Exelon-Pepco merger plan clears key review

OREANDA-NEWS. Exelon's plan to buy Pepco Holdings in a \\$6.8bn deal cleared a key hurdle last week as Maryland utility regulators found the merger was in the public's interest.

The Maryland Public Service Commission's approval by a 3-2 vote puts one of the largest utility mergers in the US closer to completion. The commission made its approval of the deal contingent on Exelon adding 20MW of renewable generation, improving reliability and spending \\$43mn on efficiency programs.

Exelon will also have to provide \\$66mn in rate credits for residential customers served by the two Pepco Holdings wires-only electric utilities in the state, Delmarva Power & Light and Pepco.

The commission said the merger offered a "rare opportunity" to benefit from economies of scale and improve reliability. The evidence in the review demonstrated that Delmarva and Pepco would become "better utilities because of the merger, " the commission found.

In a dissent, Maryland commissioners Harold Williams and Anne Hoskins said the merger was "bad for Maryland" because it would undermine competition, increase rates that would burden low-income residents and lead to the loss of local control and governance.

The commission's decision drew criticism from public advocates over concerns that Exelon would use its stronger foothold in the region to limit competition. The company will control about 80pc of the electric accounts in Maryland if the merger goes through as proposed. Environmentalists also worry Exelon could try to slow the growth of renewable energy because that resource competes with its large nuclear fleet.

Exelon said it was pleased the Maryland commission approved the merger, but said it needed to closely review the decision because it modified conditions in the deal. The merger still requires approval from utility regulators in the District of Columbia and Delaware. Exelon has said it plans to close the merger by September.