Delaware approves Exelon-PHI merger

Delaware's Public Service Commission on Tuesday approved state terms for the $6.8 billion Exelon-Pepco Holdings Inc. merger, but reserved a right to assure parity with other states on customer benefits.

The multi-state utility deal would merge Delmarva Power's parent company, PHI, with Exelon, making the combined company the Mid-Atlantic's largest electric and gas utility.

All three voting members of the commission approved the settlement agreement. Maryland approved its terms on Friday.

"There is a whole list of very positive things in this agreement," PSC Chairman Dallas Winslow said.

PSC officials said they want to assure that customer bill credits, clean-energy commitments and other benefit sharing sweeteners offered to Delaware customers are at least as good as those in Maryland and other jurisdictions.

Delaware negotiators had already secured an agreement for a $40 million, one-time customer bill credit that would amount to about $128 per customer, to be booked 60 days after the merger closes. Maryland, in contrast, agreed to a $100 customer credit, to be awarded in two $50 increments over one year, but also approved a different slate of energy efficiency and clean energy investment commitments.

New Jersey and Virginia already have approved the deal. The District of Columbia has yet to vote. All adopted a "most favored nation" provision that requires an evening up of benefits.

When combined, the two utilities would have 10 million customers and a $26 billion rate base. The deal includes a $27.25 cash payment for each share of PHI's common stock, and an Exelon assumption of $5.5 billion in debt from the acquired company.

Darryl M. Bradford, Exelon senior vice president and general counsel, called the Delaware decision "heartening" afterward and said he looked forward to final agreements and closing on the merger.

In addition to the customer fund, Exelon and PHI agreed in Delaware's settlement to write off debts older than three years for customers whose income qualifies them for the low-income energy assistance program.

The latest settlement also calls for a study of land-based wind power prospects in Kent County and Sussex County and the feasibility of additional natural gas pipeline capacity in both counties, among other terms.

PSC officials have not yet determined when they will meet to vote on a formal order that will reflect balancing with neighboring states.

None of the Delaware organizations involved in the negotiations, including the state's Sustainable energy Utility and the regional Clean Air Council, objected Tuesday.

"I'm comfortable that the commission will find what's best" in the final order, Delaware Public Advocate David Bonar said.

"One of our foremost concerns was that we wanted to make sure there is a significant rate credit provided – what they call a customer investment fund," Bonar said. "We got a better deal than our surrounding jurisdictions did."

Delaware also secured protections for Delmarva Power customers from expenses associated with non-utility power generators that sell to the regional power grid. That group notably includes nuclear power plants, operations that can generate huge revenues for owners, but that can also become significant liabilities.

Exelon operates the nation's largest fleet of reactors: 23 at 14 locations in Illinois, Maryland, Nebraska, New Jersey, New York and Pennsylvania.

Contact Jeff Montgomery at 463-3344 or jmontgomery@delawareonline.com.