Utility wants to pay you $114; is that bad deal?

Is a proposed settlement to approve the merger of Atlantic City Electric's parent company and Exelon Corp. – and give each ratepayer about $114 – a good deal for New Jersey consumers?

Stefanie Brand, director of the state Division of Rate Counsel, doesn't think so.

Yes, it does provide for a $62 million customer investment, which means about $114 for each customer.

"But it didn't include anything that prevents them from coming in for a rate increase for any period of time," Brand said. "A customer of Atlantic City Electric could get a check for $114, but in a year they could get a rate increase that wipes that out."

The state Board of Public Utilities, as well as regulators in Delaware, Maryland and the District of Columbia, is mulling a $6.83 billion proposal by Exelon Corp., the owner of Oyster Creek nuclear power plant in Lacey, to buy Washington, D.C.-based Pepco Holdings Inc., the parent company of Atlantic City Electric.

The merger would create a utility company with about 10 million customers. Besides Atlantic City Electric, Pepco Holdings also owns Delmarva Power and Pepco in Maryland and Delaware. Exelon currently owns PECO, which serves Philadelphia; Baltimore Gas & Electric; and Commonwealth Edison in Chicago.

Southern Ocean customers

Atlantic City Electric, which serves 547,000 electric customers in South Jersey, including southern Ocean County, will retain its regional operational headquarters in Mays Landing. In Ocean County, it serves Long Beach Island, Eagleswood, Little Egg Harbor, Stafford and Tuckerton and parts of Barnegat, Lacey and Waretown.

Brand's office did not sign off on the recent agreement, which still must be approved by regulators, between BPU staff, Exelon and Pepco Holdings. At a hearing two weeks ago, Brand said transition costs from the merger, such as installing a new computer system or severance payments at Atlantic City Electric may be sought by the utility in a request to raise rates.

The company should not be allowed to recoup transition costs or those costs should be capped to keep customers' savings intact, she said. "Without this limitation on transition costs, the benefit to Atlantic customers cannot be quantified and may well be illusionary."

In a statement, Exelon and Pepco Holdings officals said they worked with the rate counsel and "have offered a generous package that addressed all issues brought forward during negotiations." According to the settlement, the company said it would not seek to recover some transaction costs, such as regulatory and legal fees associated with the merger.

"The agreement as signed will improve service reliability, create cost savings that will be pased on to the customers and will bring additional good paying jobs to New Jersey," the statement said. "When it comes to merger concessions, there is a balance that must be achieved."

David P. Willis: 732-643-4039; dwillis@app.com; facebook.com/dpwillis732