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Exelon Corp. can push ahead with its $6.8 billion takeover of Pepco Holdings Inc. after a judge rejected arguments by Maryland officials that the deal gives the power company too much control over the state’s energy markets.
Queen Anne’s County Circuit Judge Thomas G. Ross on Wednesday rebuffed bids by consumer advocates and Attorney General Brian E. Frosh to block the Maryland Public Service Commission’s 3-2 approval of the buyout.
“The court finds that Exelon will suffer the greater injury should the stay be granted, particularly since [opponents] have sought extraordinary relief without any willingness to post bond,” Ross wrote in his four-page ruling.
The deal gives Chicago-based Exelon control of three utilities that provide service to about two million customers in the state, the District of Columbia, Delaware and New Jersey.
“We are pleased the judge agreed with our view that the requests for a stay had no merit,” Judith Rader, an Exelon spokeswoman, said in an e-mailed statement. “Four state commissions and the Federal Energy Regulatory Commission have already approved the merger, and we look forward to completing our transaction as we await a decision from the Public Service Commission of the District of Columbia.”
Frosh disappointed
Paula Carmody, a lawyer for the state’s Office of People’s Counsel, which serves as a consumer advocate for energy customers, didn’t immediately return a call seeking comment on the judge’s ruling.
David Nitkin, a spokesman for Frosh, called the judge’s ruling disappointing.
Md. Attorney General Brian Frosh (The Daily Record/Maximilian Franz)
“Attorney General Frosh still believes that the proposed Exelon-Pepco merger is bad for customers, bad for innovation and bad for the environment,” Nitkin said. “Creating one company that controls 80 percent of the accounts in Maryland is just not a good idea, especially when the vast majority of the financial benefits are going to shareholders, not Marylanders.”
Exelon’s shares rose 2.86 percent to $32.69 by early afternoon Wednesday in New York Stock Exchange composite trading. Pepco Holdings rose 1.47 percent on the same exchange to $27.18
Exelon offered $27.25 a share in cash for Pepco last year, in a deal to expand its holdings in the mid-Atlantic and reduce reliance on dwindling profit from its nuclear plants. The buyout means Exelon will serve more than 80 percent of Maryland’s utility customers through its Pepco and Delmarva Power units.
The court’s decision “really paves the way for getting the deal closed,” said John Bartlett, vice president at Reaves Asset Management, who oversees $2.8 billion in energy and utility investments.
“Getting Maryland approval was a fairly tumultuous process,” Bartlett said. His portfolio doesn’t include Exelon and Pepco stock.
Washington officials are expected to consider Exelon’s request for approval at the end of this month, said Paul Patterson, a New York-based analyst with Glenrock Associates Inc.
The decision will be announced at a public meeting to be disclosed 48 hours in advance, Maurice Smith, a spokesman for the district’s public service commission, said Wednesday in an interview.
‘Substantial harms’
Exelon’s pledges
To win approval from Maryland’s Public Service Commission, Exelon, the nation’s biggest nuclear plant operator, agreed to higher reliability standards and to provide $66 million in credits to its residential customers in the state in addition to pumping $43.2 million into energy efficiency programs.
Frosh opposed the combination on the grounds that it would give Exelon enough market clout to favor its high-cost nuclear reactors at the expense of residential solar systems.
The deal “poses substantial harms, offers limited benefits and is inconsistent with the public interest,” Frosh’s lawyers argued in filings with the commission.
Exelon countered that the merger would insure more “cost-effective service” for Maryland residents and make the state a leader in areas such as system reliability, energy efficiency and solar-generation development.
Maryland officials filed their appeal of the commission’s decision in Queen Anne’s County, an Eastern Shore community served by Delmarva Power. Ross’s order denying requests for a stay was made public on the circuit court’s website. A copy of the opinion wasn’t immediately available.
The case is In The Matter of Maryland Office of People’s Counsel Administrative Agency Appeal, 17C15019974.
Daily Record Legal Affairs Editor Danny Jacobs contributed to this story.
