Exelon Corp. and Pepco Holdings Inc. (PHI) on Friday saw their merger plans once again sidelined in Washington, DC, when the District of Columbia Public Service Commission (PSC) rejected their proposal and gave the companies two weeks to accept new, PSC-authored terms.

The order comes less than six months after Exelon and PHI reached a settlement agreement with DC opponents to their planned merger (see Daily GPI, Oct. 7, 2015). The settlement with the DC government, the Office of the People’s Counsel, the Office of the Attorney General of the District of Columbia and others included a package of benefits to DC ratepayers and residents.

But that Nonunanimous Full Settlement Agreement and Stipulation (NSA) is “not in the public interest,” the PSC said in a 270-page opinion and order approved by a 2-1 vote Friday.

Chief among the PSC’s concerns was a $25.6 million customer base rate credit proposal included in the settlement agreement. Exelon, PHI and the other settling parties did not establish that the proposal was fair and consistent with PSC policy, the regulators said. An alternative included in the PSC order “accepts the funding level of $25.6 million to be used for a customer base rate credit, but defers the decision on how the funds will be allocated and for what period of time until the next base rate proceeding.

“As responses to our questioning at the evidentiary hearing demonstrated, even the settling parties are less than clear about how this proposal would work and what its impact would be on the commission’s stated policy to correct the historical inequity on class negative rates of return that was created in the aftermath of restructuring and the rate freezes associated with those proceedings.”

The PSC also included in its revisions stipulations that Exelon not be the developer of a proposed solar generation facility in the District, and that the merged company fund pilot projects for grid modernization and energy efficiency for moderate- and low-income customers.

If all of the settling parties accept within 14 days the PSC’s revision to the settlement agreement, the merger will be deemed to have been approved by the PSC, according to the order.

Exelon announced its purchase of PHI, the parent company of the Potomac Electric Power Co. (Pepco), in April 2014 (see Daily GPI, April 30, 2014), and the application seeking a change of control was filed two months later.

The $6.8 billion merger, which would create the top Mid-Atlantic electric and gas utility with close to 10 million customers, would combine Exelon’s three electric and gas utilities — Chicago’s Commonwealth Edison Co., Baltimore’s BGE and Philadelphia’s PECO — and PHI’s three electric and gas utilities — New Jersey’s Atlantic City Electric, Delaware’s Delmarva Power and Washington, DC, and Maryland’s Pepco.