the deal, saying in a statement, “We do not believe the agreement the Public Service Commission approved today provides enough benefits or protections for residential, including low-income, ratepayers.” OPC’s Mattavous-Frye added in a separate statement that her office would “fight to ensure that rates remain affordable for consumers, particularly for our most economically vulnerable residents.”
This post has been updated with a statement from Pepco and Exelon.
Photo by Darrow Montgomery