Maryland regulators Friday voted 3 to 2 to approve Chicago-based Exelon’s proposed $6.8 billion acquisition of utility company Pepco Holdings, ending a year-long battle between state officials, environmentalists and the companies.
The Maryland Public Service Commission said it approved the deal with 46 conditions, including higher reliability standards, a $100 rate credit for Delmarva Power and Pepco residential customers and $43.2 million for energy efficiency programs in Prince George’s and Montgomery counties and the Delmarva-Maryland service territory.
The commission appeared to be particularly mindful of Pepco’s missteps in responding to past storm-related outages.
“We find that this merger will enable Delmarva and Pepco in Maryland to improve their reliability performance more quickly than they would without the merger,” the panel said in a statement. “We find that their day-to-day normal weather outages will be reduced, their distribution infrastructure will be improved more quickly and at lower cost, and their ability to recover from outages following major storms will be improved, all because of the merger.”
The acquisition would extend Exelon’s reach across the Northeast after its 2011 purchase of Baltimore Gas and Electric. The company is also planning to add Atlantic City Electric and Delmarva to its roster of utilities.
In a joint statement, Exelon and Pepco said they were pleased with the commission’s decision, but they needed time to understand its conditions.
“Our proposal delivers significant economic benefits to Maryland customers, increases reliability, promotes energy efficiency and advances clean energy as part of a long-term commitment to improve service and modernize our grid,” the statement said.
Commissioners who voted in favor of the deal included Chairman W. Kevin Hughes and Lawrence Brenner and Kelly Speakes-Backman.
Two commissioners, Harold D. Williams and Anne E. Hoskins, dissented, noting that Maryland customers would no longer have the benefit of comparing the “across-the-fence” offerings of BGE and Pepco. They also noted that because Pepco sold its power plants, the public would lose Pepco’s unique “voice” in energy matters.
“The merger will also lead to harmful rate increases as Exelon spends vast sums of ratepayer dollars to achieve promised reliability gains that have not been adequately assessed for prudence in a separate regulatory proceeding,” the dissenting commissioners said in a statement.
Montgomery County Council member Roger Berliner (D-Potomac-Bethesda), who heads the Coalition for Utility Reform, a group that pressed Exelon for environmental and service improvements as conditions to the merger, said the decision “poses an unacceptable threat to both ratepayers and our environment.”
Berliner did note some positives, however, including Exelon’s commitment to accept financial penalties if it does not achieve top quartile reliability within three years. He said he was pleased the merger would allow for hiker-biker trails to be built along Pepco rights-of-way. Exelon’s application is awaiting approval from the D.C. Public Service Commission and Delaware officials, who had said they would make a decision after Maryland’s announcement. .
Bill Turque contributed to this report.