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D.C. Regulators Approve Exelon's $7 Billion Takeover Of Pepco (washingtonpost.com) 61

An anonymous reader quotes a report from WashingtonPost: District regulators approved a $6.8 billion merger between Pepco Holdings and Exelon on Wednesday, creating the largest publicly-held utility in the country. The merger means that Pepco will now be absorbed by a company with the largest number of nuclear reactors in the country and widespread operations throughout the mid-Atlantic, Midwest, and New England. In voting 2 to 1 to approve the deal, the D.C. Public Service Commission said it "was in the public interest," noting that it would deposit $72.8 million in a "customer investment fund," set aside $11.25 million for energy efficiency and conservation programs targeted toward low-income residents, and carve out $21.55 million for pilot projects such as modernizing the electric distribution grid. "These benefits, among others, would not be available to District ratepayers if the merger is not approved," the commission said in a statement.
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D.C. Regulators Approve Exelon's $7 Billion Takeover Of Pepco

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  • by xlyz ( 695304 ) on Wednesday March 23, 2016 @07:54PM (#51766013) Journal
    Guess who eventually will pay for that $72.8 millions?
    No gift is worth a reduction in competition. Will we ever learn?
    • Re: (Score:2, Insightful)

      by Anonymous Coward

      72.8 million
      11.25 million
      21.55 million

      Talk about petty cash!

      Higher level management in the new company will get that and more in annual salary.

      Those numbers won't even pay the costs to open the spreadsheets.

      Do the phrase "smartest guys in the room" ring a bell?

      • In other words, they simply increased the depth and breadth of bribe money thrown around the beltway and the deal got done.

        There isn't any incentive for them to "modernize the power grid" so I can only wonder what that's a code word for. I suspect it means something like "make the necessary upgrades in their corner of the grid so they can move power around between their own generation sources to reduce their own costs."

        • Many utilities operate on a "cost plus" model, so there's actually a huge incentive to modernize the grid, or basically incur as much cost as the regulators will let the utility get away with. Even worse, when the regulated arm engages in expansion or modernization, it contracts with its unregulated "utility construction services" arm.

        • In other words, they simply increased the depth and breadth of bribe money thrown around the beltway and the deal got done.

          There isn't any incentive for them to "modernize the power grid" so I can only wonder what that's a code word for. I suspect it means something like "make the necessary upgrades in their corner of the grid so they can move power around between their own generation sources to reduce their own costs."

          You assume this isn't the reason politicians go into politics -- to get in the way of business so they can get paid to get back out of the way.

      • They probably don't get that much in annual *salary*; compensation, probably, but at those levels only a sucker makes that much money from salary instead of, say, stock options.
    • No gift is worth a reduction in competition.

      This doesn't reduce competition, because the service areas don't overlap. Each company is already a local monopoly.

      • by SeaFox ( 739806 )

        This doesn't reduce competition, because the service areas don't overlap. Each company is already a local monopoly.

        It makes the new entity a much larger force politically, which can have a negative impact of future regulatory decisions.
        Also, it makes it harder to get away from the company.

        Since this "they don't overlap" argument was already trotted out for the cableco mergers, let me say that if I really didn't like my Internet service offerings in my area, I wouldn't call and bitch about it to the Tier 1 tech support agents who literally can't do anything about it, I would move. It's harder to do that if the provider o

        • The utility companies can't negotiate content deals (something to give them leverage against i.e. Viacom) nor throttle your service (leverage against consumers) nor anything analogous. Utility rates are only negotiated with local governments who are only concerned with their specific jurisdiction, and no other jurisdictions come into play at any time in that process. Likewise, how big or small the company is doesn't have much of an impact on anything.

          • It does, however, benefit the companies' economies of scale. They can operate bigger more efficient plants for neighboring areas, and get a full picture on energy distribution for grid build-out plans. Also important, they can implement larger projects without as much risk which is useful due to the high upfront costs of renewables deployment.

            This is one area where regulation has been pretty successful, at least where I'm at. Profit margins and prices of power are limited where I'm at so a power company

            • Except that out there they still have to deal with PJM [pjm.com]. Both PEPCO and various Exelon/Constellation owned utilities all go through them so I don't think there are really any economies of scale that can be gained at this point.
      • Yeah keep thinking it doesn't eliminated competition. I guess you missed the line about rates increases.
  • I don't know about the Exelon side, but Pepco was totally blindsided by the commission's original ruling. They were in meetings, watching the vote live, and they had no fallback plan in case it didn't go through.
    The Pepco folks are surprised it appears to have gone through now, and they wouldn't be shocked if something derailed it at the last moment.
    • If Pepco was surprised by the deal being rejected the first couple of times, it certainly helps to explain why they're the one being absorbed.

