On October 8, 2015, Mayor Muriel Bowser announced that the District of Columbia (“DC”) government has reached a settlement (“Settlement”) in negotiations related to the proposed merger filed with the Public Service Commission of the District of Columbia (“DCPSC”) by Exelon Corporation (“Exelon”) and Pepco Holdings, Inc. (“Pepco” and together with Exelon, the “Joint Applicants”). While the merger application remains subject to DCPSC approval, the Settlement is a milestone for the Joint Applicants in a regulatory review process that has proven to be contentious in DC.

The initial merger application, originally filed on June 18, 2004, was denied by the DCPSC in an August 27, 2015 order in which it stated that the proposed merger model is “not one that is beneficial to [DC] ratepayers or [DC].” In particular, the DCPSC found that rates for DC ratepayers would have been increased by transition costs and regulatory costs associated with the proposed merger. Additionally, the DCPSC noted that Exelon “has been less than enthusiastic about embracing distributed generation and has taken positions on net metering and community net metering programs that are contrary to programs that promote the use of renewable resources that have already been enacted into law in [DC] or that are reflected in the sustainable DC policy adopted by the Mayor.”

According to Mayor Bowser, the Settlement includes “significant improvements from the original proposal” and “increases Exelon’s originally proposed investment in [DC] from $14 million to $78 million.” Among the improvements included in the Settlement are an average one-time credit of $57 for all DC ratepayers, and additional support for low-income residents. As to policy considerations, a press release issued by Mayor Bowser states that the Settlement supports DC’s goal to become a more sustainable city by inclusion of requirements for Exelon to make a $17 million investment in energy efficiency programs, and to separately purchase 100 megawatts of wind generated power for DC. The Settlement is also supported by the Office of the People’s Counsel, an independent agency of the DC government that advocates before the DCPSC on behalf of ratepayers.

Despite its purported improvement over the original proposal, the Settlement still faces some opposition. For instance, the Associated Press reports that DC Councilmember Mary Cheh has voiced concerns that the benefits of Exelon’s $78 million investment will be outweighed by future rate increases. Moreover, Power DC – a consortium of DC businesses and residents opposed to the merger – states on its website that Mayor Bowser “did not solicit input from the community or consult those opposed to the merger” and “everything happened behind closed doors with Exelon and Pepco executives.”

The DCPSC is currently considering the Joint Applicants’ request for reconsideration of the application for merger with no definite timeline for reaching a decision.

A copy of Mayor Bowser’s press release is available here.