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Councilmember McDuffie Submits a Letter to PSC Regarding PEPCO/Exelon Merger

December 23, 2014

Betty Ann Kane, Chairman

Joanne Doddy Fort, Commissioner

Willie L. Phillips, Commissioner

Public Service Commission of the District of Columbia

1333 H Street, N.W. Suite 200, West Tower

Washington, DC 20005


Dear Chairman Kane and Commissioners Fort and Phillips,

Thank you for your consideration of my request to hold an expedited public hearing in Formal Case 1119, the Joint Application with the Public Service Commission of the District of Columbia (Commission) for approval of the merger of Pepco Holdings, Inc. (PHI) and Exelon.  It is my understanding that the December 17, 2014 hearing was a success and that approximately 70 witnesses participated.

As you know, I have been closely monitoring the proposed merger between PHI and Exelon.  The proposed merger will significantly impact residents of the District of Columbia and the city at large.  Therefore, I have carefully reviewed the filings by all parties; the legal and regulatory framework applied in other proceedings, nationally and regionally; testimony formally submitted by diverse community representatives; and listened to comments shared by residents, businesses, and other stakeholders.

In addition I have reviewed the recent Order, issued by the Federal Energy Regulatory Commission on November 20, 2014, which authorized the merger subject to certain clarifications, after consideration of the required factors under the Federal Power Act.

I believe that the factors established by the Commission appropriately identify the key considerations that should guide this proceeding in determining whether the proposed merger is in the public’s interest.  I know that you will carefully examine the entire record to determine the reasonableness and soundness of the proposed merger, to ensure that the customer benefits are equitable, and to ensure that neither the company nor the ratepayers are unduly burdened from both a financial and regulatory perspective.  As I have stated before, the final determination is within the Commission’s legal province, and I am confident you will conduct a prudent and objective review.

The Joint Applicants and many intervenors have filed submissions regarding the proposed benefits to ratepayers, and various other aspects of the consequences of the proposed merger.  I have been particularly interested in the economic benefits to the District; job creation and/or retention; continued local control and oversight of the proposed new company by the Commission and the Council; enhanced response to significant weather events; the effect of the merger on the investment in and use of renewable resources; and, the continued commitment to maintain corporate giving at its current level or higher.

Although the Joint Applicants and intervenors have discussed many of the important issues above, I hope that the following items might be considered as they may enhance the economic benefits of the proposed merger.

  1. Economic Development Fund.  The Joint Applicants have proposed a Customer Investment Fund (“CIF”) to be utilized as the Commission deems appropriate for customer benefits.  Examples of possible uses include: bill credits; assistance for low-income ratepayers; and energy-efficiency measures.  For your consideration, I recommend examining the increasing of the CIF so that a significant investment may be deposited into an economic development fund.  This fund would be utilized to assist certified business enterprises and small businesses with designated “start-up” costs that the District can develop in consultation with the Joint Applicants.  A significant portion of these funds are recommended to be invested to ensure that the fund remains solvent in the long term.
  2. Minority and Community Banking Program.   In researching the proposed merger I have learned of the Minority and Community Banking program implemented by Exelon in Illinois, Pennsylvania, Maryland and New Jersey.  This program has a 14 year history and appears to have seen substantial growth.  Minority and Community banks would benefit from an increase in existing assets which will facilitate more services being provided to the communities they serve, while also enhancing their business model and portfolio.  In addition their partnership with the Joint Applicants may prepare them for other opportunities with similarly sized companies.
  3. Jobs.  The Joint Applicants have committed that there will be no net job losses in the District as a result of the proposed merger.  The Joint Applicants have also indicated that they plan to hire 100 new union jobs over the next two years, and that there are approximately 50 jobs currently in Virginia that will be moved to the District.  Increasing the amount of jobs available to District residents has many potential long term benefits including reducing District’s costs and increasing the District’s tax base.
  4. Career Training Program.  Closely related to Jobs, a robust career training program, established in partnership with a District-based college or university, to train District residents for opportunities that will be created as a result of the merger, new employment opportunities, and/or natural attrition may have a positive long lasting effect.  It is important that District residents are trained to fill career opportunities that will be coming on-line.

It is my hope that all interested parties will consider these additional recommendations.  I believe, if implemented, they will have an ongoing multiplier effect on the District and its residents.  In addition, these recommendations will appropriately compliment many of the benefits being proposed by the parties.

After careful examination of the Joint Applicants’ filings, the intervenors’ filings, the public comments and any additional information the Commission considers appropriate, I am confident that the Commission will make a decision in the best interest of the District and its residents and will ensure enhancements to service reliability; improved emergency response and restoration capabilities; direct, tangible and traceable benefits that will be realized by ratepayers; ongoing local oversight and control of PHI and its assets; protection from the generation side of Exelon’s business; ongoing commitments to the non-profit community; and economic enhancements to the District’s economy, including job creation and tax benefits.

I look forward to the Commission’s decision on the proposed merger.

Thank you for your consideration.

Kenyan R. McDuffie

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