CHICAGO and WASHINGTON, D.C. - Exelon Corporation (NYSE: EXC) and Pepco Holdings Inc. (NYSE: POM) today announced that they have reached a settlement agreement with Montgomery and Prince George's counties in the proceeding before the Maryland Public Service Commission (PSC) to review the companies' proposed merger, which was announced on April 30, 2014. The two counties represent all of Pepco's Maryland customers and nearly three-fourths of Pepco Holdings total customers in Maryland. The settlement, which is subject to the approval of the Commissioners of the PSC, was filed by Exelon and Pepco Holdings and signed by Montgomery County, Prince George's County, the National Consumer Law Center, National Housing Trust, Maryland Affordable Housing Coalition, the Housing Association of Nonprofit Developers and a consortium of nine recreational trail advocacy organizations led by the Mid-Atlantic Off-Road Enthusiasts (MORE).
"This agreement is a good deal for Montgomery County," said Montgomery County Executive Isiah Leggett. "Our residents deserve a top-performing utility that is accountable to customers. Exelon and Pepco Holdings are committing to reduce both the frequency and duration of outages and to bring Pepco's reliability into the top quartile, or face financial penalties if they fall short. I'm also pleased that Exelon and Pepco have agreed to make major investments in technology and innovation that will create jobs and drive the energy, environmental and economic policy goals of Montgomery County and Maryland."
"This agreement not only deals with the importance of reliable electric service, but also addresses some of my highest priorities: Promoting jobs in Prince George's County, creating pathways out of poverty and ensuring that our residents will enjoy the provision of energy service under stronger and more stringent reliability standards," said Rushern L. Baker III, Prince George's County Executive. "Exelon and Pepco will partner with us on workforce development, preparing our public school students for advanced careers in the sustainable energy sector and putting Prince George's County at the forefront of creating an advanced energy industry."
"We are pleased to have reached this settlement agreement, which will deliver significant, direct economic and reliability benefits to all of Pepco and Delmarva Power's customers in Maryland," said Chris Crane, Exelon president and CEO. "It also represents our commitment to further modernize our grid to incorporate more renewable and distributed generation, increase reliability and protect consumers through effective cost-containment measures."
The settlement includes commitments aimed at providing benefits to customers and the state through a combination of bill credits, funding for energy-efficiency programs and renewables investments, low-income customer assistance and other provisions, including:
• A commitment to designate a portion of a proposed $94.4 million customer investment fund to provide $36.8 million in bill credits, or approximately $50 per Pepco and Delmarva Power customer in Maryland. The remainder -- $57.6 million -- will go toward funding energy-efficiency programs designated by Montgomery County, Prince George's County and the PSC.
• A commitment to help economically challenged customers lower their energy bills by dedicating at least 20 percent of the energy efficiency funds to programs targeting low- and moderate-income customers.
• A $50 million "Green Sustainability Fund" to stimulate investment in solar, energy storage and other distributed generation throughout the PHI service territory. The funds could also be used for such things as energy-efficiency investments, microgrids, water conservation in buildings, clean transportation, community solar and other qualifying energy technologies. The fund will be available to qualified borrowers -- including organizations targeting low- and moderate-income residents -- in Pepco Holdings' Delmarva Power, Pepco and Atlantic City Electric territories.
• A commitment to accelerate Pepco and Delmarva Power's reliability improvements so that by 2018, Pepco will achieve first-quartile performance and Delmarva Power will achieve second-quartile performance as measured against peers, or face financial penalties if they fall short.
• Development of 15 megawatts of solar generation, with 5 megawatts each in Montgomery County, Prince George's County and the Delmarva Power service territory in Maryland. Prince George's has also entered into an energy purchase agreement with Exelon that will result in the development of an additional 5 megawatts of electricity generated by solar projects. This electricity will be provided to the county free of charge for a set period of time.
• A commitment to file a proposal with the PSC for public-purpose microgrid projects in Pepco service territory, including one project each in Prince George's County and Montgomery County.
• A commitment for Pepco and Delmarva Power to request that the PSC initiate a "grid-of-the-future" proceeding to examine opportunities to transform the electric grid through smart grid technology, microgrids, renewable resources and distributed generation. Exelon will provide up to $500,000 for the PSC to retain a consultant to study relevant issues and facilitate the proceeding.
• A commitment to work with PSC staff and other stakeholders to accelerate and enhance Pepco and Delmarva Power's energy-efficiency initiatives. The commitment includes establishing penalties for failure to meet commission-approved goals.
• A commitment of $4 million to support workforce development programs in Prince George's County, Montgomery County and the Delmarva Power service territory in Maryland. The Montgomery and Prince George's county programs will emphasize training in sustainable-energy and energy-efficiency careers.
• Development of recreational trails along certain Pepco transmission corridors.
These benefits come on top of the enhanced benefits package Exelon and Pepco Holdings filed with the PSC on March 4. The enhanced benefits package more than doubled the customer investment fund to $94.4 million and strengthened the companies' commitment to reduce the frequency and duration of power outages in Maryland. To help reduce the burden of long-standing debts for low-income families in Maryland, Exelon and Pepco Holdings also committed to a one-time elimination of unpaid bills that are over three years past due as of the date of the merger closing.
In addition to these near-term benefits, merger-related cost reductions of another $127.2 million over 10 years, and $17 million in every year thereafter, will flow back to Pepco and Delmarva Power's Maryland customers through rates lower than they would be absent the merger. In addition to the reliability commitments, upon consummation of the merger Pepco and Delmarva will become part of a family of large urban utilities with distinguished emergency response capabilities. This will give Pepco and Delmarva additional resources in the event of significant weather events and will be of enormous value to their customers during major storms.
The merger will bring together Exelon's three electric and gas utilities - BGE, ComEd and PECO - and Pepco Holdings' three electric and gas utilities - ACE, Delmarva Power and Pepco - to create the leading mid-Atlantic electric and gas utility.
In addition to today's agreement, Exelon and Pepco Holdings announced March 10 that they have reached a settlement with The Alliance for Solar Choice in Maryland.
The merger requires approvals by the Maryland Public Service Commission, the Public Service Commission of the District of Columbia and the Delaware Public Service Commission. On Feb. 13, Exelon reached a settlement agreement with staff of the Delaware Public Service Commission and other stakeholders, and the agreement is pending approval by the 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 or to download the settlement agreement, visit www.phitomorrow.com.