Maryland utility regulators approved a merger between two power giants Friday, a decision that clears a major hurdle for the $6.8 billion proposal.
The 3-2 vote from the Maryland Public Service Commission leaves the fate of Exelon Corp.’s plan to buy Pepco Holdings Inc. in the hands of regulators in the District of Columbia. Regulators in Delaware, New Jersey and Virginia have approved the deal, as has the Federal Energy Regulatory Commission.
The proposed deal has generated opposition from consumer advocates who contend it would allow Exelon to run roughshod over utility rates and edge out renewable power, noting the Chicago-based utility has been a chief opponent of a federal wind subsidy. They also say the acquisition is designed to smooth losses from Exelon’s ailing nuclear fleet, which is facing stiff competition from wind energy in the Midwest and natural gas.
Exelon has said that customer rates won’t increase, citing new efficiencies from the larger company. Exelon officials also have said that it legally cannot cover losses from its nuclear business by raising rates on customers in other territories, though opponents point to prior instances of other utilities selling assets at above market value to subsidiaries to generate cash.
The approval comes with 46 conditions. some of which were changed from earlier proposals. Exelon said it was glad to get the thumbs-up, but that it needed more time to review the order.
“We are pleased that the Maryland Public Service Commission has approved our merger. However, the commission’s order modifies a number of the proposed conditions and we must carefully review it in its entirety,” Exelon spokesman Paul Adams said.
Opponents have kept the heat on the D.C. Public Service Commission for the past several months, which is likely to intensify now that it holds the final say on whether the deal is enacted. Four city council members have publicly spoken out against the deal and are pushing Mayor Muriel Bowser to oppose it as well. Councilman David Grosso, an independent, told regulators in a Tuesday letter that it could lead to future rate increases.
“I am aware that Exelon has proposed a ‘ring-fencing’ measure to protect Pepco and by extension, its ratepayers, from financial risk for five years; however, I have no confidence that this measure will insulate customers from future rate increases, especially if this mechanism is to sunset,” Grosso said.
Maryland regulators added conditions to the approval aimed to quash concerns. They include ensuring “supplier diversity,” creating a $14.4 million “Green Sustainability Fund” for solar, energy storage and other projects, spending $43.2 million on energy efficiency programs and awarding a $100 credit to all residential Pepco customers in Maryland.
It also would honor existing “net-metering” programs, a system that benefits solar power customers by paying them for power they sell back to the grid. Net metering has come under fire recently from the utility industry because it says such customers don’t pay for grid upkeep while remaining connected to it for backup power.
Critics of the deal said the terms were inadequate.
“There are significant and reals risks that Exelon will use this merger to increase energy bills over the next few years to subsidize its failing investments in nuclear power. The minimal additional conditions imposed by the commission will do absolutely nothing to offset the harms caused by this merger,” said Susan Stevens Miller, lead counsel with Earthjustice.
