Nuclear Utility Suffers Setback As DC Pursues Clean Energy
Regulators for Washington DC rejected the proposed purchase of Pepco Holdings by Exelon, potentially killing off the $6.84 billion acquisition. By law, the DC Public Service Commission (PSC) said, the deal must benefit the public, and not just leave it unharmed. Chairman Betty Ann Kane said on August 25 that the body’s move was “one of the most important decisions the commission will ever make.”
The rejection was momentous, as Exelon had already received approval from neighboring states in the region, including Virginia, Maryland, New Jersey, Delaware, along with the regulatory approval from the Federal Energy Regulatory Commission (FERC). The shareholders of Exelon and Pepco had also given their endorsement.
But DC regulators took heavier scrutiny than their counterparts in other states. The PSC, in the summary of its decision, underscored the skepticism over allowing a deal to go through, arguing that “a rate case lasts only until the next rate case. This decision is forever.” The deal garnered more interest than any other proceeding conducted by the commission in over a century, the PSC said. Pepco’s share price dropped by more than 15 percent immediately following the announcement, and Exelon’s stock was down more than 4 percent.
There were a long list of problems that pushed the commission into blocking the takeover of Pepco, and some of the arguments highlighted the pivotal point that the utility industry finds itself in.
DC’s PSC argued that the takeover of Pepco could interfere with the city’s mandate “to pursue a cleaner and greener future that includes more renewable energy resources and more distributed generation,” which could be difficult “at a time when the electric industry is undergoing significant transformation.”
Weighing the pros and cons, the PSC noted the significant benefits to the city and its ratepayers from the proposed merger. For example, Exelon would pay $33.75 million into a fund that the district could use at the PSC’s discretion. That amount is equivalent to about $128 per ratepayer. Also, Exelon offered a significant premium for Pepco, offering up $1.6 billion more than what Pepco’s assets were worth.
