Maryland regulators on Feb. 17 approved, with 40 conditions, the application to merge Exelon (NYSE:EXC), Constellation Energy Group (NYSE:CEG), Baltimore Gas and Electric (BGE) and Exelon Energy Delivery Company.
The conditions require that the new company invest $113.5m over a three-year period into a fund to provide energy efficiency and low-income energy assistance to BGE customers, and provide a $100 rate credit to BGE residential customers within 90 days of consummation of the merger, the state Public Service Commission said.
Other conditions include enhanced ratepayer conditions, such as strengthening certain aspects of BGE’s existing ring-fencing conditions and safeguards against the new company’s ability to increase wholesale electricity prices by exerting market power, the PSC said.
According to the order, the conditions also call for new generation within the state and within specifically constrained transmission regions. Exelon is to develop or assist in developing 285 MW to 300 MW, nameplate capacity, of new generation in Maryland within a 10-year period following consummation of the merger. Projects that have, as of the date of the settlement, either begun construction or that the applicants have committed to build other than as part of this proceeding do not qualify toward fulfillment of the condition, the PSC added.
The generating capacity is to be derived as such: 120 MW of primarily gas-fired combustion turbines in Maryland by December 2015; 125 MW of Tier I renewable resources by Jan. 15, 2022; 30 MW of solar generation by December 2015; and from new animal waste-to-energy generation.
The utilities have 10 days from the ruling date to notify the PSC if they reject the terms and decide not to move forward with the merger. Assuming they decide to proceed, Constellation will become a subsidiary of Exelon, with no publicly traded stock. Exelon and Constellation shareholders will own 78% and 22%, respectively, of the combined company. Along with BGE, Exelon will have three utility companies, including PECO Energy Company and Commonwealth Edison Company, that will be governed directly by Exelon Utilities, an unincorporated division within Exelon.
BGE headquarters are to remain in Baltimore, remain locally managed and continue to serve its customers under its own name, the PSC said, adding that the PSC retains the authority to “divest BGE from its parent company should serious calamities occur.”
The PSC said as originally filed in May 2011, the merger raised serious concerns and could not be approved in its original form. However, with appropriate conditions, the PSC determined that the proposed merger is “consistent with the public interest, convenience and necessity, including benefits and no harm to ratepayers.”
In statements posted on their respective companies’ websites, executives said they were pleased with the approval.
“[W]e accept the additional conditions that the commission has imposed,” Exelon President and COO Christopher Crane, who will become president and CEO of Exelon upon closing of the merger, said in the statements.
Mayo Shattuck III, chairman, president and CEO of Constellation, will become executive chairman of Exelon upon closing of the merger.
The companies noted that the proposed transaction has been approved by Exelon and Constellation shareholders, and that regulatory approvals or reviews have been completed by the New York PSC, the Public Utility Commission of Texas, the Department of Justice and the U.S. Nuclear Regulatory Commission.
The merger requires regulatory approval by FERC.