The state has reached a tentative settlement with Exelon Corp. and Pepco Holdings Inc. that could allow a merger of the two companies and the acquisition of Atlantic City Electric, one of four electric utilities in New Jersey
The agreement signed with the staff of the state Board of Public Utilities still needs to be approved by the agency’s commissioners, but marks a significant hurdle in approving the $6.8 billion deal -- at least in New Jersey. It still needs to be approved, however, by agencies in Delaware, Maryland, and the District of Columbia.
If the deal does go through, it would mean that Public Service Electric & Gas, the state’s largest electric utility, would be the only one based in New Jersey. All the others have been acquired by out-of-state energy-holding companies.
That has been a bone of contention in the past, particularly relating to Jersey Central Power & Light ever since its acquisition by Akron-based FirstEnergy Corp. Consumer advocates and regulators have repeatedly questioned whether the parent company has invested enough in maintaining the reliability of its system.
The so-called stipulated settlement submitted to the BPU commissioner calls for a $62 million customer investment fund to be used for direct rate credits to customers of Atlantic City Electric within 60 days of the merger closing. It also would provide up to $15 million in energy savings to the utility’s 545,000 customers over five years.
“This agreement is good for New Jersey,’’ said Joseph Rigby, PHI chairman, president, and chief executive officer. “By joining the Exelon family of utilities, ACE will be able to deliver substantial benefits to its customers and communities.”
Not everyone agreed. The New Jersey Division of Rate Counsel, which represents consumer and business interests, refused to sign on to the agreement.
Describing the proposed $62 million in customer credits under the settlement “as fleeting as best,’’ Division of Rate Counsel Stefanie Brand noted there is no limitation on customers being hit with post-transition costs.
“It is little comfort to a business or a residential customer to receive a check for $115 and then a rate increase after that could dwarf the $115 benefit,’’ Brand said in written comments to the proposed settlement.
“If a customer 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 said.
The merger also has generated opposition in other quarters. In filings with the Federal Energy Regulatory Commission (FERC), critics said Exelon’s acquisition of Pepco might lead to-- at the expense of consumers -- in decisions made by the PJM Interconnection, the operator of the nation’s largest power grid.
The Independent Market Monitor for PJM, which oversees and promotes competition within the regional power grid, also expressed concerns, noting that the newly combined company would account for nearly a quarter of transmission assets in the PJM market, an increasingly large driver of profits for utility companies.
But an Exelon executive said the deal would be beneficial to the state, saying it would create the leading Mid-Atlantic electric and gas utility in the region, according to Chris Crane , president and chief executive of the Chicago-based company. “Our combined company will bring significant benefits to New Jersey and ACE customers,’’ he said.