D.C. regulators reject proposed Exelon-Pepco merger

Regulators in the District of Columbia have rejected a proposed merger between power companies Exelon Corp. and Pepco Holdings Inc., throwing into doubt the fate of a $6.8 billion deal that would have turned Exelon into the largest U.S. utility by customer count.

Locally, the deal would have combined Exelon, parent company of Peco Energy Co., with Pepco, parent of Atlantic City Electric and Delmarva Power and Light.

The three-member D.C. Public Service Commission voted unanimously Tuesday to spurn the merger, which had already been approved by regulatory agencies in New Jersey, Delaware, and Virginia and by the Federal Energy Regulatory Commission. Earlier this month, a Maryland judge rejected a bid by the state's attorney general to block approval of the deal by Maryland regulators.

Washington was the last jurisdiction to weigh in on the proposal. The companies have 30 days to ask for reconsideration by the commission, according to a statement from the regulator released after the ruling Tuesday.

Chicago-based Exelon announced in April 2014 that it was buying Washington-based Pepco for $6.8 billion. The deal would create a large electric and gas utility in the Mid-Atlantic region, serving about 10 million customers.

Betty Ann Kane, chair of the D.C. Public Service Commission, said the companies did not meet their burden of showing that the proposed merger would benefit the public.

In a statement, Exelon said: "We are disappointed with the commission's decision and believe it fails to recognize the benefits of the merger to the District of Columbia and its residents and businesses. We continue to believe our proposal is in the public interest and provides direct immediate and long-term benefits to customers, enhances reliability and preserves our role as a community partner. We will review our options with respect to this decision and will respond once that process is complete."

In an interview with Bloomberg News, Hugh Wynne, a New York-based analyst for Sanford C. Bernstein & Co., said: "The pressure is going to be extraordinary on [Exelon chief executive Chris] Crane to close this transaction. He will focus all efforts on this commission and put together a package that satisfies their standard."