CHICAGO and WASHINGTON, D.C. (Feb. 18, 2015) - Exelon Corporation (NYSE: EXC) and Pepco Holdings Inc. (NYSE: POM) have enhanced their proposed package of merger benefits in the District of Columbia to provide even greater benefits to Pepco customers, their communities and the District. The improved package of benefits was outlined in testimony filed with the Public Service Commission of the District of Columbia (PSC) and aligns with settlements achieved in New Jersey and Delaware.
"We've listened to the feedback of stakeholders in the District of Columbia," said Exelon President and CEO Chris Crane, "and have substantially enhanced our proposed package to deliver even more value to Pepco customers and their communities."
The merger will bring together Exelon's three electric and gas utilities - BGE, ComEd and PECO - and Pepco Holdings' three electric and gas utilities - Atlantic City Electric, Delmarva Power and Pepco - to create the leading mid-Atlantic electric and gas utility.
Exelon and Pepco Holdings have proposed to increase the value of the District of Columbia customer investment fund to $33.75 million from $14 million. The PSC will determine the use of the funds for direct customer benefits, such as rate credits, energy efficiency or low income assistance. These commitments provide an upfront customer benefit that is 2.4 times the value of the companies' original proposal. In addition to these near-term benefits, another $51.2 million in projected merger savings over 10 years will flow back to District customers through rates lower than they would be absent the merger.
In their PSC filing, Exelon and Pepco Holdings also enhanced their commitments for reducing the frequency and duration of power outages in the District. The companies committed that Pepco's reliability performance will meet or exceed the PSC's existing standards for the three-year period from 2018 to 2020. Under these new performance targets:
• Pepco's average outage frequency in its D.C. operational area will not exceed 0.66 outages, a 35.9 percent improvement over Pepco's average performance over the years from 2011 to 2013.
• Pepco's average outage duration in its D.C. operational area will not exceed 90 minutes, a 39.6 percent improvement over Pepco's average performance over the years from 2011 to 2013.
The companies committed to achieving these reliability targets without increasing Pepco's forecasted reliability spending. If Pepco does not achieve the reliability performance target, it would be subject to enhanced financial penalties of up to $5.6 million on an annual basis.
The companies were able to commit to meeting or exceeding the PSC's 2020 standards for both outage frequency and duration after reviewing Pepco's 2014 calendar year reliability performance, which recently became available, and through the application of the Exelon management model. After a thorough analysis, the companies determined that Pepco could make these enhanced commitments without increasing budget and accept a larger penalty should it not achieve them.
Exelon and Pepco Holdings' prior commitments for maintaining Pepco's local presence, continuing its support for the community, and promoting Pepco's low-income customer assistance, energy-efficiency and demand-response programs have not changed. The companies' commitments related to Pepco employment, and workforce and supplier diversity, also remain the same.
In addition to the District of Columbia PSC, the merger requires approvals by the Delaware Public Service Commission and Maryland Public Service Commission. Following the expiration of the U.S. Department of Justice's review period on Dec. 22, 2014, the Hart-Scott-Rodino Act no longer precludes completion of the merger.
The transaction was approved by the New Jersey Board of Public Utilities in February, the Federal Energy Regulatory Commission in November, the Virginia State Corporation Commission in October and PHI stockholders in September. The companies expect to complete the merger in the second or third quarter of 2015. For more information about the merger, visit www.phitomorrow.com.