Peco parent's takeover of Pepco approved by Md. regulators

Exelon Corp.'s $6.8 billion takeover of Pepco Holdings Inc. was approved by Maryland regulators over the objections of the state's top lawyer, who argued that it would slow the growth of rooftop solar.

The 3-2 decision, posted Friday on the Maryland Public Service Commission's website, includes 46 conditions. Exelon - owner of Peco Energy Co. in Philadelphia - still needs approval in Delaware, where a settlement has been proposed to the utility regulator, and by the District of Columbia Public Service Commission. Pepco serves 1.3 million customers in Washington, its neighboring Maryland suburbs, and Delaware.

Friday's order requires Exelon, the nation's biggest nuclear plant operator, to meet higher reliability standards, provide $66 million in credits for its residential customers in Maryland, and pump $43.2 million into energy efficiency programs, according to a statement from the commission.

"There are no onerous terms here for Exelon," said Charles Fishman, a Chicago-based analyst for Morningstar Inc. "Exelon's challenge here is to improve reliability.

Maryland and the District of Columbia had punished Pepco with some of the lowest rates in the nation because of poor reliability.

Pepco stock rose 8.8 percent to $27 at the close. Before the announcement, it slid to $24, its low for the year. Exelon rose 2.9 percent to $34.50.

Exelon is "pleased" with Maryland's decision and will "carefully review" the commission's terms before saying more, Paul Adams, a Baltimore-based spokesman for the company, said in an e-mail.

Maryland Attorney General Brian E. Frosh said the combination would give Exelon enough market clout to favor its high-cost nuclear reactors at the expense of residential solar systems. Chicago-based Exelon countered with a promise to develop 15 megawatts of solar power in the state, and create a $19.8 million fund to encourage investment in rooftop solar and energy efficiency.

Exelon offered $27.25 a share in cash for Pepco last April, in a deal to expand its holdings in the mid-Atlantic and reduce reliance on dwindling profit from its nuclear plants.

"The evidence shows that Exelon intends to control the pace of development of distributed energy resources," Frosh said in a filing with the commission.