​Exelon Merger Rejected As Supporters Scramble To Salvage Pepco Pact

Exelon Merger Rejected
Author: Kara GilmourBy:
Staff Reporter
Feb. 27, 2016

The Exelon merger was rejected by district regulators that is halting the deal with Pepco for a second time and sending supporters scrambling to salvage a pact to create the nation’s largest electric utility, according to The Baltimore Sun.

The D.C. Public Service Commission voted 2 to 1 against a $78 million plan negotiated chiefly by Mayor Muriel E. Bowser’s office. Under that plan, the city would have held down residential rates for the next four years and directed tens of millions of dollars to environmental projects, low-income energy assistance and workforce-training programs.

Exelon merger rejected with Pepco amid complications

Exelon merger rejected with Pepco amid complications

But the commission said the way Bowser (D) intended to spend the money that utilities were willing to pay the city in exchange for support was “not in the public interest.”

A majority of the commission found there was no “persuasive rationale” for giving residents almost $26 million to cushion expected rate increases through 2019. That would exacerbate an imbalance in which businesses and the federal government subsidize residential rates in the nation’s capital, the PSC said.

But the commission offered a narrow path forward to keep the $6.8 billion merger on track. It said Pepco and Exelon could reapply with new terms, under which the PSC would decide how the $26 million is allocated. That would potentially send millions of dollars in credits to businesses or the federal government — not residents — to equalize rates.

That would create a politically perilous path for Bowser, the city’s chief advocate for ratepayers, the District’s attorney general and others who supported the deal late last year on the grounds that residents would be insulated from rate hikes for at least four years.

Under the PSC’s proposal, the nine parties involved have 14 days to approve the new terms.

Anya Schoolman, head of DC Solar United Neighborhoods, which opposed the merger, said it was a “slap” at Bowser’s plan.

“This is a huge slap at the mayor’s office, saying ‘Keep your hands off ratepayers’ money,’ ” Schoolman said, referring to Bowser’s plan to spend the money in ways to win political support for the deal.

In a statement, Bowser said she was reviewing her options and that her rejected plan had wide support, including from longtime merger critic Sandra Mattavous-Frye, the District’s chief advocate for ratepayers, and D.C. Attorney General Karl A. Racine.

“Last year, in conjunction with the Office of the People’s Council, Attorney General Racine and others, the District advanced a deal that ensures D.C.’s energy future — focused on reliability, affordability and sustainability,” Bowser said. “The Public Service Commission took the framework we negotiated and made adjustments. We will have to carefully review the commission’s order to determine if it meets our goals for ratepayers, especially residents.”

But Racine was more openly skeptical. He said that the credits to insulate residents from increases through 2019 was an “essential protection” in the deal and “given that that provision is now in doubt, the benefit to residential ratepayers also now is in doubt.”

Exelon spokesman Paul Elsberg said the company was still reviewing how it could move forward.

“The commission’s order prescribes new provisions that we and the settling parties must carefully review to determine whether they are acceptable,” he said.

Elsberg said that after discussions with the mayor’s office and others, Exelon “will have more to say about what it means and our next steps.”

The PSC’s decision Friday gave some in the room whiplash, with opponents of the deal first standing and cheering at the rejection and then later bemoaning that the deal could still go through.

PSC Chairman Betty Ann Kane proposed a motion to reject the merger. Then the commission voted on a plan to give the companies terms for eventual approval. That also passed 2 to 1, but this time with Kane dissenting.

She said that, as in August when the PSC first rejected the plan, she saw an “inherit conflict of interest” in putting the city’s electricity distribution in the hands of an out-of-town nuclear-power generator.

“The fact remains unchanged from the original application that the takeover of Pepco will entangle the company in an ownership structure that is an inherit conflict of interest and that it takes it in the opposite direction from its sole focus of being a distribution company that is required” under D.C. law, Kane said.

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