will Exelon E&G be greater than the sum of its parts?

In this issue, we present an exclusive interview with John Rowe, president and CEO of Exelon, a utility company that recently made big news when it announced that it would merge with Public Service Enterprise Group, Inc. (PSEG) of New Jersey to form Exelon Electric & Gas.

That merger would create a mega-utility with total assets of approximately $79 billion and $27 billion in annual revenues. The combined company will serve 7 million electric customers and 2 million gas customers in three states: Illinois, New Jersey and Pennsylvania. Exelon Electric & Gas would also become the nation’s largest power generator, with a generation portfolio of approximately 52,000 MWs of domestic capacity.

To call managing such a merger a daunting task would seem to be a tremendous understatement, but Rowe is no stranger to managing the product of a large utility merger. He became president and co-CEO of Exelon after it was formed from the merger between Unicom Corp. and PECO Energy Co. back in 2000.

At the time the Unicom/PECO merger was completed in 2000, Rowe stressed the importance of synergies. He noted the importance of teamwork during a merger and talked about the whole being stronger than the sum of its parts.

“The Exelon company being created is much stronger than the two predecessor companies (Unicom and PECO Energy) were a year ago,” Rowe said back in 2000. “The assets are stronger, the operations are more productive and the people are exceeding our expectations. We’re already delivering value to the shareholders.”

His message today when talking about the pending merger of Exelon and PSEG is remarkably similar to the message he delivered more than four years ago. “It (the Exelon/PSEG merger) will combine the strengths and assets of both companies,” Rowe says in this issue’s Profile. “”the resulting company will be both stronger and more competitive. ” In the end, we believe that both customers and shareholders will benefit.”

Rowe says that the new Exelon Electric & Gas will build on the success and experience gained during the Unicom/PECO merger. “As with any merger, the challenge is to realize the synergies,” he told EL&P.

One company that seems to have done a good job of realizing synergies after a merger is Progress Energy, the utility company created from the merger of Carolina Power & Light and Florida Power in 2000. After that merger, Progress CEO Bill Habermeyer sat down and outlined a three-year plan to improve customer satisfaction, operating performance and reliability, reduce prices, and raise employee satisfaction and safety performance.

A recent report from Progress Energy indicates that the company was able to achieve and exceed the goals of that three-year “commitment to excellence” plan.

When Progress was formed, the company’s Florida customers were without power for more than 100 minutes annually. Progress filed a report with the Florida Public Service Commission in late February of this year stating that the company had reduced the average to 77 minutes in 2004-beating the utility’s own goal of 80 minutes. Progress achieved this improvement, in part, by investing more than $100 million in new facilities, replacing old equipment and investing in new trucks, technology and tools for field workers.

Before the Progress merger, Florida Power’s residential customer satisfaction was ranked 49th out of 70 utilities nationally and 16 out of 21 in the South. As part of its three-year plan, the company added 175 new pay locations for customers and added 1,000 telephone lines to handle emergencies and outage situations. Today, Progress Florida ranks 18th out of 77 utilities nationally and fifth out of 15 in the South.

The Progress merger seems also to have improved employee satisfaction and safety at the company.

“Following the merger, we knew there was a need to focus on improving employee satisfaction,” Habermeyer said. “There is a direct correlation between employee satisfaction and better performance.”

Habermeyer’s plan called for increased employee training, new tools for employees and a emphasis on worker safety. As a result, Progress Energy’s annual employee opinion survey indicates that employee satisfaction has indeed improved. In addition, Progress Florida’s OSHA injury rate improved more than 50 percent between 2001 and 2004.

Based on the statistics from Progress Energy, the CP&L/Florida Power merger can be viewed as a success. Time will tell if the whole of Exelon Electric & Gas becomes greater than the sum of its parts. We wish Rowe and his team the best of luck as they oversee this tremendous endeavor.

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The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at Jennifer.Runyon@ClarionEvents.com.

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