Reg­u­la­tors re­ject Ex­elon-Pepco power merger

The Pak Banker - - BUSINESS -

Util­i­ties reg­u­la­tors for the Dis­trict of Columbia on Tues­day de­nied Ex­elon Corp's (EXC.N) $6.8 bil­lion bid for Pepco Hold­ings Inc (POM.N), deal­ing a ma­jor blow to a deal that would have cre­ated the coun­try s top power dis­trib­u­tor.

Pepco shares fell 15.4 per­cent, and Ex­elon was down about 4 per­cent af­ter the D.C. Public Ser­vice Com­mis­sion said the com­pa­nies had not proven that the pro­posed merger was in the public in­ter­est. The three-mem­ber com­mis­sion was the fi­nal reg­u­la­tory hur­dle for the deal, which was an­nounced in April 2014. The four other states re­quired to ap­prove the deal had voted in fa­vor of the merger.

The com­pa­nies, which have 30 days to ask the com­mis­sion to re­con­sider its or­der, said they were dis­ap­pointed in the de­ci­sion and would re­view their op­tions. If the com­mis­sion re­jects an ap­pli­ca­tion for re­con­sid­er­a­tion, the com­pa­nies would then have the op­tion of ap­peal­ing the de­ci­sion to the D.C. Court of Ap­peals. The com­pa­nies may also choose to sub­mit another ap­pli­ca­tion.

"Lately we have seen a trend of reg­u­la­tory com­mis­sions re­ject­ing deals and leav­ing the door open for a re-sub­mit­ted ap­pli­ca­tion with en­hanced terms for rate-pay­ers," said Daniel Fidell, of USCA Se­cu­ri­ties LLC. "That door is open for Ex­elon and Pepco. I ex­pect they will be do­ing so," he added.

Com­mis­sion Chair­woman Betty Ann Kane said the de­ci­sion was one of the most im­por­tant rul­ings that the agency would ever make. She said that while the merger would of­fer some ben­e­fits, some fac­tors could prove harm­ful to the Dis­trict. "Pepco would be­come a sec­ond-tier com­pany in a much larger cor­po­ra­tion whose pri­mary in­ter­est is not in dis­tri­bu­tion, but in gen­er­a­tion," Kane said at the hear­ing where the de­ci­sion was an­nounced.

Op­po­nents of the deal have said it would raise rates for con­sumers while lim­it­ing growth of re­new­able power in the re­gion. "The pro­posed ac­qui­si­tion would have been a sub­stan­tial step back­wards in the Dis­trict s ef­forts to move to­ward more sus­tain­able elec­tric­ity gen­er­a­tion and greater re­liance on lo­cal, re­new­able energy," said Power DC, a coali­tion of en­vi­ron­men­tal­ists and public ad­vo­cacy groups.

Pepco serves about 2 mil­lion cus­tomers in the Dis­trict of Columbia, Delaware, Mary­land and New Jersey. Ex­elon has about 7.8 mil­lion cus­tomers in Mary­land, Illi­nois and Penn­syl­va­nia. Be­fore the D.C. rejection, the pro­posed trans­ac­tion had won ap­proval from Delaware, Mary­land, New Jersey, Vir­ginia and the U.S. Fed­eral Energy Reg­u­la­tory Com­mis­sion. It is not clear how the D.C. public ser­vice com­mis­sion s de­ci­sion would af­fect an on­go­ing re­view by the Jus­tice Depart­ment. A depart­ment spokesman de­clined to com­ment on Tues­day.

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