Exelon Corporation (NYSE:EXC) and Pepco Holdings Inc. (NYSE:POM) today filed an application seeking approval of their proposed merger (click here for filing) with the Maryland Public Service Commission. The companies announced their proposed merger on April 30.
“I’m very pleased that Exelon is committed to maintaining and enhancing service, meeting customers’ needs reliably and efficiently, and actively engaging in civic and charitable life in the Maryland communities we serve.”
The combination of the companies will bring together Exelon’s three electric and gas utilities – BGE, ComEd and PECO – and Pepco Holdings’ (PHI’s) three electric and gas utilities – Atlantic City Electric, Delmarva Power and Pepco – to create the leading mid-Atlantic electric and gas utility.
The Maryland filing describes Exelon’s commitment to significantly improve reliability, maintain charitable contributions at higher than 2013 levels for at least 10 years following closing of the merger and provide immediate economic benefits to Pepco and Delmarva Power customers in Maryland. Pepco serves approximately 537,000 customers in Montgomery and Prince George’s counties; and Delmarva Power serves approximately 231,000 customers on Maryland’s Eastern Shore. Submission of the filings initiates the regulatory approval process in Maryland.
“The filing we are making today describes in detail how our proposed merger will benefit Maryland’s economy and the customers served by Pepco and Delmarva Power,” said Chris Crane, Exelon president and CEO. “The commitments we are making will deliver immediate economic benefits to customers and Maryland, and will ensure that Pepco and Delmarva Power continue their long history of investing in their communities.”
Joseph M. Rigby, PHI chairman, president and CEO, said the two companies share a culture of customer service and will benefit from sharing best practices across all utilities.
“The combination of our companies will provide us an opportunity to take the customer service and reliability improvements we’ve already made in Maryland to an even greater level,” said Rigby. “I’m very pleased that Exelon is committed to maintaining and enhancing service, meeting customers’ needs reliably and efficiently, and actively engaging in civic and charitable life in the Maryland communities we serve.”
Benefits to PHI utility customers and service territories described in the regulatory filings and testimony include:
- Customer Investment Fund Commitment. Upon closing of the merger, Exelon will provide an aggregate $100 million, of which $40 million will go to benefit Pepco and Delmarva Power customers in Maryland. The funds can be used as the PSC deems appropriate for customer benefits, such as bill credits, assistance for low-income customers and energy-efficiency measures.
- Charitable Contributions Commitment. Exelon has committed to provide $50 million over 10 years to charitable organizations and programs in the communities the PHI utilities serve —exceeding PHI’s 2013 funding levels. Exelon will exceed PHI’s 2013 charitable giving of $623,000 in Maryland.
- Local Jobs, Local Presence and Local Leadership. Exelon has committed to no net involuntary merger-related job losses of Pepco and Delmarva Power utility employees for at least two years after the merger, and to honor all collective bargaining agreements. Exelon and PHI have announced that upon the retirement of Joe Rigby at the close of the merger, Dave Velazquez, currently executive vice president, PHI Power Delivery, will become president and chief executive officer of the PHI utilities. Donna Cooper (Pepco) and Gary Stockbridge(Delmarva Power) will also remain with the company in their roles as regional presidents.
- Enhanced Customer Service and Reliability Commitment. Exelon has committed to build on the significant improvements to service reliability that Pepco and Delmarva Power have already achieved for customers in recent years by setting new, more stringent reliability targets. By 2020, Exelon commits to reducing the frequency of power outages for Pepco by 38 percent and average outage duration by nearly 43 percent compared with the 2011-2013 period. In the Delmarva Power service area, Exelon has committed to reducing the frequency of outages by nearly 40 percent and average outage duration by 53 percent compared with the 2011-2013 period. Exelon has offered to be subject to financial penalties if Delmarva Power or Pepco do not meet their targets. The combined companies also will benefit from sharing best practices and storm restoration resources.
These proposed merger commitments are anticipated to result in substantial economic benefits for Maryland customers and communities, as detailed in an economic modeling analysis included in the merger approval filings.
Combined with reliability improvement projects already announced by PHI and underway, the merger commitments are expected to produce about 6,300 to 7,000 jobs and result in $542 million to $623 million in economic benefits to the Maryland economy. These results are anticipated to be achieved within six years after the merger closes.
Exelon also proposes measures to effectively insulate the PHI utilities from potential financial risks of other Exelon businesses; these measures are described in detail in the filing.
The companies have already made transaction-related filings with the Federal Energy Regulatory Commission, the Virginia State Corporation Commission, the Delaware Public Service Commission, the Public Service Commission of the District of Columbia and the New Jersey Board of Public Utilities. The transaction is also subject to the notification and reporting requirements under the Hart-Scott-Rodino Act and other customary closing conditions.
The transaction requires the approval of the stockholders of PHI, which is scheduled to take place on Sept. 23, 2014. The companies anticipate completing the merger in the second or third quarter of 2015.