As in any industry, the landscape of utilities is always changing. Part of this dynamic is fueled by the need for big companies to strengthen their positions and maximize profits. Those same motives fueled a recent acquisition that produced a new giant among the nation’s electric utilities.
In April, Chicago-based utility, Exelon Corp., announced the purchase of another energy provider, Pepco Holdings Inc., based in Washington, D.C.
The merger provides Exelon with a higher level of stability in the face of volatile energy markets. While Exelon is one of the nation’s larger utilities performing in open, competitive markets, Pepco’s subsidiaries operate in regulated markets.
Pepco serves about 2 million utility customers in Delaware, Maryland, New Jersey and Washington, D.C., and Exelon delivers electricity and natural gas to more than 6.6 million customers in Maryland, Illinois and Pennsylvania. The combined businesses will serve approximately 10 million customers and have a rate base of approximately $26 billion.
According to Exelon President and CEO Chris Crane, the two companies “have a compelling strategic rationale for merging, given our geographic proximity and similar utility business models.”
As Exelon stated, the transaction will further expand its regulated holdings, ensuring a balanced earnings mix as power prices recover.
According to Reuters, with the transaction, Exelon will overtake Duke Energy Corp. as the biggest power distribution company in the United States. Clearly, Exelon sees the competition on a more regional scale, asserting only that the acquisition will “create the leading Mid-Atlantic electric and gas utility.”