Just days after winning antitrust clearance from the Departmentof Justice (DOJ), the proposed merger of Philadelphia-based PECOEnergy Co. and Unicom Corp. of Chicago, parent of CommonwealthEdison Co., got more good news last week — it sailed through FERCwithout any conditions attached.

The new holding company to be created by the transaction, ExelonCorp., is on track to become the nation’s largest electric utilitywith five million customers and total revenues of $12.4 billion.Exelon would be worth $31.8 billion upon completion of the merger,with $15.2 billion in equity market value and $16.6 billion in debtand preferred stock. The utilities hope to complete the merger bySeptember.

“It’s a very large merger and it’s one that’s very important tothe bulk power market in the middle of the country,” said ChairmanJames Hoecker. “The combined loads of these two utilities is some30,000 MW, which is as much as in either the New York or NewEngland ISOs.”

Both Corbin McNeill Jr. and John W. Rowe, CEOs of PECO Energyand Unicom, respectively, said they were “delighted” by theCommission’s “expeditious decision” to approve the proposed merger.Elizabeth Anne (“Betsy”) Moler, former FERC chair and now seniorvice president for federal government affairs with Unicom, was atthe Commission meeting when the utility marriage was endorsed. Shewill head up Exelon’s Washington office.

Massey noted FERC saw some red flags with the merger, but theywere mitigated after the Commission examined other factors. Forexample, “the applicants horizontal screen analysis showed thatmerger-related increases in generation concentration in theCommonwealth Edison-destination market violated the DOJ/FTCguideline thresholds in several time periods,” he said.

But upon reviewing other factors, “the analysis [showed] that itwould not be profitable for the merged company to drive up priceseven in [these] relatively concentrated markets,” If it withheldoutput to boost prices, Massey said Exelon would lose market shareto generation plants that could provide service at “comparablecosts.”

Also mitigated were concerns that the wedded company would useits transmission system to “strategically frustrate” the market,Massey said. Both utilities have vowed to relinquish control oftheir transmission systems to “appropriate independent regionalentities,” he noted. The merger deal still requires the approval ofthe Securities and Exchange Commission, the Nuclear RegulatoryCommission, the Pennsylvania Public Utility Commission and theshareholders of both utilities.

Susan Parker

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