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Proposed Pepco-Exelon Merger Rejected As Submitted, But It's Not Dead Yet

The fate of the Pepco-Exelon merger hinges on the D.C. Public Service Commission.
http://www.flickr.com/photos/afagen/7328207498
The fate of the Pepco-Exelon merger hinges on the D.C. Public Service Commission.

Updated 2:30 p.m.

The Pepco-Exelon merger is still alive.

District regulators initially rejected the $7 billion merger at hearing earlier Friday but then offered an alternative deal for the power companies to consider.

The D.C. Public Service Commission voted to impose a series of conditions on the companies. If those are met, two of the three commissioners said they would vote in favor of the merger, leading to its approval. Pepco, Exelon, the D.C. government and a handful of other parties will have two weeks to approve the revised agreement.

New Jersey, Virginia, Maryland and Delaware have all signed off on the merger. The District is the final hurdle; if it accepts the deal, the Illinois-based Exelon will take over Pepco and become the nation's largest electric utility.

Opponents of the deal, like D.C. Council member Mary Cheh (D-Ward 3), say they think the proposed changes to the merger agreement are minor and that the deal will be approved.

"The conditions are so modest, Cheh said. "It's like nibbling around the edges of what's really wrong with this deal."

The biggest change includes redirecting some of the $72 million that Exelon is offering the District. Roughly a third of that money was earmarked for the city government to spend on energy conservation programs and job training. Under the new deal, that portion will be kept in an escrow fund for rate-payers.

When D.C.'s Public Service Commission voted 2-1 to reject the merger, an audible cheer broke out in the PSC's packed chambers.

Opponents of the deal thought they had won.

But then, regulators announced there would be a second vote on a revised deal. The vote was also 2-1, but this time PSC Chairwoman Betty Ann Kane cast the dissenting vote.

Kane, who initially voted to reject the deal, said the revised agreement still doesn't fix the main problem with the merger.

"The fact remains unchanged from the original application that the takeover by Pepco will entangle the company in an ownership structure that is an inherent conflict-of-interest," Kane said. That conflict, Kane said, surrounds Exelon's power-generating business model and the District's push for clean energy.

The new agreement is long — over two hundred pages — and the power companies say they need to review the terms of the deal. "Until we review the fine print it's hard to say," said Pepco spokesman Vincent Morris. "But obviously we believe this in the public's interest, and we're pleased that they supported it and kept it going."

The Associated Press contributed to this report

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