Comments on the Exelon proposal to acquire Pepco Holdings, Inc.

These comments were submitted on February 16, 2015, ^[1] to the Maryland Public Service Commission by Arjun Makhijani on behalf of the Institute for Energy and Environmental Research regarding Case Number 9361, In the Matter of the Merger of Exelon Corporation and Pepco Holdings, Inc.

The main conclusion and primary recommendation are below. You can also read the entire comments here.

While this proceeding is called “the Matter of the Merger,” it is in effect an acquisition by Exelon of Pepco Holdings, Inc. (PHI) because PHI would become a wholly-owned subsidiary of Exelon and subsumed under its management and control by buying out PHI stockholders. It is understood that the wires-only part of PHI would continue to be subject to the jurisdiction of the various Public Service Commissions, including the Maryland Public Service Commission (PSC).

Main Conclusion

This merger will saddle Maryland ratepayers with risk of serious harm, including the billions of dollars in added debt that Exelon will take on to buyout PHI stockholders. They will be exposed to risks posed by the largest merchant nuclear fleet in the United States, even more than they are today. Putting nuclear energy into a clean energy standard that would replace renewable portfolio standards, an option advocated by Exelon, would seriously destabilize and damage Maryland’s renewable energy industry and may devastate it. The merger will also do serious damage to Maryland’s prospects for having a just, democratized, resilient energy sector that would be compatible with its goal of 90 percent greenhouse gas reductions relative to 2006 by the year 2050. The company promises no significant, measurable improvements in reliability above those of Pepco. In any case, it is the responsibility of the PSC to hold the wires-only utilities to specific standards of reliability and to enforce them; if reliability needs improvement, there is an adequate mechanism to address the problem. A costly and risk-laden acquisition by Exelon is not needed for that. The proposed customer investment benefit of a $50 rebate on electricity bills to PHI customers, totaling $100 million, is pathetically small compared to the more than $1.8 billion in cash benefits for an above-market purchase price to PHI stockholders. The customer benefit is even small compared to severance and retention payments ($163 million) and banker and equity transaction payments ($263 million).
Principal recommendation: The Public Service Commission should unequivocally and firmly reject the merger application.