Exelon, Pepco want to marry, but D.C. won't license them
How does this merger help power users? asks D.C.
Chicago-based Exelon Corp., which owns Philadelphia's Peco Energy, and Washington-based Pepco (Potomac Electric Co.) Holdings, which owns Atlantic Electric in South Jersey and Delmarva Power & Light in Newark, Del., said today they still think their planned marriage is a good idea, even after the District of Colombia's Public Service commission moved to block their union last week on grounds it won't help consumers.
The utilities say they will challenge the Commission's order: "We remain convinced the decision fails to recognize the substantial immediate and long-term benefits of our merger proposal to citizens, businesses and communities" in D.C., the utilities said in this joint statement.
"We will continue working to complete the merger," previously blessed by the other Pepco states of Delaware, New Jersey and Maryland, which Exelon and Pepco insist will shower "hundreds of millions of dollars in direct financial benefits, improved reliability and storm response, renewable energy projects," community grants and business promotion, even as the merged company cuts costs.
Wall Street is less impressed: Pepco fell 16% and Exelon fell 7% last Tuesday, outpacing the overall U.S. stock rout that day. Even after the companies said today they would fight, the stocks remain at multi-year lows.
The deal would cost Exelon nearly $7 billion; the companies hope to save $1.3 billion over 10 years through cost-cutting. D.C. questioned whether that saving would benefit consumers, as it must, under D.C. law, for the deal to win approval, according to the commission's decision.
Moody's and Fitch credit rating agencies have warned of possible credit rating downgrades that would raise borrowing costs, since both companies owe a lot of money, at a time when cheap natural gas makes it tougher to squeeze energy profits from customers.
Left unclear is just how Exelon and Pepco hope to reverse the D.C. regulator's decision, and what the buyer can promise --extra-low rates, specific additional services, moving its headquarters to Washington? -- that would convince the regulator this deal is good for consumers, after all.