D.C. Regulators Dump Exelon-Pepco $6.8 Billion Deal
Last week, the District of Columbia Public Service Commission has dumped a $6.8 billion merger deal between Exelon Corp. and Pepco Holdings Inc. This is a precautionary measure that would help protect its residents. There is still hope for the two companies to get the merger possible as long as they can comply with the new terms and conditions.
Muriel Bowser the city mayor, People's Counsel Sandra Mattavous-Frye and Attorney General Karl Racine said on Tuesday that they cannot uphold the said proposal. If Pepco and Exelon will still pursue the approval of the deal by next week, both companies need to look for a way to boost their assistance and of those five other parties. All of them need to sign off on deal for the city's Public Service Commission to free the transaction from doubt or confusion.
What concerns most is the lack of guarantee in the suggested agreement that residential customers will not have rate hike over the next few years. For the merger to get going, Exelon needs to negotiate new conditions with all of the parties and file it by March 11 with the Public Service Commission, said Guggenheim analyst Shahriar Pourreza. "While there is time to negotiate any alternative conditions, we believe there is increasing likelihood" that Exelon may walk from the deal, he said, as reported by Bloomberg.
The mayor's team had managed for the utility companies to pay $78 million to the District in favor of getting the city's support for the $6.8 billion merger. This was already approved by Delaware, Virginia, Maryland, New Jersey and federal regulators. Bowser's plan would have reduced the rate hike for D.C. residents for four years, however, it was dumped by the District regulators last week saying that it was not in the interest of the public and would only worsen the present imbalance wherein federal taxpayers and businesses to pay D.C. residential rates, according to the Washington Post.
"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," said Exelon spokesman Paul Adams.
The agreement between Pepco and Exelon was first revealed on April 30, 2014 rolling out plans for a new utility that could service 10 million with a base rate of $26 billion. The merging process has been costing high price for Exelon which already spent more than $259 million for the plan and preparation for the probable merger. Exelon will have to pay Pepco $180 million when the merger fails, since Exelon acquired 18,000 shares of Pepco preferred stake for $180 million and Pepco has the right to get the $0.1 per share, the Washington Business Journal reports.
The seemingly fall down of the agreement is a major triumph for environmentalist and a loss for the District's business community which worries that refusal will solidify the image of the city as hostile to major corporations.