Regulators of utilities reject the proposal put forward by Exelon Corporation (NYSE:EXC) in a bid for Pepco holdings (NYSE:POM).
Utilities regulators of the District of Columbia rejected the bid that would have created the nation's largest power generation and distribution company. The deal was called off the Public Service Commission of DC when both companies were unable to prove in any way how or why this deal would be in the interests of the general public. The merger was announced in April of last year, and among its biggest hurdles was the fact that the regulatory bodies had to be consulted. It is worth noting that four other states that will have been affected by this merger signed off positively and were in favor of the deal.
The two companies involved in the case, Exelon and Pepco have a 30 day period in which they can request a review with the Public Service Commission. In a release, the companies said they were disappointed with the decision made by the body and is right now looking at a number of options going forward. If the second review is rejected as well, the companies can take their merger and this case to the DC Court of Appeals, contesting the decision. Alternately, the companies can restart the application by going over the procedure again. A spokesperson for the USCA has said that this a trend with regulatory bodies; first time applications are rejected, leaving the opportunity to reapply open, but have enhanced terms and conditions for taxpayers.
Harmful to the district
Chairperson of the commission said that this decision is a highly important one. She went on to say that if the deal had gone through, it may be beneficial in some aspects, but harmful in others. Pepco would have become second tier to the large corporation which has generation as its primary interests, and not in the distribution of power. Many opponents to the deal also pointed out how the deal would have increased the rates that end users will have to pay. It will have also limited the already slow growth of renewable sources in the area.
As is, Pepco serves close to 2 million consumers in the DC, Maryland, Delaware, and New Jersey areas. Exelon has nearly 8 million customers in Pennsylvania, Illinois and Maryland. The proposal was approved by Maryland, Delaware and New Jersey before being rejected by DC.