D.C. Public Service Commission Denies Exelon-Pepco Merger

The final hurdle for Exelon Corp.’s purchase of Pepco Holdings Inc. (PHI) became the ultimate stumbling block, as the Public Service Commission of the District of Columbia (DCPSC) could not be persuaded that the merger was in the public interest.

The DCPSC—an independent agency established by Congress to regulate electric, natural gas, and telecommunications companies in the District of Columbia—is the only jurisdiction to deny the application. Other jurisdictions, including Virginia, New Jersey, Delaware, Maryland, and the Federal Energy Regulatory Commission, have already approved the deal.

Exelon announced its purchase of PHI—one of the largest energy delivery companies in the Mid-Atlantic region, serving about two million customers—on April 30, 2014, and the application seeking a change of control was filed on June 18, 2014.

In its summary of the decision, the DCPSC said the “decision is one of the most significant decisions that the Commission will ever make. Unlike a rate case, this decision will effect a permanent change in the ownership and control of the District’s local electric distribution company. A rate case decision lasts only until the next rate case. This decision is forever.”

Seven factors were said to have been considered in determining if the merger was in the public interest. They included:

• Ratepayers, shareholders, the financial health of the utilities standing alone and as merged, and the economy of the District;
• Utility management and administrative operations;
• Public safety and the safety and reliability of services;
• Risks associated with all of the joint applicants’ affiliated non-jurisdictional business operations, including nuclear operations;
• The commission’s ability to regulate the new utility effectively;
• Competition in the local retail, and wholesale markets that impacts D.C. and D.C. ratepayers; and
• Conservation of natural resources and preservation of environmental quality.

In a press release announcing the decision, DCPSC Chairman Betty Ann Kane stated, “The public policy of the District is that the local electric company should focus solely on providing safe, reliable and affordable distribution service to District residences, businesses and institutions. The evidence in the record is that sale and change in control proposed in the merger would move us in the opposite direction.”

PHI and Exelon have 30 days to ask the DCPSC to reconsider its decision.

—Aaron Larson, associate editor (@AaronL_Power, @POWERmagazine)