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Pepco-Exelon Merger Alters Utility Landscape


By William Atkinson | May 15, 2016
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On March 23, the District of Columbia Public Service Commission voted to approve a $6.8 billion merger between Pepco Holdings and Exelon, creating the largest investor-owned utility in the nation. Combined, the two utilities will serve 10 million customers.


Chicago-based Exelon has the largest number of nuclear reactors in the nation, with operations throughout the Mid-Atlantic, New England and Midwest. Pepco is an electric utility serving customers in the Washington, D.C., metropolitan area. The sheer size of the merger is expected to change the national utility landscape.


The merger was first proposed in 2014, and the Federal Energy Regulatory Commission, the U.S. Justice Department, and the public service commissions in Maryland, Delaware and New Jersey had already approved it. After voting down the proposal in August 2015 and again in February 2016, the D.C. Public Service Commission was the only remaining obstacle. 


D.C. Mayor Muriel Bowser and city leaders were concerned that current Pepco residential customers will see higher rates, which has happened in other cities following Exelon acquisitions of utilities. 


On the other hand, district business leaders actively lobbied for the merger. Millions of dollars that Bowser had wanted to earmark to cushion residential customers from rate increases could now instead go toward credits for businesses or the federal government. One reason regulators approved the merger was because it would add commercial customers to a rate-relief plan and significantly increase power resources.


Environmental groups suggested that a merger would divert Pepco from a path toward more renewables (wind and solar), given Exelon’s reliance on a massive fleet of nuclear power and natural-gas-generating stations.


As part of the deal, Exelon agreed to provide $50 to Pepco customers for benefits such as rate credits, assistance for low-income customers and energy-efficiency measures. This includes a deposit of $72.8 million in a “customer investment fund,” $11.25 million for energy efficiency and conservation programs targeted to low-income residents and another $21.55 million for pilot projects, such as modernizing the electric distribution grid.


While the deal has been approved, stakeholders can still seek a stay on the commission’s ruling, though Bowser has yet to say whether she would attempt to do so.


About The Author

ATKINSON has been a full-time business magazine writer since 1976. Contact him at [email protected]

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