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 Pepco shares fell 15.4 percent, and Exelon was down about 4 percent
after the D.C. Public Service Commission said the companies had not
proven that the proposed merger was in the public interest.
The three-member commission was the final regulatory hurdle for the
deal, which was announced in April 2014. The four other states
required to approve the deal had voted in favor of the merger.
The companies, which have 30 days to ask the commission to
reconsider its order, said they were disappointed in the decision
and would review their options.
If the commission rejects an application for reconsideration, the
companies would then have the option of appealing the decision to
the D.C. Court of Appeals. The companies may also choose to submit
another application.
"Lately we have seen a trend of regulatory commissions rejecting
deals and leaving the door open for a re-submitted application with
enhanced terms for rate-payers," said Daniel Fidell, of USCA
Securities LLC.
"That door is open for Exelon and Pepco. I expect they will be doing
so," he added.
Commission Chairwoman Betty Ann Kane said the decision was one of
the most important rulings that the agency would ever make. She said
that while the merger would offer some benefits, some factors could
prove harmful to the District.
"Pepco would become a second-tier company in a much larger
corporation whose primary interest is not in distribution, but in
generation," Kane said at the hearing where the decision was
announced.
Opponents of the deal have said it would raise rates for consumers
while limiting growth of renewable power in the region.
"The proposed acquisition would have been a substantial step
backwards in the District's efforts to move toward more sustainable
electricity generation and greater reliance on local, renewable
energy," said Power DC, a coalition of environmentalists and public
advocacy groups.
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Pepco serves about 2 million customers in the District of Columbia,
Delaware, Maryland and New Jersey. Exelon has about 7.8 million
customers in Maryland, Illinois and Pennsylvania.
Before the D.C. rejection, the proposed transaction had won approval
from Delaware, Maryland, New Jersey, Virginia and the U.S. Federal
Energy Regulatory Commission.
It is not clear how the D.C. public service commission's decision
would affect an ongoing review by the Justice Department. A
department spokesman declined to comment on Tuesday.
The Public Service Commission was established in 1913 and regulates
power, gas and telecommunication companies in the District of
Columbia.
On the New York Stock Exchange, Exelon closed down 6.9 percent at
$30.40, and Pepco dropped 16.5 percent to close at $22.51.
(Additional reporting by Anannya Pramanick; Editing by Soyoung Kim,
Lisa Von Ahn and Frances Kerry)
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