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The Washington District of Columbia Public Service Commission (PSC) approved a $6.8 billion merger between Pepco Holdings and Exelon today, creating the largest publicly-held utility in the country.
The PSC supported the deal after initially rejecting it because it would deposit $72.8 million in a “customer investment fund”, set aside $11.25 million for energy efficiency and conservation programs targeted toward low-income residents and carve out $21.55 million for pilot projects such as modernizing the electric distribution grid.
Exelon first proposed its takeover of Pepco in April of 2014. The D.C. Public Service Commission at first had dealt a major setback to the giant utility marriage last August when it denied Chicago-based Exelon’s proposed $6.4 billion takeover of Pepco Holdings.
The PSC’s approval had been the final hurdle to the merger, which had been approved by the Federal Energy Regulatory Commission, the Justice Department, and the states of Maryland, Delaware and New Jersey.
The all-cash transaction is based on a $27.25 share price that represents a 24.7 percent premium to Pepco Holdings’ closing price of $21.85 on April 25, 2014, when the deal was announced. That valued the deal at about $6.8 billion based on the number of outstanding shares reported in Pepco’s most recent securities filing. The deal has been approved by the boards of directors at both companies and must still be endorsed by Pepco shareholders. Exelon also agreed to provide up to $100 million — or about $50 a customer — to give Pepco customers benefits such as rate credits, assistance for low income customers and energy efficiency measures.
The proposal was part of a larger trend of utilities undertaking strategies that lower their exposure in competitive power markets in favor of owning regulated utilities that have more predictable, if lower, revenue streams. The transactionshould help lower Exelon’s overall business risk profile considerably by increasing its ownership in regulated monopolies and decreasing, on a percentage basis, the contributions from its less regulated merchant nuclear operations. (Wash Post, 3/23/2016)