Exelon Corp.’s proposed $6.8 billion takeover of Pepco Holdings Inc. was approved by Washington regulators, clearing the way for the companies to form the nation’s biggest utility almost two years after the deal was first announced.
The District of Columbia’s Public Service Commission voted in favor of the deal at a meeting in Washington Wednesday. Pepco shares jumped as much as 28 percent.
The sign-off from Washington was the final hurdle needed for Chicago-based Exelon to complete the deal. Earlier this month, Exelon and Pepco made a renewed attempt to salvage the merger, offering to reallocate customer benefits they had pledged.
The decision will allow Exelon Chief Executive Officer Chris Crane to complete his long-running quest to add Pepco’s steady, regulated earnings to offset losses at his company’s nuclear power plants. The U.S. utility industry is consolidating as power companies are looking to grow through acquisitions in the face of tepid electricity demand, low prices and rising costs to upgrade aging equipment and comply with pollution regulations.
D.C. regulators first turned down the merger in August, saying it wasn’t in the public interest. Last month, regulators rejected Exelon’s effort to win approval with a settlement it struck with Washington Mayor Muriel Bowser and other city officials that included $78 million in benefits. At that time, the commission offered a counterproposal that it said would allow the agency to approve the merger if all the parties to the settlement agreed to its terms. Bowser and the Office of the People’s Counsel said they couldn’t accept the commission’s plan because it didn’t guarantee a freeze on residential bills for three years.
On March 7, Exelon filed its latest proposal, which was an attempt to strike a compromise with regulators and D.C. officials by providing an option that would preserve the residential rate freeze as well as giving the commission discretion to spend $20 million of the $78 million of promised customer benefits. Exelon and Pepco also said that either company could terminate the deal at any point and the companies asked D.C. for a decision by April 7.
The companies had gotten approvals from Maryland, Virginia, New Jersey, Maryland, Delaware and federal regulators.