Utility regulators in Washington rejected utility giant Exelon’s planned purchase of D.C. and Maryland utility Pepco, saying the deal would harm the city’s residents and be of no benefit to grid reliability.
“The public policy of the District is that the local electric company should focus solely on providing safe, reliable and affordable distribution service to District residences, businesses and institutions,” said Betty Ann Kane, chairwoman of the D.C. Public Service Commission, in announcing the panel’s decision on Tuesday. “The evidence in the record is that sale and change in control proposed in the merger would move us in the opposite direction.”
The three-member commission, which oversees the city’s electric system, unanimously rejected the deal. Washington was the final hurdle the companies had to overcome to move ahead with the purchase.
All other states in the region, including Maryland and Virginia, have approved it. The Federal Energy Regulatory Commission and the Department of Justice also approved the merger.
The utility companies have 30 days to ask the commission to reconsider its decision.
Exelon has successfully merged with a number of utilities in the Washington-Baltimore area, including Maryland-based Baltimore Gas and Electric.
A group of environmentalists who had tried to block the deal in Maryland, but failed, saw D.C. as their last hope to repel a deal with Exelon, which they claim would roll back renewable energy development and harm consumers.
“Exelon’s long history of hostility to renewable energy and competition from small clean energy businesses is a threat to the future of homegrown clean energy projects in D.C. and Maryland,” said Susan Stevens Miller, senior counsel for the group Earthjustice.
Miller says the Maryland utility commission failed to make the connection when it decided in favor of Exelon earlier this year. Earthjustice, with a group of other environmental groups that include the Sierra Club, had appealed the Maryland ruling in court.
Miller says her group will use arguments accepted by the D.C. commissioners in continuing their appeal of the Maryland decision that is pending in Queen Anne’s County Circuit Court. A spokesman for the groups says how environmental groups proceed in the Maryland case has to do with Exelon’s response to Tuesday’s decision.
“If Exelon attempts to find a pathway forward despite the [D.C.] decision, we will continue to press our appeal,” said Philip Ellis, a spokesman for Earthjustice, in an email. There was no immediate action by Pepco or Exelon following the Tuesday ruling.
Consumer watchdog Public Citizen also applauded Washington’s decision to reject the merger. The group’s outreach adviser, Allison Fisher, said D.C. regulators listened to citizen groups and neighborhood commissions in assessing the deal, unlike their colleagues in surrounding states that “yielded to corporate pressure.”
Fisher said the deal would be “bad” for consumers for similar reasons raised by the environmental groups.
“In rejecting the deal, D.C. regulators recognized that Exelon’s economic interest and business model are fundamentally incompatible with the District’s established policies of promoting renewable energy and localizing the generation of electricity,” Fisher said.
The commission agreed that “the potential harm of the merger to the District and its electric utility customers outweighed the benefit to shareholders — who would have received a $1.842 billion windfall had the merger been approved,” he said.
Stock prices for Pepco and Exelon took a tumble after the decision was made. Pepco took the brunt of the losses, with more than a 14-percent drop in its share price. Exelon’s stock price was down over 3 percent.
