Pepco-Exelon Merger in Limbo

A revised merger plan between local utility Pepco Holdings Inc. and Chicago-based international energy company Exelon Corp. eliminated key provisions that Mayor Muriel Bowser sought and were previously agreed to. As a result, the merger has lost support from the mayor and a number of stakeholders.

On Feb. 26, the D.C. Public Service Commission voted 2-1 to reject the plan that the mayor’s team negotiated. Addressing “four areas of concern,” according to a commission press release, the commission drafted an alternative plan that removed a guarantee to defer rate increases to D.C. residents for four years. In a 2-1 vote, it approved this revised plan, which went back to the companies for review.

“The PSC’s counter­proposal guts much-needed protections against rate increases for D.C. residents and assistance for low-income D.C. ratepayers,” the mayor said in a statement. “That is not a deal that I can support.”

Bowser was against the merger until her team was able to negotiate a $78-million investment package from Exelon for the District (versus the originally proposed $14 million). Among other things, the package included the four-year rate freeze; a $14-million direct credit for residential customers; $17 million for sustainability projects, including $10 million for the District’s Green Building Fund, $3.5 million for solar projects and $3.5 million for the Sustainable Energy Trust Fund; a commitment to purchase 100 megawatts of wind power per year; and $5.2 million for jobs and training.

People’s Counsel Sandra Mattavous-Frye, of the Office of the People’s Counsel for the District of Columbia, also came out against the merger. “The Commission’s order eviscerates the benefits and protections essential to render the proposed merger in the public interest by making changes to the $25.6 million rate offset provision for residential customers which was the single most critical provision I supported,” she said, according to a press release. Mattavous-Frye had been against the merger since the proposal was first announced.

In order for the new merger plan to go through it must be approved by March 11, following a 14-day review period, by Bowser, Mattavous-Frye, District Attorney General Karl A. Racine — who was the first to come out against the revisions — and six other stakeholders.

Failure of the merger could be seen as a blow to the business community in the District, which they believe already has a reputation for being unfriendly toward large corporations. But environmental groups maintain their opposition to the merger in any form, despite the additional funds for green projects in the District, claiming the merger would hinder a genuine move toward renewable energies.

Update: At press time, Pepco and Exelon filed several new options for the Public Service Commission to consider.

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