D.C. Service Commission Rejects Pepco-Exelon Deal — Sort of

The D.C. Public Service Commission, which regulates electric, natural gas, and telecommunications companies in the District of Columbia, rejected Exelon’s proposal to buy Pepco in a $6.8 billion bid by a vote of 2 to 1, Feb. 26.

In August of last year, the commission rejected the merger plan but allowed a resubmission. Mayor Muriel Bowser announced a settlement deal in October in support of the Pepco-Exelon merger.

The utility merger with Pepco would create the biggest utility company in the country — already the federal government, Delaware, Maryland, New Jersey and Virginia have approved it.

Neverthless, in a separate Feb. 26 vote, the D.C. commission offered its approval to the merger, if four conditions were met within 14 days.

The following is part of a statement issued by the commission.

“Today, the Public Service Commission of the District of Columbia (Commission) voted in a 2 to 1 decision to reject, as filed, the Nonunanimous Full Settlement Agreement and Stipulation (NSA) concerning the proposed merger between Pepco and Exelon Corporation as not being in the public interest (Order No. 18109).

“Chairman Betty Ann Kane and Commissioner Joanne Doddy Fort comprised the majority vote rejecting the NSA with Commissioner Willie L. Phillips dissenting. However, Commissioner Fort proposed alternative terms for a Revised NSA that would, if accepted by the settling parties, result in the approval of the Revised NSA and the Merger Application without additional action by the Commission, and asked for approval to send the alternative terms to the settling parties. . . .

“In initially determining whether the NSA is in the public interest pursuant to D.C. Code §§ 34-504 and 34-1001, Chairman Kane and Commissioner Fort agreed that there are four (4) areas that warrant rejecting the NSA as filed:

“(1) the evidentiary record failed to provide a persuasive rationale for excluding non-residential ratepayers from sharing in the proposed $25.6 million allocation of the Customer Investment Fund (CIF) for base rate credit relief and failed to persuade the Commission that the proposed allocation would not undermine the Commission’s ability to address the negative rate of return that currently exists for residential ratepayers and the resulting subsidies that are placed on non-residential customers;

“(2) the NSA assigns roles to Exelon, as a developer of a solar generation facility at Blue Plains, and to Pepco, as a developer of four public purpose microgrids, that undermine competition and grid neutrality and are inconsistent with the District’s restructured market;

“(3) the proposed uses of the CIF for sustainability projects and Low Income Home Energy Assistance Program (LIHEAP) payments do not improve Pepco’s distribution system nor advance the Commission’s objective to modernize the District’s energy systems and distribution grid; and

“(4) the proposed method of allocating the CIF funds to District Government agencies and designated funds deprives the Commission of the ability to ensure that all of the funds are being used to enhance the distribution system and benefit District ratepayers, and to enforce the terms of the NSA.

“Commissioner Fort’s alternative terms resolve the four (4) areas of concern by: (1) deferring a decision on the allocation of the $25.6 million Customer Base Rate Credit until the next Pepco rate case; (2) removing the provision that designates Exelon as the developer of a 5 MW solar generation facility at DC Water Blue Plains Treatment Plant and requiring Pepco’s commitment to facilitate the interconnection of a 5 MW solar project for any vendor selected by DC Water through its procurement process; (3) creating an escrow fund with two subaccounts at Pepco to hold $32.80 million of the $72.8 million Customer Investment Fund funded by Exelon under the NSA, $21.55 million of which is to be used for pilot projects emerging from Formal Case No. 1130 (a case to modernize the District’s energy system) and $11.25 million of which would be used for energy efficiency and energy conservation initiatives with a primary focus on housing, including multifamily buildings, for low and limited income District residents; and (4) striking as premature the provisions regarding Pepco’s role with the District to develop public purpose microgrids and requiring Pepco to facilitate and support the pilot projects under Formal Case No. 1130. …”

Mayor Bowser released the following statement on the commission’s decision on the proposed Pepco-Exelon merger:

“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. 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.” ?

Exelon Corporation issued a statement on the decision: “The commission’s order prescribes new provisions that we and the settling parties must carefully review to determine whether they are acceptable. Once we have had a chance to study the order and confer with the settling parties, we will have more to say about what it means and our next steps.”

The PowerDC Coalition released the following statement in response to today’s ruling.

“Although the commission agreed the merger should be denied, its 14-day, last-chance, fix-it proposal is a band-aid on a problem that cannot be fixed. This is an extremely disappointing outcome for the District of Columbia and our entire region. Tens of thousands of residents, the majority of D.C.’s neighborhoods, and all of the substantive experts who looked at this merger agreed that it will lead to higher electricity rates and slower progress on clean, efficient energy. In the end, we fear that the corrupting influence of corporate money on our elected officials won the day – again. Today’s decision, however, will not stop the citizens of D.C. from continuing to advocate for lower power rates and expanded renewable energy.”

See The Georgetowner’s Dec. 2 editorial on the proposed Pepco-Exelon merger.