By Suzanne Herel

Two key Maryland counties have agreed to support Exelon’s controversial takeover of Pepco Holdings Inc. in return for promises to fund customer bill credits, grid reliability improvements, renewable energy projects, energy efficiency programs and help for low-income consumers.

Montgomery and Prince George’s counties, suburbs of D.C., represent three-quarters of Pepco’s customers in Maryland, where Attorney General Brian Frosh, consumer advocacy groups and environmentalists have been urging the Public Service Commission to reject the $6.8 billion deal. (See Exelon ups Merger Offer in Maryland as AG Calls for Rejection.)

The acquisition, which would give Exelon control of more than 80% of the state’s electricity customers, also faces opposition from detractors in D.C. (See Exelon Sweetens the Deal for DC in Pepco Takeover.)

“We believe the agreement is significant because it was signed by a large consortium of low-income consumer advocates and recreational interest groups, in addition to Montgomery and Prince George’s counties,” Exelon spokesman Paul Adams told RTO Insider.

The agreements, filed with the PSC, bring with them a delay in a decision while the public is given time to weigh in.

The parties involved can submit testimony on the settlement until March 30. This is also the deadline for testimony on another settlement with The Alliance for Solar Choice filed March 2. Written public comments may be submitted through April 9.

Hearings Set for April

Evidentiary hearings are set for April 7-9. The PSC had planned to issue its decision on April 8; now it is shooting for April 29.

In a statement announcing the new schedule, the PSC said, “According to the request, the joint applicants have entered into two settlement agreements that they believe resolve all contested issues in this proceeding.”

The Maryland Office of People’s Counsel, however, continues to urge the PSC to reject the deal.

“Generally, we disagree with that,” People’s Counsel Paula Carmody told RTO Insider on Tuesday. “Our perspective is that the transaction is not good for our state, not good for ratepayers and not in the public interest.”

Carmody noted the number of parties yet to be won over — among them the Maryland Energy Administration, the staff of the PSC and groups including the Coalition for Utility Reform.

That organization’s counsel, Montgomery County Councilmember Roger Berliner, submitted a filing March 3 asking the PSC to require Exelon to increase its commitment to reliability, renewable energy and distributed generation.

“Exelon is trying to pick folks off, but appreciate the dynamic they face,” Berliner said in an interview, echoing Carmody’s list of critics.

In a brief filed with the PSC, the OPC said, “Nothing in the revised commitments or in the joint applicants’ initial brief overcomes the substantial harms and risk that will result if the subject acquisition is approved.”

It added, “The joint applicants’ commitments that supposedly provide benefits — those concerning reliability, the Customer Investment Fund and low-income assistance — also provide little, if any, value.”

The proposed conditions, OPC said, don’t address what Maryland stakeholders will lose: “the ability and right to compare the policy proposals and performance of two investor-owned utilities serving customers in Maryland that are subject to the same laws and regulations.”

“The concern about Exelon is that it will favor its nuclear power plants at the expense of renewable energy. In the absence of Exelon making a commitment to renewable and distributed energy in Maryland, I don’t think this merger will be found in the public interest.”

‘Necessary but not Sufficient’

Berliner commended some of the settlement’s aspects, in particular Exelon’s agreement to pay $500,000 for the PSC to retain a consultant to study how to transform the electric grid; a commitment to improve reliability by 2018; and the creation of a $50 million “Green Sustainability Fund” to stimulate investment in solar, energy storage and other distributed generation.

“There are good things in the settlement with the counties,” Berliner said. “But to use legal terminology, they are necessary but not sufficient. The bar is a little higher for this merger to be found in the public interest.

“I think they need to do more.”

In the meantime, Gov. Larry Hogan has delayed the appointment of two new members of the PSC until after the five-member board rules on the Exelon deal. The governor has nominated Michael L. Higgs Jr., a telecommunications attorney, and Jeannette M. Mills, former chief customer service officer for Exelon’s Baltimore Gas and Electric.

DC Opposition

Meanwhile, three members of the D.C. Council have penned a letter to the District’s PSC urging the commission to reject the deal, saying that it is not in the public interest, as required by law.

Mary Cheh, Elissa Silverman and Charles Allen said the transaction creates a conflict of interest between Exelon, a producer of electricity, and Pepco, which buys electricity and distributes it.

“A producer looks for the highest prices for its product, but a buyer looks for the lowest prices,” they said.

They cited the commission’s 1999 approval of Pepco’s proposed divestment of its generation assets as being in the public interest and yielding “non-monetary, but no less important, benefits to District ratepayers.”

“With Pepco substantially out of the generation business,” the PSC wrote at the time, “there will be less motivation for the company to act as an inhibitor to the development of a competitive generation market in the District.”

The councilmembers concluded that “the only real beneficiaries of the takeover will be Pepco shareholders (Exelon is buying them out at a more than 24% premium over market value) and Exelon Corp. (which will capture a steady, reliable stream of revenue to offset its riskier generation assets).”

The D.C. Office of People’s Counsel, who also is critical of the proposed deal, said last week that it was too early to tell if the settlement proposed in Maryland would benefit D.C. consumers.

“At this time, the Office of People’s Counsel is focused on the evidentiary hearings” set for March 30 through April 8, People’s Counsel Sandra Mattavous-Frye said. “There may be terms in the Maryland settlement proposal that may be of benefit to District consumers, but I still need more time to carefully examine the details and to determine whether any of these have value to the District of Columbia.”

The acquisition has been approved by the staff of the Delaware PSC, the New Jersey Board of Public Utilities, the Federal Energy Regulatory Commission and the Virginia State Corporation Commission.

Exelon hopes to close the deal in the second or third quarter of this year.