Exelon, Pepco Make Renewed Attempt to Save $6.8 Billion Dealby and
Companies are proposing to reallocate customer benefits
Exelon and Pepco ask for Washington decision by April 7
Exelon Corp. made another attempt on Monday to gain approval from District of Columbia regulators to buy Pepco Holdings Inc. for $6.8 billion, after being rejected twice in its bid to form the nation’s biggest utility.
In an application filed with the district’s Public Service Commission Monday, Exelon and Pepco said they’d be open to changing the allocation of $45.6 million in customer benefits they had already committed to. The offer is intended to address concerns by Washington’s mayor, as well as other city officials, about potential rate increases for residential customers. The companies asked for an expedited decision by April 7.
The filing may be Exelon’s last attempt to salvage its nearly two-yearlong quest to form the nation’s biggest utility by customer count by adding the Washington utility-owner. Exelon had previously said that it would walk away from a deal should regulators fail to decide on it by March 4. The company took back that deadline last week and said it was continuing to discuss terms with parties. The D.C. Public Service Commission, which is the last approval needed for the deal, has so far denied approval of the merger, saying the conditions proposed so far haven’t proven the transaction is in the best interest of customers.
“It’s a last-ditch effort,” Andrew Smith, an analyst for Edward Jones, said by phone Monday. “They’ve made their best and final offer. They’re both pretty desperate, it appears, to get the deal done but they’re not willing to give anything else in terms of financial benefits.”
The terms of the merger between Pepco and Exelon have also changed, according to a regulatory filing Monday. The companies can scrap the deal at any time, they said.
In Monday’s filing, Exelon and Pepco said they would set aside $25.6 million in committed customer benefits to prevent residential rates from increasing through 2019. Another $20 million would be used at the commission’s discretion for purposes including relief for business customers, low-income customer assistance and grid modernization.
“The commission and the settling parties are in agreement that the value of the overall benefits we have committed to the District is appropriate -- it’s essentially a question of how those benefits are allocated for the District,” Pepco Chief Executive Officer Joe Rigby said in a statement.
Parties including Washington Mayor Muriel Bowser and the Office of the People’s Counsel were told about the proposal for reallocation of customer funding, Exelon spokesman Paul Elsberg said Monday on a conference call with reporters. He wouldn’t say whether any support it. Those parties were part of a pact that had been proposed in October but rejected by the commission last month.
“This alternative proposal provides flexibility in determining a path forward for the merger, addressing the guidance the commission provided in its order and the desire to protect district residents, including those most in need, from rate increases,” Exelon CEO Chris Crane said.
The D.C. Office of the Attorney General, which represents the District government in the case, and the People’s Counsel were reviewing the latest proposal, the offices said. Officials from the Washington, D.C. Mayor’s office and the Public Service Commission didn’t immediately respond to requests for comment on the companies’ alternative proposals.
Officials from the District of Columbia Water and Sewer Authority, another party that opposed the terms proposed by D.C. Regulators last month, didn’t immediately respond to a request for comment.
Exelon rose 1.7 percent to $33.92 at the close in New York. Pepco fell 1 percent to $24.18 after rising as as much as 3.4 percent.
Alternatively, Exelon and Pepco said in the filing that they’d accept the approval of the previous settlement they had reached with city officials including the mayor and the People’s Counsel, but that agreement was rejected by the Public Service Commission last month. The companies said they’d also agree to a proposal the commission came up with on its own last month, but parties including the mayor and People’s Counsel were opposed to that.