Exelon Corp. (NYSE: EXC) and Pepco Holdings Inc. (NYSE: POM) announced May 18 that the companies have completed their review of the Maryland Public Service Commission’s order approving their merger and have committed to fulfill the more stringent conditions and package of customer benefits imposed by the commission.
“We are pleased that the Maryland Public Service Commission has found our proposed merger with Pepco Holdings Inc. to be in the public interest. In particular, we are heartened that in its order, the Commission recognized Exelon’s proven track record and ability to maximize grid reliability improvements,” said Chris Crane, Exelon president and CEO. “After a thorough review of the order, we have concluded that it is constructive, but the conditions it imposes – including those to which the companies already committed in our settlement – will also be challenging. It poses some stringent conditions that will be difficult to fulfill, but all of us at Exelon accept the challenge and commit to proving ourselves in an expanded role in Maryland.”
Pepco Holdings Chairman, President and CEO Joseph M. Rigby said: “Together, Exelon and Pepco Holdings utilities will be able to provide better customer service and reliability in Maryland than Pepco and Delmarva Power could without the merger, in large part because of the ability to share best practices with three utilities that are already top performers: BGE, ComEd and PECO. We look forward to delivering on the commitments we’ve made and which the Commission has expanded: economic benefits, as well as increased reliability, energy efficiency and clean energy, as part of a long-term commitment to Maryland.”
The Exelon-Pepco Holdings merger will bring together Exelon’s three electric and gas utilities – Baltimore Gas & Electric, Commonwealth Edison and PECO Energy – and Pepco Holdings’ three electric and gas utilities – Atlantic City Electric, Delmarva Power and Potomac Electric Power – to create the leading mid-Atlantic electric and gas utility.
The Maryland commission on May 15, in a tight 3-2 decision, approved the merger. The commission’s approval lists 46 conditions, including higher reliability standards and $43.2 million for energy efficiency programs in Prince George’s and Montgomery counties and the Delmarva service territory. The commission approved two settlement agreements between the joint applicants and multiple parties in the case with some modifications. A major condition of the merger is a requirement that Delmarva and Pepco meet aggressive reliability performance standards from 2016 through 2020 within projected budget targets and subject to penalties for non-compliance. Additionally, Exelon must provide for the construction of 20 MW of renewable energy generation, 10 MW each in the Delmarva and Pepco Maryland service territories.
The merger still requires approvals by the Public Service Commission of the District of Columbia and the Delaware Public Service Commission. On Feb. 13, Exelon reached a settlement agreement with staff of the Delaware PSC and other stakeholders, and the agreement is pending approval by the commission. Following the expiration of the U.S. Department of Justice’s review period in December 2014, the Hart-Scott-Rodino Act no longer precludes completion of the merger.
The transaction was approved by the New Jersey Board of Public Utilities in February, the Federal Energy Regulatory Commission in November 2014, the Virginia State Corporation Commission in October 2014 and PHI stockholders in September 2014. The companies expect to complete the merger in the second or third quarter of 2015.
Exelon is the nation’s leading competitive energy provider, with 2014 revenues of approximately $27.4 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 approximately 32,000 megawatts of owned capacity comprising one of the nation’s cleanest and lowest-cost power generation fleets.
Pepco Holdings 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.