Pepco Holdings Inc., the company that includes oft-criticized electricity utility Pepco, is being sold to Chicago-based Exelon for $6.8 billion in cash.
It’s unclear what that will mean for Pepco’s customers, many who have complained for years about Pepco’s poor service record. On Wednesday, after the deal was announced, it seems those who watch Pepco issues are optimistic that the deal will bring increased electric reliability to Pepco customers in Montgomery County.
Pepco as a brand will remain and its headquarters will stay in Washington, D.C. Pepco and Exelon leaders said in a conference call on Wednesday it’s still to be seen how the company reorganizes its employee structure.
“Those of us who have endured Pepco’s poor performance could benefit from this transaction if our state regulators insist that Exelon make a binding commitment to dramatically improving reliability,” County Councilmember Roger Berliner said in a statement.
Berliner, an energy lawyer, has led Montgomery County’s efforts to pressure Pepco into improving its infrastructure and reliability, which has come under intense examination during prolonged power outages after powerful storms in the past few years.
“Exelon, owner of Baltimore Gas & Electric, has a better track record than Pepco when it comes to reliability. But we will need our regulators to be strong,” Berliner said. “This potential deal will make Exelon a very dominant force in Maryland’s energy sector and our regulators will have to be much more vigilant than they have been in the past.”
The Maryland Public Service Commission will be one of three state utility regulators that has to sign off on the merger. The D.C. Public Service Commission must also approve the deal.
Pepco Holdings Inc. includes Atlantic City Electric and Delmarva Power. If the deal is approved, Chicago-based Exelon will combine those utilities with Baltimore Gas & Electric and PECO in Philadelphia to form the Mid-Atlantic’s largest gas and electric utility, with an estimated 10 million customers. Exelon also owns ComEd, which serves Chicago and much of Northern Illinois.
Sixth District Rep. John Delaney on Wednesday said he thinks the massive utility company being proposed might bring more investment in infrastructure and more reliability.
“While we look forward to reviewing the details as to how the merger will benefit our constituents, we believe that the scale created by this business combination can be used to increase investment in the service area, which can drive higher levels of reliability and we are encouraged by Exelon and Pepco’s joint commitment to focus on customer service through the transition,” Delaney said in a statement.
At the Public Service Commission, hearings on Pepco’s third rate increase request in three years started this month. There’s hope in some circles that the merger might result in a healthier financial outlook for the Pepco, which in turn would mean the end of the near constant string of rate increase requests.
In a Nov. 6 earnings call, outgoing Pepco Chairman Joseph Rigby told investors the PSC’s decision to grant $27.9 million of its $60.8 million rate hike request last time around meant the company must make another request.
Abbe Milstein, founder of the Powerupmontco group and a frequent critic of Pepco, said she hopes Montgomery County uses the merger as a way to get rid of its “long outdated” franchise agreement with Pepco.
That agreement makes the utility virtually immune from liability on safety issues and some issues of electric reliability. The utility has a state-regulated monopoly in Washington D.C. and most of Montgomery County.
“My hope would be at this point that some on the County Council would see this as an opportunity to get involved at the Public Service Commission merger hearings,” Milstein said. “This is an opportunity to make a real claim not just for reliability but for not giving Exelon this virtual immunity on liability issues. That’s how you make them accountable. That’s how you increase reliability. You can’t just kind of wish on a star that they make that happen. We don’t know.”
The purchase would include a $100 million in customer improvement fund that could be used for rate credits, energy efficiency programs and low-income customer assistance across the company’s many coverage areas.
ComEd and PECO are delivering first-quartile performance, according to reliability rankings, and BGE’s rating has risen to its best-ever levels since Exelon bought BGE in 2012.
Exelon will pay $27.25 per share for all outstanding Pepco Holdings stock, a 24.7 percent premium over the stock’s April 25 closing price.
“This is just a tremendous win for our employees, our customers and our investors,” Rigby said on the conference call.
Flickr photo by Bill in DC
