Councilmember McDuffie’s Letter on Pepco Holdings, Inc. and Exelon Merger

November 7, 2014

Dear District of Columbia Resident,

As Chairman of the Council of the District of Columbia’s Committee on Government Operations, I exercise legislative oversight of Pepco Holdings, Inc. (PHI), the Public Service Commission of the District of Columbia (Commission) and the Office of the People’s Counsel (OPC).

On April 30, 2014, PHI and Exelon announced plans for the companies to merge. The combination would bring together Exelon’s three electric and gas utilities – Baltimore, Gas, and Electric, Commonwealth Eddison Company and PECO – and PHI’s three utilities – Pepco, Atlantic City Electric and Delmarva Power.

I previously noted that I will be following this proceeding very carefully, ensuring that the interests of customers all over the city are protected.  However, the decision on the plan to merge falls squarely within the purview of the Commission.  The Commission is an independent quasi-judicial agency established with the exclusive jurisdiction over matters related to services and rates provided by the utility companies conducting business in the District of Columbia.  District residents’ interests are represented before the Commission by OPC, which serves as the statutory advocate for utility customers.

On June 18, Exelon and PHI filed an application seeking approval of their proposed merger from the Commission.  The Commission has identified seven factors it will consider in deciding this case.  They are the effects of the transaction on:

(1)   Ratepayers, shareholders, the financial health of the utilities standing alone and as merged, and the economy of the District;

(2)   Utility management and administrative operations;

(3)   Public safety and the safety and reliability of services;

(4)   Risks associated with all of the Joint Applicants’ affiliated non-jurisdictional business operations, including nuclear operations;

(5)   The Commission’s ability to regulate the new utility effectively;

(6)   Competition in the local retail, and wholesale markets that impacts the District and District ratepayers; and,

(7)   Conservation of natural resources and preservation of environmental quality.

To date, there have been 167 filings in the case.  Recently, on November 3, 2014, direct testimony from OPC, as well as 12 other intervenors in the case, including the District of Columbia Government, was filed.  Several other entities and individuals have also filed comments but did not formally intervene.[1]  Pursuant to the Commission’s Order dated October 9, 2014, the parties will continue to engage in discovery over the next few months, with all reply briefs in the case due on March 26, 2015.  I expect that the Commission will deliver a final decision in the case within 90 days of all the reply briefs being filed.

As an important component of this proceeding, the Commission will hold at least four community hearings where comments from residents and ratepayers will be heard.  The dates of the hearings will be announced by the Commission. However, I have requested that the Commission hold at least one of the hearings as soon as practicable in December of this year.  I believe that the sooner the District’s residents are able to express their views regarding the merger, the more fruitful the discussions, negotiations and decisions in this process will be.

I will continue to closely monitor the legal proceedings in this case as well as the community hearings.  It is important to remember that the Commission retains exclusive jurisdiction over any electric utility’s District of Columbia operations.  Similarly, any electric utility in the District will remain under the legislative oversight of the Council and subject to OPC’s statutory role.

The Commission has the expertise, as well as the statutory obligation, to manage this proceeding and issue a ruling based on the sound application of the law to the facts presented.  I have every confidence that the Commission will execute their duties diligently, and will render a decision that is in the best interest of the residents of the District of Columbia.

In Service,

Kenyan R. McDuffie