By Suzanne Herel
The D.C. Office of the People’s Counsel and Mayor Muriel Bowser’s administration came out Friday against Exelon’s revised merger proposal in filings that appear to quash the energy giant’s chances of acquiring Pepco Holdings Inc.
Neither the alternative offered by Public Service Commissioner Joanne Doddy Fort nor the options filed March 7 by Exelon guarantee “the type of rate protection I have been seeking in this case for almost two years,” said People’s Counsel Sandra Mattavous-Frye.
“Most critical to me were the benefits for residential ratepayers, particularly low-income residents who struggle to pay their electric bills,” she said. “OPC worked hard to achieve the guarantee of no rate increases for residential ratepayers through March 2019. We urge the PSC to resolve this issue expeditiously to bring closure for D.C. residents.”
In the March 7 joint filing, Exelon and PHI offered three options: Accept the agreement brokered by Mayor Muriel Bowser’s administration, which the commission rejected 2-1 Feb. 26; adopt the revision of that agreement that Fort and Commissioner Willie Phillips proposed; or agree to a new alternative that would provide $20 million in rate relief taken from funds earmarked for smart grid and environmental programs. It asked the PSC to rule by April 7. (See Exelon, Pepco Urge Compromise Deal to Win DC PSC OK for Merger.)
In a short filing on behalf of the D.C. government, Attorney General Karl Racine said the only acceptable option would be to accept the settlement that the PSC already rejected.
“The district continues to support the [settlement] as proposed on Oct. 6, 2015, and believes that approval of the merger on those terms provides direct and tangible benefits to ratepayers, promotes sustainability and otherwise remains in the public interest,” he wrote.
In a joint statement, Exelon and Pepco said, “Practically every party that filed comments today continues to believe the merger is in the public interest and supports its approval. The comments show differing opinions on how a portion of the more than $78 million in funds that Exelon has committed to the district should be used if the merger is approved. We hope the Public Service Commission will find a solution that secures all of the benefits for the district and Pepco’s customers and urge it to consider the alternatives we have outlined to approve the merger.”
Four other settling parties in the case also filed comments. The National Consumer Law Center, National Housing Trust and National Housing Trust-Enterprise Preservation Corp. rejected the revised settlement proffered by the commission but urged consideration of Exelon’s third alternative.
“Should option three be rejected, the merger is likely to collapse,” they said. “From the perspective of NCLC/NHT, this is contrary to the public interest, and particularly contrary to the interests of low-income households in the district.”
The Apartment and Office Building Association of Metropolitan Washington filed its support of Fort’s revised version of the settlement “as reasonable and in the public interest.”
“The proposed [revised settlement] clarifies the responsibilities of Exelon and Pepco in a post-merger environment, permits all ratepayers to participate in the benefits of the merger, ensures that funds that are intended to benefit ratepayers and improve Pepco’s electric system in the District of Columbia are not diverted to other purposes, and retains the commission’s statutory authority to enforce the terms and conditions of the [agreement],” it said.
The D.C. Water and Sewer Authority was the only settling party that did not file comments with the PSC, but it publicly has come out against the commission’s revised deal. The comment period is open through Thursday.
Critics of the merger were pleased.
“Today’s filings are great news for D.C. residents and ratepayers,” said Anya Schoolman on behalf of the PowerDC coalition. “There is no viable path forward for Exelon’s attempt to take over Pepco. We agree with the Office of the People’s Counsel’s filing. D.C. is ready to move on.”
The merger began looking doubtful March 1, as Mattavous-Frye, Bowser and Racine said publicly they couldn’t support the commission’s alternative. (See Exelon-Pepco Deal in Doubt as Mayor, Consumer Advocate Balk at New Terms.)
All took issue with the PSC’s requirement that $25.6 million earmarked for residential rate relief be held in escrow until the next Pepco rate case and then be considered for disbursement, including to nonresidential customers.
The PSC said it would approve the merger under its revised settlement with no further commission action if all settling parties agreed to it within 14 days. (See DC PSC: Will OK Exelon-Pepco Deal for Additional Concessions.)
Exelon has spent an estimated $259 million over the past two years trying to capture Pepco’s $7 billion rate base.
CEO Chris Crane said in a Feb. 3 earnings call that the company was prepared to immediately begin buying back the 57.5 million shares it issued for the $6.8 billion deal if the merger fell through.
Friday’s news further weakened Pepco’s stock, which closed Monday at $22.22, down 8% from Friday’s open and down 16% from the open on Feb. 26, before the PSC rejected the mayor’s settlement. Exelon’s share closed Monday at $34.63, down almost 1% from the Friday open but up almost 9% since Feb. 26.