Washington DC regulators turn down Exelon-Pepco power merger
26 August 2015
Utilities regulators for the District of Columbia on Tuesday denied power generating major Exelon Corp's $6.8 billion bid for power utility Pepco Holdings Inc, in a major blow to a deal that would have created the country's top power distributor.
Pepco shares were down 15.4 per cent, while Exelon slid 4 per cent after the DC Public Service Commission said the companies had failed to prove that the proposed merger was in the public interest.
After the deal was approved by four other states, the three-member commission was the deal's final regulatory hurdle. The deal had been announced in which in April 2014.
The companies, which had 30 days to ask for reconsideration of the order, said they were disappointed in the decision and would review their options.
In the event of the commission rejecting an application for reconsideration, the companies would then have the option of appealing the decision to the DC Court of Appeals.
The companies might also choose to submit another application.
"Lately we have seen a trend of regulatory commissions rejecting deals and leaving the door open for a re-submitted application with enhanced terms for rate-payers," said Daniel Fidell, of USCA Securities LLC, Reuters reported.
"That door is open for Exelon and Pepco. I expect they will be doing so," he added.
According to the commission, it found no evidence the combination would improve the reliability of service and the panel expressed concern about a new management structure at Exelon that would not include a Pepco member on its executive committee, ''thereby diminishing the influence of Pepco within the new structure.
''Pepco will become a second tier company in a much larger corporation whose primary interest is not in distribution, but in generation. At a time of change in the energy field, Pepco's ability to adapt will be constrained by an increased management bureaucracy. We are also concerned about the inherent conflict of interest that might inhibit our local distribution company from moving forward to embrace a cleaner and greener environment.''