Exelon and Maryland’s attorney general are battling over whether a proposed merger of the Chicago-based utility and Pepco Holdings Inc. would benefit the state’s ratepayers.
Attorney General Brian Frosh trashed the proposed $6.9 billion deal in comments to the state’s utility regulator, which will decide on whether to approve the merger this summer. All five regulatory bodies where Pepco operates — Delaware, Maryland, New Jersey, Virginia and Washington, D.C. — must OK the plan. If given the green light, Pepco’s nearly 2 million customers would be rolled into Exelon’s service.
“This merger will harm Maryland customers, offers no tangible, incremental benefits of sufficiently meaningful value, and is not in the public interest. Nothing in the filed testimony, or the evidence adduced during lengthy and comprehensive hearings, changes these facts,” Frosh, a Democrat, said in the 60-page filing, which implored the Maryland Public Service Commission to deny the merger.
Exelon has faced pushback from consumer groups in Washington and Maryland in recent weeks over the proposal. The regulatory bodies in Maryland and the District haven’t yet ruled on the merger, whereas Virginia, Delaware and New Jersey have already given it the thumbs up.
“We are encouraged that a number of parties have included in their filing constructive proposals for terms under which they can support the merger, thereby offering a path to provide the benefits of the merger to utility customers and other Maryland stakeholders. On the other hand, a few parties have taken a ‘just say no’ position, without considering the tangible, long-term benefits that this merger offers,” Exelon spokesman Paul Adams told the Washington Examiner.
Following Frosh’s filing, Exelon said it would increase its “consumer investment fund” in Maryland to $94 million, up from $40 million. The firm has said those funds could be used as regulators see fit, such as on customer rebates or through energy efficiency programs. Exelon says the proposed merger would benefit electricity customers because the larger firm would shed costs through efficiency gains. In Maryland alone, customers would save $127 million over the first 10 years and then $17 million annually.
But opponents are worried an enlarged Exelon would use its heft to jam rate increases through regulators and deny renewable power sources access to electric grid infrastructure. They also allege Exelon could have East Coast ratepayers arbitrage losses from its struggling nuclear fleets in Illinois and New York, such as by selling assets at above market rates to other subsidiaries to generate cash flow.
Exelon says those claims are dubious. They’ve noted their nuclear assets, which exist in competitive markets where the utility cannot recoup costs from customers through rates, are “ring-fenced” from subsidiaries in regulated markets. That means Exelon could not shift costs from Illinois or New York to its would-be customers in Pepco’s service territory, the firm contends.
“Exelon has already invested in and will continue to invest in renewable generation, distributed generation, energy storage, energy efficiency, clean natural gas vehicles, and other initiatives that some intervenors claim, without basis, are ones Exelon would oppose simply because Exelon owns nuclear generation. Those allegations are simply false and are contradicted by overwhelming evidence in the record,” the utility said in its filing.
