Justice Department Orders Exelon, Constellation to Divest Coal Plants Before Merger

Exelon Corp. and Constellation Energy Group must sell three electricity generating plants in Maryland before the companies can proceed with their proposed $7.9 billion merger to level competition for wholesale electricity in the mid-Atlantic region, the U.S. Department of Justice (DOJ) said last week.

Filing a civil lawsuit in a U.S. District Court in Washington, D.C. to block the proposed merger, the DOJ’s Antitrust Division contended that the transaction, as originally proposed, “would substantially lessen competition for wholesale electricity, ultimately increasing electricity prices for millions of consumers in the mid-Atlantic region.” The DOJ also filed a proposed settlement that could resolve the department’s competitive concerns and lawsuit. Exelon and Constellation have agreed to conditions set out in the settlement, but the federal court must approve it before the companies can close the transaction.

According to the complaint, the merger would create one of the largest electricity companies in the U.S. with combined assets of $72 billion and annual revenues of $33 billion, and would combine the assets of two large competitors in the mid-Atlantic region. Together, the companies would own between 22% and 28% of the generating capacity in the densely populated mid-Atlantic area encompassing Delaware, the District of Columbia, New Jersey, eastern Pennsylvania, and parts of Maryland and Virginia. The department said that the combination of the assets would enhance the incentive and ability of the merged firm to raise wholesale electricity prices and reduce output.

The proposed settlement outlines divestiture of three power plants with more than 2,600 MW of capacity. The plants to be divested are the 1,370-MW coal-fired Brandon Shores plant and the 1,020-MW gas-, coal-, and oil–fired H.A. Wagner plant in Anne Arundel County, Md., as well as the 400-MW coal-fired C.P. Crane plant in Baltimore County, Md.

The merger has so far been approved by the New York Public Service Commission, the Public Utility Commission of Texas, and shareholders of Exelon and Constellation. It now requires regulatory approvals by the Federal Energy Regulatory Commission, the Nuclear Regulatory Commission, and the Maryland Public Service Commission.

In a previous merger settlement with the State of Maryland, the Maryland Energy Administration (MEA), the City of Baltimore, and the Baltimore Building and Construction Trades Council announced on Dec. 15 that Exelon, Constellation, and Baltimore Gas and Electric Company agreed to provide a package of benefits totaling more than $1 billion and expected to create more than 6,000 jobs in Maryland.

The companies announced their agreement to merge on April 28. Exelon expects to complete the transaction early next year.

Sources: POWERnews, DOJ, Exelon, Constellation