ExelonPepco3

The District of Columbia Public Service Commission rejected a settlement that would have supported the merger of Exelon and Pepco, but in its place, the commission offered its own set of conditions. On Feb. 26, the public service commission rejected the Exelon-Pepco merger, 2-1, with commission Chairman Betty Ann Kane and Commissioner Joanne Doddy Fort voting against it. Essentially, Kane and Fort rejected the settlement agreement that the administration of D.C. Mayor Muriel Bowser (D) negotiated with Exelon in October 2015.

Kane and Fort said even with the settlement agreement, Exelon hadn’t met the test of whether the merger is in the public’s best interest while Commissioner Willie Phillips respectfully disagreed.

Maryland, Delaware, and New Jersey have agreed to the merger in addition to the U.S. Justice Department and the U.S. Federal Energy Regulatory Commission. The District is the only jurisdiction that hasn’t approved the merger, and if it doesn’t the merger falls apart.

The settlement agreement, known as the nonunanimous settlement agreement (NSA), would have provided District ratepayers benefits such as a one-time credit of $50 for residential ratepayers, setting up an Exelon office in the District, hiring 102 residents to work for the company, no rate increases until March 2019, $17 million to support the District’s alternative energy program, and millions to assist seniors and low-income residents in paying their utility bills.

Kane said there were four reasons for rejecting the NSA and therefore the merger. She said that non-residential ratepayers couldn’t participate in the proposed $25.6 million Customer Investment Fund (CIF), which was unacceptable; Exelon as the sole developer of a solar generation facility at Blue Plains and Pepco as the developer of four public purpose microgrids are moves that would be inconsistent with the District’s restructured market; the use of the CIF for sustainability projects and Low Income Home Energy Assistance Program payments don’t improve Pepco’s distribution system and doesn’t advance the commission objective to modernize the District’s energy system; and the proposed method of allocating the CIF to District government agencies and designated funds deprives the commission of the ability to enhance the distribution system that would benefit District ratepayers.

However, Fort offered an alternative to Exelon. Fort’s plan would require Exelon defer a decision on the $25.6 million Customer Base Rate credit until the next Pepco rate increase; remove the provision that would designate Exelon as the solar developer and require Pepco to manage a process that would allow DC Water to select the solar developer through its procurement procedures; create an escrow fund with two sub-accounts at Pepco to hold $32.80 million of the $72.8 million CIF funded by Exelon; $21.55 million to modernize the District’s energy system and $11.25 million for energy efficiency and conservation initiatives that would focus on housing units for low-income District residents and strike Pepco’s provisions to develop public purpose microgrids.

Fort said the merger would get her support if her plan was accepted by Exelon. In the second vote, the offer of the alternative plan was approved with Fort and Phillips voting in favor of it while Kane voted “no.” Exelon has 14 days to consider whether to accept Fort’s plan and if they do, she and Phillips said they will approve the merger.

Bowser said that her administration will examine the commission’s order before deciding its next course of action. “The Public Service Commission took the framework we negotiated and made adjustments,” the mayor said. “We will have to carefully review the commission’s order to determine if it meets our goals for ratepayers, especially residents.”

People’s Counsel Sandra Mattavous-Frye was cautiously optimistic. “At this point, we are carefully reviewing the order to understand the alternative terms put on the table to determine our next steps,” Mattavous-Frye said. “Going forward, our task will continue to be to ensure that any possible agreement will result in rate relief, consumer protections, and major investments in reliability, jobs, and renewable energy.”

The D.C. Council has no say on the merger but D.C. Council member Mary Cheh (D-Ward 3), a longtime proponent of the merger, doesn’t support it and wasn’t happy with Fort’s plan. “They are just tinkering around the edges with the NSA plan,” Cheh said. “This is an inherent conflict of interest and isn’t the way we do business in the District of Columbia.”

Douglas Sloan, a District political strategist, said the commission’s proceedings on the merger have been weak and Exelon has come out the winner already. “I was in favor of rejecting the merger,” Sloan said. “I think the alternative plan is milquetoast and Exelon will accept it. D.C. will get stuck with a bad deal that will haunt ratepayers in 2019.”