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
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
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
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