Pepco-Conectiv merger receives final D.C. approval

WASHINGTON, May 3, 2002 — The pending merger of Potomac Electric Power Company (Pepco) and Conectiv drew a step closer on Thursday with final approval from the District of Columbia Public Service Commission.

Approvals by regulators in New Jersey and the U.S. Securities and Exchange Commission are all that remain before the two companies are combined.

“The commission’s action brings us to the final steps necessary to complete the merger process and provides additional benefits for our Washington customers by extending the current period of rate stability,” said Dennis R. Wraase, Pepco president and chief operating officer.

The merger of Pepco, based in Washington, and Wilmington, Del.-based Conectiv will create the largest electricity delivery company in the mid- Atlantic region with a transmission network serving 1.8 million customers in a 10,000-square-mile area. The two utilities will continue operations as separate companies under a new corporate parent, Pepco Holdings, Inc., with headquarters in Washington.

The merger has received approval from the Federal Energy Regulatory Commission, and has cleared review by the Federal Trade Commission and the Department of Justice. Delaware, Maryland, Pennsylvania and Virginia previously approved the merger. A merger settlement agreement reached last month in New Jersey requires final consideration by the Board of Public Utilities.

Under the merger settlement in the District of Columbia, the current cap on Pepco’s distribution rates will be extended 30 months through Aug. 7, 2007. The company also agreed not to seek recovery of merger related costs and to contribute $2 million to support development and implementation of a small customer “smart meter” pilot program. Smart metering technology allows customers to more closely monitor their energy usage, enabling them to change usage patterns to their benefit.

Pepco ( ) is an investor-owned company that delivers electricity to more than 700,000 customers in Washington, D.C. and the Maryland suburbs. Conectiv ( ) is focused on two core energy businesses. Conectiv Power Delivery provides energy to more than one million customers in N.J., Del., Md., and Va. Conectiv Energy manages a growing portfolio of “mid-merit” power plants that can respond quickly to changes in the demand for power with the PJM power pool.

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