This story was updated at 4:45 p.m. on Aug. 20, 2014.
Pepco and Exelon asked Tuesday for the Maryland Public Service Commission’s stamp of approval on the proposed merger of the two companies, announced in April.
Pepco Holdings Inc. plans to sell to Exelon Corp., the Chicago-based parent company of Baltimore Gas and Electric (BGE), for $6.83 billion, all-cash.
The sale would bring together Exelon’s three electric and gas utilities, BGE, ComEd and PECO, with Pepco Holding’s three utilities, Atlantic City Electric, Delmarva Power and Pepco, cementing Exelon’s hold on the mid-Atlantic market.
The filing Tuesday initiates the regulatory approval process required in Maryland, said Donna Cooper, Pepco Region President.
Cooper said the application filed with the PSC details the benefits of the merger, including more reliable electric service, economic growth, charitable donations and direct benefit to customers.
“Exelon is committed to working with Pepco and Delmarva Power to continue improving service reliability, deliver financial benefits to Maryland customers, and to continue Pepco and Delmarva Power’s strong tradition of community involvement and support,” said Melissa Sherrod, Exelon vice president of corporate affairs.
Montgomery County Councilman Roger Berliner said in a statement Tuesday that it is up to state regulators to determine if the proposed merger—which will result in a single utility totally dominating the state—is in the public interest.
“Our Council has formally stated that should the Commission conclude it is in the public interest, it could only do so with binding commitments to superb reliability and better service to our long-suffering constituents,” Berliner (D-Dist. 1) of Bethesda said.
Cooper said Tuesday that the merger will result in fewer power outages.
Courtney Nogas, Pepco spokeswoman, said Pepco customers currently experience about 1.62 outages per year with an average outage duration of 176 minutes.
Under the merger application filed with the PSC on Tuesday, the companies have committed to improve reliability for Pepco customers by 38 to 40 percent. Specifically, by 2020 Pepco customers will experience no more than 1 outage per year and an average outage duration of no more than 101 minutes, as based on a three-year historical average to account for any abnormal weather, such as the 2012 derecho that kept Montgomery County residents in the dark for as long as eight days.
If the companies do not meet the reliability targets, Exelon offered to face “financial penalties.”
In May, the Montgomery County Council unanimously approved a resolution proposed by Berliner imploring the PSC to require “that Exelon provide substantial ratepayer benefits, including, but not limited to, quality of service equivalent to a top quartile utility within three years, and that cost recovery for investments necessary to achieve that outcome be tied to performance,” should it approve the sale.
Montgomery County residents who have seen steady increases in their electric rates should not see those rates change initially under the merger, Cooper said.
While Pepco Holdings leadership said in 2012 that the utility planned to pound the rate case drum, filing every nine months for higher rates — which it has so-far fulfilled, filing in 2011, 2012 and 2013 — Cooper said Tuesday that the merger does not include a rate adjustment.
“At this time there are not plans to file a rate adjustment request consistent with what was articulated based on that nine-month time frame,” Cooper said.
Sherrod said Exelon will also dedicate $40 million to a Customer Investment Fund to directly benefit Pepco and Delmarva Power customers through bill credits, assistance for low-income customers and energy efficiency measures. It will also donate $50 million in 10 years to charitable organizations and programs in the communities served by Pepco, Delmarva Power and Atlantic City Electric.
Pepco employees should also keep their jobs under the merger. The company has committed to avoid any involuntary job losses at the utilities for the first two years of the merger.