  • Or come close to it. Like telecoms who promise to build out rural internet, they'll just not pay, then claim some BS hardship, and pay a team of lawyers and lobbyists 1/10th of the price, buy up politicians via small 5-figure campaign bribes/donations, and ultimately knock all that down like $6 million.

    • by ShanghaiBill ( 739463 ) on Wednesday March 23, 2016 @08:24PM (#51766197)

      Or come close to it.

      They don't need to weasel out of it. $72+$21+$11 million is nothing. That is a rounding error on one month of Exelon's revenue.

      • by whh3 ( 450031 )

        All of this is very interesting, especially in the context of D.C.'s recent dealing with WalMart. The council agreed to let WalMart build supercenters agreeing to increase in minimum wage in exchange for their promise to build some stores in food deserts. Then, low and behold, WalMart said that the economic conditions would no longer make it possible for them to build the grocery stores in those locations after they already built the ones that they figured would be profitable.

        Washington post coverage [washingtonpost.com]

        "Fool m

        • What a one sided article...

          DC raised the min wage already and is planning to raise it again.

          The conditions under which the deal with the City was made no longer exist. You can't expect Walmart not to redo the math after the terms change.

          This is why the city probably won't sue, the lawyers will say "yea, you can probably force the issue, but only if you grant an exception so Walmart doesn't have to pay the new higher wages or pay into the family leave fund."

          • by whh3 ( 450031 )

            You absolutely can and should expect them to be true to the deal. It's not that they did not know their was a risk of "the math" changing.

            Plus, it wasn't the terms of the deal that changed. It was their misread of the economy. Not the city's fault.

  • by Vinegar Joe ( 998110 ) on Wednesday March 23, 2016 @08:33PM (#51766233)

    When I first saw the headline, I thought it read Pepsico. I was afraid they'd now screw up Mountain Dew. Having realized my mistake, I am resting easier now thank you.

  • I think in the vast majority of situations, the politician says what he does is good for the public... Whether it is or not.
  • by Archfeld ( 6757 ) <treboreel@live.com> on Wednesday March 23, 2016 @10:02PM (#51766573) Journal

    "carve out $21.55 million for pilot projects such as modernizing the electric distribution grid."

    What a concept, a utility company "carving" out money to maintain the system they have a monopoly on. People wonder how our national infrastructure got into the horrible shape it is now...

    • by dj245 ( 732906 )

      "carve out $21.55 million for pilot projects such as modernizing the electric distribution grid."

      What a concept, a utility company "carving" out money to maintain the system they have a monopoly on. People wonder how our national infrastructure got into the horrible shape it is now...

      There are a lot of ways that could go down. Maybe external parties want to implement systems that the utility doesn't think are important. Just as an example, smart meters that can control AC units in the event of a power shortage. In some parts of the country, there is a solid case to be made for installing such equipment. In other areas, it might be completely frivolous.

      The article uses the term "modernizing", not "maintaining". You're reading your own bias into it. Without knowing all the detai

      • by Archfeld ( 6757 )

        Point well taken. The area I hail from has PG&E, and they instituted smart meters some years ago, and then promptly let go of several hundred workers who previous walked the neighborhoods reading meters in lieu of one guy in a truck driving thru at 15 mph reading them automatically. Immediately following our switch, my monthly cost went up $20/month. When I called on PG&E they claimed that the old meters were not as accurate, and that they had been under-charging us for many years. On a side note I

  • Obama, Axelrod and others from his administration and presidential campaign worked for Exelon.

  • "...it would deposit $72.8 million in a "customer investment fund," set aside $11.25 million for energy efficiency and conservation programs targeted toward low-income residents, and carve out $21.55 million for pilot projects such as modernizing the electric distribution grid."

    So basically these companies bought off the regulatory commission to the tune of some 100 million that will probably never make it to the slated end projects.

    Is there any level of American government that can't be bought?

  • . . . . because for months, after the initial and second disapproval, you constantly heard commercials with paid shills, excuse me, Local Concerned Citizens extolling the virtues of the merger. I'd be curious to know just how large the advertising budget was for the PR effort. Likely, in the millions of dollars. Which makes you wonder, just how much will Excelon be making, that they can shell out all this coin JUST to be the local electric utility. . .
  • Where's Teddy Roosevelt when you need him?

  • Why would an oil company buy a soda/restaurant company?

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