Pepco Slides as D.C. Mayor Joins Opposition to Exelon Tie-Up

  • D.C. Mayor Bowser says new proposal `guts' protections
  • Consumer counsel and attorney general also oppose merger plan

Pepco Holdings Inc. slid to the lowest since August after opposition mounted to a proposal to allow Exelon Corp. to buy the utility for $6.8 billion, casting the deal in doubt.

Washington Mayor Muriel Bowser, Sandra Mattavous-Frye, an attorney with the Office of People’s Counsel, and Attorney General Karl Racine said Tuesday the latest merger settlement fails to protect residential customers from rate increases. Their criticism focuses on a proposal from regulators that would allow the tie-up to go forward if nine parties, including the three that voiced opposition Tuesday, sign off.

Bowser was instrumental in brokering a settlement with Exelon and other parties that revived the deal after an initial merger plan was voted down in August. The District’s Public Service Commission rejected the settlement agreement Feb. 26 and offered a new plan. Pepco fell 15 percent to $22.36 at 2:51 p.m. after plunging by as much as 16 percent, the most since Aug. 25, when Washington regulators first rejected the transaction.

“You have to consider this a serious obstacle, as the people’s counsel previously supported the revised settlement,” said Kit Konolige, a utility analyst for Bloomberg Intelligence. “The fact that she made a fuss over a $26 million provision in a $6.8 billion merger might make people think Exelon will get tired of the games and just walk away.”

Opposition over consumer protections is the latest setback for Exelon and Pepco, which have been working to gain regulatory approval for their tie-up for nearly two years.

Protections Gutted

The commission’s Feb. 26 agreement "guts much-needed protections against rate increases for D.C. residents and assistance for low-income DC ratepayers," Bowser said in a statement on her website. "That is not a deal that I can support."

The proposal changed a $25.6 million rate offset provision for residential customers that  Mattavous-Frye called “the single most critical provision I supported.” Without adequate guarantees that rates won’t be increased for residential customers through March 2019, she said she cannot support the deal, according to a statement Tuesday.

“The proposed settlement is not in the public interest," Racine told the Washington Post. Robert Marus, a spokesman for Racine, didn’t immediately respond to a request for comment.

Exelon is “still digesting” the counsel’s statement while continuing to review the conditions the commission proposed last week, company spokesman Paul Elsberg said by phone, adding that the utility owner is conferring with settling parties. Pepco didn’t immediately have a comment.

Exelon Chief Executive Officer Chris Crane said on Feb. 3 that without a decision from Washington by March 4, the company would walk away from the deal. A sign-off from Washington is the last approval the companies need to move forward with the takeover. Exelon rose 0.6 percent to $31.69.

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