DC Commission, Last Holdout among Regulators, Denies Exelon-PHI Merger

The proposed merger between Exelon Corporation and Pepco Holdings Incorporated (PHI) will likely be rejected after the District of Columbia Public Service Commission denied the petition on August 27, ruling that the $6.4 billion transaction is not in the public interest. The applicants have said they will appeal the DC commission’s decision, which shut the final gate to the merger after it was approved by commissions in each of the other relevant jurisdictions. The merger must be approved in each jurisdiction in order to pass.

On behalf of the District of Columbia Government, one of the intervenors in the DC case, Synapse expert witnesses testified on four of the seven major factors the commission considered when weighing whether Exelon’s proposed acquisition of PHI would benefit the public. Synapse testified on the effects of the merger on reliability, the environment, and the economy, and on risks associated with the companies’ existing nuclear fleets. The commission also considered the effects of the merger on utility management, the commission’s ability to regulate the new utility, and competition in energy markets.

Synapse witnesses Max Chang and Tyler Comings recommended the commission reject the merger based on:

  • inadequate proposed reliability standards
  • lack of evidence that the merger will support the environmental goals of the District’s Sustainable DC program
  • flawed and misleading estimation of the impacts on jobs and other economic impacts
  • risks associated with passing the decommissioning costs of Exelon’s nuclear fleet to PHI ratepayers if units are retired after proposed protection measures expire

After considering the positions of all intervenors (most of whom opposed the transaction, according to a press release accompanying the official order), the commission found that the proposed merger, when taken as a whole, is not in the public interest. Notably, the commission determined that approving the merger would result in PHI becoming part of a more complicated business structure, which would wrench from the commission its ability to regulate its local utility.

The merger was previously approved by the Federal Energy Regulatory Commission, the Justice Department, and public utility commissions in Delaware, Maryland, and New Jersey (Synapse witnesses also testified on behalf of public interest clients in these states). Exelon and PHI have 30 days from the date of the decision (August 27) to file a petition for reconsideration, after which the commission has 30 days to grant or deny the request.