Exelon and Pepco Holdings File for Merger Approval with Utility Commissions in Delaware, New Jersey and Washington, D.C.

On Jun 18, 2014

Exelon Corporation and Pepco Holdings Inc.  today filed applications seeking approval of their proposed merger with the Delaware Public Service Commission, the Public Service Commission of the District of Columbia and the New Jersey Board of Public Utilities. The companies announced their proposed merger on April 30.

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 filings describe the transaction’s benefits to customers and the communities that the companies serve. The submission of the filings initiates the regulatory approval process in Delaware, the District of Columbia and New Jersey.

“The filings we are making today describe in detail how our proposed merger will serve the public interest,” said Chris Crane, Exelon president and CEO. “We are committed to working with our PHI partners to achieve significantly enhanced reliability and service for PHI customers, to deliver immediate and ongoing financial benefits to PHI customers, and to continue PHI’s record of strong community engagement.”

Joseph M. Rigby, PHI chairman, president and CEO, added that being part of a family of utilities with distinguished emergency response capabilities will be of enormous value to the Pepco Holdings utilities and their customers, and Exelon’s culture of giving back to communities will continue the PHI utilities’ tradition of both philanthropy and volunteerism.

“I am very pleased that Exelon has pledged to maintain and enhance service, meet customers’ needs reliably and efficiently, and actively engage in the civic and charitable life of our service areas,” Rigby said.

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 to be used across the PHI utilities’ service territories as each public service commission 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.
• Local Jobs, Local Presence and Local Leadership. Exelon has committed to no net involuntary merger-related job losses of PHI utility employees for at least two years after the merger, and to honor all collective bargaining agreements. The company will also maintain existing operational headquarters for Atlantic City Electric in Mays Landing, N.J.; Delmarva Power in New Castle, Del.; and Pepco in Washington, D.C. In addition, Exelon and PHI announce 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), Vince Maione (Atlantic City Electric) 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 the PHI utilities have already achieved for customers in recent years by setting new, more stringent reliability targets. This commitment is intended to result in significant reductions in the frequency and duration of power outages by 2020. Specific reliability targets for each PHI utility vary based on their current reliability metrics. Exelon has offered to be subject to financial penalties if Atlantic City Electric, 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 customers and communities served by the PHI utilities, as detailed in an economic modeling analysis included in the merger approval filings.

Combined with reliability improvement projects already announced by PHI and underway (including the undergrounding project in Washington, D.C.), the merger commitments will produce approximately 11,000 to 14,000 new jobs and between $1.0 billion to $1.3 billion in benefits to the economies of Delaware, Maryland, New Jersey and Washington, D.C. 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 and credit risks of other Exelon businesses; these measures are described in detail in the filings.

The companies have already made transaction-related filings with the Federal Energy Regulatory Commission and the Virginia State Corporation Commission. 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. The companies plan to file for merger approval with the Maryland Public Service Commission in August, which still allows for the completion of the merger in the anticipated timeframe of the second or third quarter of 2015.

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