The state’s residential utility consumer advocate says nothing good will come of merging Chicago-based Exelon Corp. with Pepco Holdings Inc. – but that doesn’t mean ratepayers share her public ire.
Maryland People’s Counsel Paula M. Carmody says it isn’t clear that Pepco customers even know their local utility is facing a $6.8 billion takeover, despite the red flags her office has raised over the pending deal – and the fact that a week of public hearings on the merger begins tonight.
“These types of transactions can be very complicated when you’re looking at the long-term impacts, so it can sometimes be difficult for customers to know really what’s going on when a company comes in and wants to take over more locally based companies,” Carmody said.
The official position of the Office of the People’s Counsel is that the Maryland Public Service Commission should deny the application, officially filed by the two companies in August.
In announcing the deal, Exelon CEO Chris Crane promised cost savings — $250 million in synergies in the first five years — and improved service. But Carmody says Exelon’s primary interest in acquiring Pepco lies in getting ahold of the utility’s ratepayer revenues to hedge against the uncertainty of their generation companies.
“Exelon and PHI have claimed that the acquisition will result in better reliability performance,” Carmody said. “But the testimony from our witnesses and other witnesses in this case make pretty clear that the acquisition will do nothing in terms of incrementally better reliability performance.”
More broadly, Carmody believes the deal would result in undue influence from out-of-state Exelon in the region. Already the owner Baltimore Gas & Electric, the utility would lay claim to 80 percent of the state’s electricity customers.
Exelon and PHI – parent company of Potomac Electric Power Co., Atlantic City Electric Co. and Delmarva Power & Light – announced that the Chicago-based company agreed to buy PHI for $6.8 billion in April.
PHI shareholders approved the deal in September; Virginia regulators approved it in October, and the Federal Energy Regulatory Commission gave the merger its stamp of approval in November. Pending approvals by regulators in Delaware, New Jersey and the District of Columbia, Exelon hopes to close the deal by the third quarter of this year.
Exelon, already a utility giant and the biggest nuclear plant operator in the country, stands to gain PHI’s 738,000 Maryland ratepayers, bringing its customer base up to 10 million – and cementing its status as the biggest electric and gas utility in the mid-Atlantic.
As part of the approval process, under state law, the parties must prove that the deal would benefit and not harm customers – a benchmark Carmody says hasn’t been met.
The Public Service Commission is set to decide by April.
Carmody said if the hearings draw a crowd, it will be in Montgomery County, where Pepco customers have for years complained about the utility’s reliability. In 2011, state regulators slapped Pepco with a $1 million fine for not addressing system problems that led to repeated power outages.
The lone hearing there is scheduled for Jan. 13 in Rockville.
“Customers in that county in particular have been active and vocal,” she said.
But at hearings planned on the Eastern Shore and in Prince George’s County, Carmody said her office just doesn’t know about what kind of turnout the opportunity to weigh in will attract.
THE PUBLIC HEARING SCHEDULE IS AS FOLLOWS:
Tuesday, Jan. 6 at 7 p.m.: Kent County Public Library, 408 High Street, Chestertown
Wednesday, Jan. 7 at 7 p.m.: Chesapeake College – Cadby Theatre, Wye Mills Campus, Eastern Shore Higher Education Center, Routes 50 and 213, Wye Mills
Thursday, Jan. 8 at 7 p.m.: Salisbury University, Room TETC – 153, 1101 Camden Ave., Salisbury
Tuesday, Jan. 13 at 6 p.m.: Montgomery County Council Office Building Auditorium, 100 Maryland Ave., Rockville
Wednesday, Jan. 14 at 6 p.m.: Prince George’s County Community College, Room 227 – Community Room B, 301 Largo Road, Largo