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ComEd, Peco Expect Rapid Merger Review

ComEd, Peco Expect Rapid Merger Review

Commonwealth Edison and PECO Energy told regulators last week they are expecting approval of their mega-merger in near record time because of a long list of expected merger benefits and few apparent regulatory hurdles. They filed applications and notices of reorganization last week with FERC, the Pennsylvania PUC and the Illinois Commerce Commission.

They claim their flawless combination will "enhance electric competition, foster FERC's independent transmission system initiatives, protect both wholesale and retail customers, and ensure sufficient, safe, reliable, low-cost and clean energy for consumers." They also believe the merger meets all FERC criteria for approval.

The deal "is another pro-competitive step by companies already in the vanguard of competition," they told FERC. As a result, they have asked for final regulatory approval in time for the transaction to be consummated in September of next year, one year after being announced (see NGI, Sept. 27). Mergers if this type typically require at least 15 months for approval.

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

To avoid any issue regarding post-merger market power, the applicants agreed that Philadelphia-based PECO will sell its 300 MW sales agreement with Chicago-based ComEd, which has been in place since 1996, to an unaffiliated buyer as promptly as possible after the merger is consummated.

The filing also indicates that existing provisions in their wholesale power requirements already "ensure that customers will not experience a rate change as a result of the merger." Nevertheless, they have committed to "hold their requirements and transmission customers harmless from net merger-related costs." Also, both ComEd and PECO have retail rate freezes or caps in effect.

To meet a requirement of the Public Utility Holding Company Act (PUHCA) that the two electric utilities be interconnected, they assured regulators that "they are effectively interconnected through a portfolio of transmission arrangements on third-party transmission systems. This portfolio is highly effective, reliable and economical, and will enable the applicants to move power across the system when it is economical to do so."

PECO asked the Pennsylvania PUC to authorize the formation of a holding company, and to approve the merger of the newly formed holding company with Unicom, as well as the transfer of certain assets and common facilities from PECO Energy to newly established corporate affiliates.

Rocco Canonica

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