Swallowed by Exelon, troubled DC-area utility Pepco is no more

Pepco mega-merger with Exelon now complete after DC gets its pound of flesh in what’s likely to be a good deal for area power customers. Pepco will now operate under Exelon's holding company banner. Meanwhile, stocks remain directionless in light Monday trading.

Chase Tower, Chicago, Illinois (W. Monroe St. & S. Clark St.). Headquarters of Chase bank and Exelon. (Image via Wikipedia entry for Exelon. Photo © Jeremy Atherton, 2006, published here under Creative Commons Attribution-Share Alike generic license 2.5.)

WASHINGTON, March 28, 2016 – At long last, after a lengthy period of fiscal and political Sturm und Drang, Pepco (former symbol: POM), the perpetually controversial Washington, D.C.-area utility, is no more. Pepco was swallowed whole in a complex merger transaction by Chicago-based mega-utility Exelon (EXC). Exelon now touts itself as the nation’s largest utility company.

Trading in Pepco’s stock is now halted, and shareholders will receive proportional shares in EXC in accordance with the final merger agreement now in effect.

A general PRN news release provides top level details:

“The merger brings together Exelon’s three electric and gas utilities — BGE, ComEd and PECO — and Pepco Holdings’ three electric and gas utilities — Atlantic City Electric, Delmarva Power and Pepco — to create the leading mid-Atlantic electric and gas utility company.

“Chris Crane retains his current position as president and CEO of Exelon. Joseph M. Rigby, previously chairman, president and CEO of Pepco Holdings, retires as an officer of Pepco Holdings. David M. Velazquez has assumed the role of president and CEO of Pepco Holdings.

“‘Today, we join together as one company to play a vital role as a leader in our industry and the mid-Atlantic region,’ Crane said. ‘We’ve made a number of commitments to customers in all of the Pepco Holdings utilities’ jurisdictions — the District, Maryland, Delaware and New Jersey — and we look forward to getting to work to deliver those benefits to our customers and communities.’”

“Exelon will provide a package of direct benefits – including bill credits, reliability improvements and other investments – worth more than $430 million for customers and communities in Delaware, the District of Columbia, Maryland and New Jersey under the commitments made in those jurisdictions…

“The merger brings together Exelon’s three electric and gas utilities — BGE, ComEd and PECO — and Pepco Holdings’ three electric and gas utilities — Atlantic City Electric, Delmarva Power and Pepco — to create the leading mid-Atlantic electric and gas utility company.”

This problematic merger—some two years in the making—was dogged first by extortion demands from the DC city government and then by objections from the District’s Public Service Commission as well-as a last-minute hold put on the finally-approved transaction.

Although other area utility commissions and jurisdictions Pepco serves/served—including Maryland, Delaware, Virginia and New Jersey—had long ago given the green light to the merger, the District, as is so often the case, held out, forcing Exelon and Pepco again and again to sweeten what amounts to an income redistribution plan in order to complete the merger.

The District finally agreed to a revised deal in February only to run into the buzz-saw of its own Public Service Commission which thought that the massive giveaways could very well damage the fiscal viability of the merged companies. Apparently a compromise was reached last week, allowing the deal to conclude, a decision that was announced late last week.

Full details, more or less, are available via this PR website and involve in part what have become typical global warming climate change boondoggle-promises utilities are being forced to choke down by the current administration and its lackeys. The money-losing nonsense pledges includ a promised 100 megawatts of wind energy, 7 megawatts of new solar energy in DC and, somehow, making solar panel installation “easier” for area customers—all of which imply massive subsidies, likely paid for by the merged companies before winding up in customer’s monthly bills whether customers like it or not.

The site also touts an “immediate bill credit” of $50 for residential customers, which reminds us of those dollar-off coupons you get as your award in any number of generally meritless class-action suits against U.S. companies. (That’s because the attorneys get to keep the major part of these huge settlements.)

$50 doesn’t mean much to anyone any more, but it is something for cynical DC and other area pols to tout in their election campaigns, which is actually what the $50 is all about.

Fortunately, there’s at least one potential upside to this transaction. Pepco customers have long been infuriated by the utility’s consistently lousy performance during violent spring and summer storms as well as the area’s occasional blizzards. Numerous customers have often been without power for days and sometimes weeks after a large storm moves out over the Atlantic.

But Pepco until fairly recently would typically keep its repair and maintenance budgets tight, the better to pay the company’s traditional fat dividends to stockholders, who certainly appreciated the consideration. But hapless Pepco customers did not, and the company’s PR woes continued to increase.

Exelon, by all accounts, is a considerably better run utility, and may finally be able to improve maintenance and repair conditions in the DC-area.

Pepco, BTW, will actually continue to exist under the Exelon umbrella, much as the former Allegheny Power now functions under its acquirer, Akron-based First Energy (FE). Allegheny’s several local utility entities reverted to their original names (such as Potomac Edison in West Virginia) after the merger with FE, retaining many local offices and maintenance facilities while leaving accounting, budgeting, payroll and the like to the acquiring holding company.

That said, the former Allegheny buck now stops in Akron. Likewise, the Pepco buck will now stop in Excelon’s HQ city of Chicago no matter what logo you might see on future bils. Chicagoans are famous for getting livid when public services don’t work, so Exelon has typically made sure this rarely happens. If EXC can bring that tradition to long suffering DC-area Pepco customers, this mega-merger will ultimately be a good thing.

Today’s Wall Street action:

As of the noon hour Monday in post-holiday trading, stock trading action has been trendless on light volume. The Dow is slightly up, the S&P 500 is slightly down and the NASDAQ is off a little more. Energy is off a bit, stocks have an iffy feel to them, and traders seem to be waiting for someone else to make the first move. We’ll likely have a better feel for this tomorrow, so stay tuned.

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