The state Board of Public Utilities yesterday approved a $6.8 billion merger between energy giant Exelon Corp. and Pepco Holdings Inc., a settlement that will deliver $62 million in direct rate credits to customers of Atlantic City Electric, a subsidiary of PHI.
The deal, which still needs to be approved by the equivalent agencies in Delaware, the District of Columbia, and Maryland, would create one of the largest electric and gas utilities in the nation with nearly 10 million customers.
If the merger goes through, it also would leave Public Service Electric & Gas as the only one of four electric utilities still based in New Jersey. That concern, raised by a BPU commissioner, reflects fears that out-of-state holding companies are not investing enough in maintaining reliability in the Garden State.
“We expect Exelon to be frequent visitors to New Jersey,’’ said BPU Commissioner Joseph Fiordaliso, who presided over hearings in the case. “It’s important they have a physical presence here in New Jersey.’’
As part of the settlement, the new company will keep Atlantic City Electric’s operational headquarters in Mays Landing and will maintain the utility’s annual charitable contributions of $700,000 for 10 years. Exelon is based in Chicago.
The settlement provides that the half-million customers of Atlantic City Electric receive the direct rate credits within 60 days of the merger closing. The agreement also requires the utility to provide $15 million in energy-efficiency savings over the next five years.
Those numbers could rise depending the outcome of negotiations in other jurisdictions where the proposed merger has generated more controversy. Under the settlement approved by BPU, customers will receive equal benefits as those won by regulators elsewhere.
“This merger represents a great compromise that will provide many benefits to New Jersey, including $62 million worth of direct-rate credits for customers of Atlantic City Electric,’’ said Richard Mroz, president of the BPU. “Additionally, the settlement protects the jobs of nearly a thousand New Jersey residents and keeps the company’s local operational headquarters in Mays Landing.’’
For the BPU, the case, originally filed last April, was resolved very quickly, being decided in only 10 months since the merger was announced in April and an application to the agency last June. The merger will bring together Exelon’s three electric and gas utilities with Pepco’s three electric and gas utilities, including Atlantic City Electric.
“Our combined company will bring significant value to New Jersey and ACE customers, and we are thankful to the board for their approval,’’ said Joseph Rigby, chairman, president and CEO of PHI.
Not everyone agreed. The New Jersey Division of Rate Counsel declined to sign the settlement, describing the proposed $62 million in customer credits as “fleeting as best.’’ Rate Counsel Stefanie Brand argued there is no limitation on customers being hit with post-transition costs, larger than the projected $115 one-time credit.
To some, Atlantic City Electric could face tough times in the future with the collapse of the gaming industry in the resort town. Four of the city’s 12 casinos closed last year, eroding a key base of the utility’s revenue. To maintain the reliability of its service, those costs could be passed on to other customers, particularly residential ratepayers.
“If a customers of Atlantic City Electric were to ask what lasting benefits he or she would receive if this merger takes place, I would be hard-pressed to have an answer,’’ Brand told NJ Spotlight last month.
But Exelon and Atlantic City Electric executives disagreed, saying the merger would provide greater resources to the utility — a prospect that could reduce power outages by one-third.
The companies hope to close the merger sometime in the second quarter or third quarter of 2015, according to Lendel Jones, a spokeswoman for some of Pepco’s utility holdings. The merger already has won the approval of the Federal Energy Regulatory Commission and the Virginia State Corporation Commission.