America has a new largest electric utility company as of early April.
Plenty of drama occurred from beginning to end, but D.C. regulators late last month finally gave the final go-ahead needed for Exelon Corp. to complete its nearly $7 billion deal for Pepco Holdings. The combined utilities serve about 10 million customers, stretching from Illinois to Delaware, Maryland and Virginia and the nation’s capital.
This was a deal that was almost dead on arrival. Plenty of concerned parties in Washington D.C. were against it, and the D.C. Public Service Commission twice rejected it before some terms were changed to satisfy the skeptical.
Exelon provided a package worth more than $430 million—including bill credits, reliability improvements and other concessions—to sweeten the pot for customers and communities in D.C., Delaware, Maryland and New Jersey, according to reports.
The deal brings together six electric and gas utilities under one Exelon umbrella. Atlantic City Electric, Delmarva Power and Pepco join Baltimore Gas & Electric, ComEd and PECO. The merger pushes Exelon ahead of Duke, NextEra, Dominion and Southern among U.S. electric holding companies.
And, despite the struggles getting there, Exelon CEO Chris Crane expressed certainty that this was the right thing to do for his company and industry.
“We believe consolidation in this sector on the regulated side is necessary, and it can provide a competitive advantage for not only the consumer but also the other stakeholders in the communities we serve,” Crane told interviewers on the “Bloomberg Markets” show last week.
Exelon is focused on the integration phase with Pepco right now, Crane added, but it will consider other merger opportunities as they appear down the road.
“Getting that right first is the imperative,” he told Bloomberg Markets about Pepco integration. Exelon could look at other things “but that’s not a focus right now.”
Other major utilities are focusing on their own M&A efforts, of course. Atlanta-based Southern Co. and natural gas-focused AGL Resources recently received some regulatory approvals for their $8 billion combination that, once completed, would reach 9 million customers.
Duke Energy had become the nation’s biggest utility only four years ago when its merger with Progress Energy was completed; that created a gas and electric giant with 7 million customers.
Duke, as others in its field, is not standing pat, either. The Charlotte, North Carolina-based Duke is buying Piedmont Natural Gas in a nearly $5 billion transaction still awaiting final approvals.