Update: DC ratepayer advocate rejects proposal to save Exelon-Pepco merger

Dive Brief:

In a statement made today, the D.C. Office of the People's Counsel said it couldn't accept Exelon and Pepco's latest proposal aimed at saving their proposed $6.8 billion merger.
At issue for the ratepayer advocate is how to allocate part of the $78 million customer investment fund (CIF) that would be set aside to protect consumers from rate impacts.
People's Counsel Sandra Mattavous-Frye said in the statement that the most recent proposal from the utility companies doesn't entail "the type of rate protection I have been seeking in this case for almost two years."

Dive Insight:

The Exelon-Pepco merger saga continues, with D.C.'s ratepayer advocate rejecting the latest proposal to save the merger. The rejection deals another blow to the merger that would create the nation's largest utility, but has struggled to gain approval in the District of Columbia

After the D.C. PSC rejected a settlement deal made between the Exelon, Pepco, D.C. Mayor Muriel Bowser, and several merger stakeholders, Exelon and Pepco filed a new proposal on Monday with the D.C. PSC in an effort to save their proposed $6.8 billion merger.

When rejecting the deal, the regulators expressed concern in their order that non-residential ratepayers were shut out of the $25.6 million allocated for residential rate relief under the settlement deal made last year. Now under the new conditions, that money would be assigned as a part of Pepco’s next rate case, which is under the purview of the PSC.

The latest alternative proposal put forward by Exelon addressed the PSC's concerns over how to allocate the million fund. While the original settlement set aside about $25 million for residential rate relief, the PSC said those funds should be allocated at Pepco's next rate case — a provision the mayor and other city officials oppose. Under the new proposal, a $45.6 million allocation of the CIF would be split into two parts — $25.6 million for a residential rate freeze and $20 million for the commission to use at its discretion.

The Office of the People's Counsel did not find the new proposal to be in the public interest. Instead, they said the original settlement reached by several parties in October 2015 is still in the public interest "because of the promise of rate protection, improvements in reliability, job creation and development of renewable energy alternatives."

It remains to be seen whether the Mayor will oppose the latest proposal put forth by Exelon and Pepco. Shortly after the ratepayer advocate came out against the PSC order on March 1, the Mayor's Office did the same. A rejection of the proposal by the Mayor would deal yet another blow to a merger that has struggled to clear its final hurdle — approval by the D.C. PSC.

When reached by Utility Dive, a spokesperson for Mayor Muriel Bowser's office said it had no comment at this time. They referred only to their statement made on March 1, in which the Mayor came out against the new conditions required for approval that were placed on the deal by the PSC in their February 26 ruling to reject the deal as proposed. That PSC order, according to the mayor, "guts much needed protections against rate increases for D.C. residents and assistance for low-income D.C. ratepayers."

A spokesperson for Exelon reached out to Utility Dive to offer this comment on behalf of Exelon and Pepco: "Practically every party that filed comments today continues to believe the merger is in the public interest and supports its approval. The comments show differing opinions on how a portion of the more than $78 million in funds that Exelon has committed to the District should be used if the merger is approved. We hope the Public Service Commission will find a solution that secures all of the benefits for the District and Pepco’s customers and urge it to consider the alternatives we have outlined to approve the merger."

For more information on the deal, check out our story on the PSC decision and this timeline on the merger saga.