District of Columbia regulators on Friday rejected for a second time a proposed $6.8 billion merger between power companies Exelon and Pepco, but said the deal could still go forward if new conditions are met.
Approval by the District represents the final regulatory hurdle for the merger, which four states and the federal government already approved. The deal would create a large electric and gas utility in the mid-Atlantic region, serving 10 million customers.
The D.C. Public Service Commission first rejected the merger last year, saying it would not benefit ratepayers. Mayor Muriel Bowser's administration stepped in and negotiated a $78 million settlement with the companies that includes protection for ratepayers, job guarantees and investments in renewable energy. But critics of the deal still say it would harm both consumers and the environment.
If the companies agree to the new conditions, the merger would be automatically approved without any further action by the commission. However, Commission Chairman Betty Ann Kane said she still opposes the deal. She said the companies have not addressed a fundamental flaw: Exelon is mainly an energy producer, while Pepco is a distributor.
"The fact remains unchanged from the original application that the takeover of Pepco will entangle the company in an ownership structure that is an inherent conflict of interest," Kane said. She added that Pepco would continue to be "financially healthy" if it did not merge with Exelon.
However, the other two commissioners said the merger would be in the public interest with the new conditions in place. The companies have two weeks to agree to the terms, and it was not immediately clear how they would proceed. Pepco spokesman Vincent Morris said the companies would need to "carefully review" the commission's order.
Exelon CEO Chris Crane told investors in a conference call earlier this month that the company would abandon the merger if it's not approved by early March.
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The conditions include additional protections for ratepayers, including $25 million in credits to offset rate increases. The commission also wants Pepco, not Exelon, to develop a large solar power-generation facility in southwest Washington.