Commonwealth Edison and PECO Energy told regulators last weekthey are expecting approval of their mega-merger in near recordtime because of a long list of expected merger benefits and fewapparent regulatory hurdles. They filed applications and notices ofreorganization last week with FERC, the Pennsylvania PUC and theIllinois Commerce Commission.

They claim their flawless combination will “enhance electriccompetition, foster FERC’s independent transmission systeminitiatives, protect both wholesale and retail customers, andensure sufficient, safe, reliable, low-cost and clean energy forconsumers.” They also believe the merger meets all FERC criteriafor approval.

The deal “is another pro-competitive step by companies alreadyin the vanguard of competition,” they told FERC. As a result, theyhave asked for final regulatory approval in time for thetransaction to be consummated in September of next year, one yearafter being announced (see NGI, Sept. 27). Mergers if this typetypically require at least 15 months for approval.

The ComEd-Peco merger of equals would form the largest domesticelectric utility holding company with five million customers,assets worth $37 billion and total revenues of $12.4 billion. Itwould also be the largest nuclear operator in the U.S. with assetslocated in the Midwest and Northeast. According to the dealshareholders would receive shares in the new holding company withthe opportunity to elect to receive cash ($45 per PE share or$42.75 per UCM share) at closing on a prorational basis. Eachcompany will have $750 million of its outstanding sharesrepurchased before or simultaneous with closing.

To avoid any issue regarding post-merger market power, theapplicants agreed that Philadelphia-based PECO will sell its 300 MWsales agreement with Chicago-based ComEd, which has been in placesince 1996, to an unaffiliated buyer as promptly as possible afterthe merger is consummated.

The filing also indicates that existing provisions in theirwholesale power requirements already “ensure that customers willnot experience a rate change as a result of the merger.”Nevertheless, they have committed to “hold their requirements andtransmission customers harmless from net merger-related costs.”Also, both ComEd and PECO have retail rate freezes or caps ineffect.

To meet a requirement of the Public Utility Holding Company Act(PUHCA) that the two electric utilities be interconnected, theyassured regulators that “they are effectively interconnectedthrough a portfolio of transmission arrangements on third-partytransmission systems. This portfolio is highly effective, reliableand economical, and will enable the applicants to move power acrossthe system when it is economical to do so.”

PECO asked the Pennsylvania PUC to authorize the formation of aholding company, and to approve the merger of the newly formedholding company with Unicom, as well as the transfer of certainassets and common facilities from PECO Energy to newly establishedcorporate affiliates.

Rocco Canonica

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