The staff of the Maryland Public Service Commission and the state agency responsible for advocating for residential utility customers are raising concerns about a proposed merger between utility giant Exelon Corp. and Pepco Holdings.
While the PSC staff recommended imposing more conditions on the deal, the Maryland Office of People’s Counsel called for the merger to be rejected, saying it would result in few benefits and actually harm customers.
“Such an acquisition would allow Exelon to exercise undue influence and control over regulated electric service and retail electric company policies in most of the State of Maryland,” said People’s Counsel Paula Carmody in a statement.
A consulting firm hired by the PSC staff argued that Exelon’s estimate of economic benefits to Maryland as a result of the merger was “deeply flawed” and did not take into account job losses that could cost the state between $41 million and $309.4 million in economic impact, according to testimony filed late Monday. The Maryland Energy Administration also disputed Exelon’s estimate of reliability benefits.
In April, Chicago-based Exelon Corp., which owns Baltimore Gas and Electric Co., proposed a $6.8 billion merger with Pepco Holdings, which owns three electric and gas utilities — Pepco, Atlantic City Electric and Delmarva Power. Pepco serves customers in the District and its Maryland suburbs.
The merger was approved by the Federal Energy Regulatory Commission last month, by the Virginia State Corporation Commission in October and by Pepco shareholders in September. But it still requires approval by the U.S. Department of Justice and public service commissions in Maryland, Delaware, the District of Columbia and New Jersey.
The consultant hired by the PSC staff, Kansas-based Overland Consulting, also argued that the merger would result in far more savings than what Exelon said it would pass along to customers.
In applying for the merger, Exelon said it would set aside $100 million to be allocated to its customers. Exelon said that money would be used to give Pepco customers in Maryland a roughly $50 credit on their bills and pay for energy efficiency programs and assistance for low-income customers. The firm also pledged $50 million in charitable donations in the next decade.
PSC staff recommended Monday that Exelon set aside $167 million, with 80 percent of that earmarked for a larger bill credit for customers. BGE customers received a $100 bill credit when its former parent company, Constellation, was acquired by Exelon in 2012.
The PSC can reject the proposed merger or impose conditions, just as it did before Exelon acquired BGE in 2012. BGE and Pepco gave up on a planned merger in 1997, unwilling to accept the conditions Maryland and D.C. regulators set.
In calling for the deal’s rejection, the OPC said in testimony filed late Monday that it was concerned about the creation of a near-monopoly in Maryland controlled by faraway corporate owners.
“Exelon already owns BGE, but this acquisition would allow Exelon, a corporation located in Illinois, to control electric utilities serving 80 percent of Maryland’s electric customers,” People’s Counsel Paula Carmody said in a statement. “While Exelon has provided a ‘checklist’ of purported benefits, including claims of better reliability, to customers and the State, OPC has determined that they are either non-existent or woefully deficient.”
Paul Adams, an Exelon spokesman, released a statement in response arguing that the proposed merger would benefit the public.
“The Maryland Public Service Commission proceeding is an open process that allows for the consideration of input from all interested parties,” the statement said. “As part of this process, we are open to feedback and discussions with all stakeholders. We believe that the facts — which are available in the testimony we’ve filed with the commission and other information we have provided to the parties through the regulatory process — will show that this merger is in the public interest and will benefit customers and the community.”
The proposed merger has garnered support from some corners, including a Montgomery County Council member and the Red Cross. They see Exelon, which would grow to about 10 million ratepayers with the addition of Pepco Holdings, as better able to manage reliability issues in the power-outage-plagued Pepco service area. Pepco was fined $1 million by Maryland regulators in 2011 for failing to properly maintain its system. Other supporters include the Maryland Chamber of Commerce and the United Way of the National Capital Area.
PSC staff also outlined other conditions that they thought ought to be imposed on Exelon if the merger is approved: commitments to boost Pepco’s customer satisfaction rate, to maintain funding for tree-trimming to reduce power outages, and to maintain or improve current programs to increase customer energy efficiency.
Montgomery County officials filed testimony calling for Exelon to provide a $110 bill credit for each residential customer. Prince George’s County officials also support a higher rate credit, though they did not give a figure.
Some groups opposed the merger, including the Sierra Club and Chesapeake Climate Action Network, which said Exelon has not shown enough commitment toward energy efficiency. Bruce Burcat of the Mid-Atlantic Renewable Energy Coalition also called for a rejection of the merger, or that if approved, Exelon be required to obtain more of its power from wind or other renewable sources.
Public hearings on the proposed merger are to begin in January. If approved by all the regulatory groups, Exelon expects to complete the merger next year.
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