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Pepco and Exelon File for Several Pathways to Secure Merger

Pepco Holdings Inc. and Exelon Corporation proposed three approaches

In a filing to the Public Service Commission of the District of Columbia Monday, Pepco Holdings Inc. and Exelon Corp. proposed three approaches, any one of which, if approved, would prevent the loss of more than $78 million in direct benefits for the District and Pepco customers, and allow the companies to complete the merger. The proposals offer the Commission considerable flexibility in determining how the funds are allocated to ensure the merger is in the public interest. The companies asked the Commission for a decision by April 7.

"We're prepared to deliver the benefits of our original merger settlement or to accept all of the terms the Commission concluded would place the merger in the public interest," said Exelon President and CEO Chris Crane. "We have also offered a third option that aims to balance the alternate terms the Commission offered in its Feb. 26 order with the views of some of the settling parties on the issue of rate credits to residential customers."

The merger settlement Pepco Holdings and Exelon reached with the DC government and others in October 2015 set aside $25.6 million to offset residential customer rate increases through March 2019. However, in its Feb. 26 order, the Commission removed that set-aside and concluded that the Commission should determine how those funds will be allocated across customer classes in the next Pepco rate case.

"The Commission and the settling parties are in agreement that the value of the overall benefits we have committed to the District is appropriate -- it's essentially a question of how those benefits are allocated for the District," said Joe Rigby, chairman, president and CEO of Pepco Holdings. "To safeguard these benefits for the District and its residents, we are putting before the Commission several options that will allow the merger to move forward."

Alternative Proposal

The alternative proposal in the companies' filing addresses the settling parties' concerns by reallocating a portion of the total customer benefits for a $45.6 million fund – $25.6 million would preserve the original merger settlement's rate credits for residential customers, including low-income households, to offset rate increases through March 2019, and $20 million would be used at the Commission's discretion for purposes including rate credits for customers (including commercial customers), additional low-income customer assistance or grid modernization.

"This alternative proposal provides flexibility in determining a path forward for the merger, addressing the guidance the Commission provided in its order and the desire to protect District residents, including those most in need, from rate increases," Crane said. "And it maintains the full $78 million in benefits for the District and Pepco customers agreed to in the original settlement."

Like the revised settlement the Commission has proposed, this alternative proposal preserves most of the benefits of the original settlement that will make electricity more affordable, reliable and sustainable for customers and support local jobs and the local economy, including:

  • An immediate credit of more than $50 on the electric bill of every household in the District,
  • Forgiveness of all residential customer accounts over two years old,
  • Fewer and shorter power outages for Pepco customers,
  • Significant financial penalties to Exelon and Pepco if they do not meet higher reliability goals,
  • Seven megawatts of new solar energy in the District,
  • Practices that will make it easier for customers to install solar panels,
  • A commitment to purchase 100 megawatts of wind energy in PJM,
  • More than $5 million for workforce development programs in the District,
  • A commitment to hire more than 100 union workers and other job commitments in the District,
  • A commitment to move the headquarters of several key Exelon functions to the District,
  • Enhancement of workforce and supplier-diversity programs, and
  • A guaranteed $19 million in contributions over 10 years to nonprofits that serve the District's most vulnerable residents.

Merging with Exelon also will lower Pepco's costs, and Pepco will pass the money it saves on to consumers through rates lower than they would be if the merger does not occur -- an estimated $51 million in savings over the first decade alone.

Pepco Holdings and Exelon have secured necessary regulatory approvals from the Federal Energy Regulatory Commission as well as commissions in Virginia, New Jersey, Maryland and Delaware, The District of Columbia Public Service Commission is the last remaining approval required.

The companies requested the Commission reach a decision on the filing by April 7 so as not to delay the delivery of the merger's significant benefits to District residents.

For more information about the merger, visit

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