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FERC Gives Thumbs Up To PECO, Unicom Union

FERC Gives Thumbs Up To PECO, Unicom Union

Just days after winning antitrust clearance from the Department of Justice (DOJ), the proposed merger of Philadelphia-based PECO Energy Co. and Unicom Corp. of Chicago, parent of Commonwealth Edison Co., got more good news last week --- it sailed through FERC without any conditions attached.

The new holding company to be created by the transaction, Exelon Corp., is on track to become the nation's largest electric utility with 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 debt and preferred stock. The utilities hope to complete the merger by September.

"It's a very large merger and it's one that's very important to the bulk power market in the middle of the country," said Chairman James Hoecker. "The combined loads of these two utilities is some 30,000 MW, which is as much as in either the New York or New England ISOs."

Both Corbin McNeill Jr. and John W. Rowe, CEOs of PECO Energy and Unicom, respectively, said they were "delighted" by the Commission's "expeditious decision" to approve the proposed merger. Elizabeth Anne ("Betsy") Moler, former FERC chair and now senior vice president for federal government affairs with Unicom, was at the Commission meeting when the utility marriage was endorsed. She will head up Exelon's Washington office.

Massey noted FERC saw some red flags with the merger, but they were mitigated after the Commission examined other factors. For example, "the applicants horizontal screen analysis showed that merger-related increases in generation concentration in the Commonwealth Edison-destination market violated the DOJ/FTC guideline thresholds in several time periods," he said.

But upon reviewing other factors, "the analysis [showed] that it would not be profitable for the merged company to drive up prices even in [these] relatively concentrated markets," If it withheld output to boost prices, Massey said Exelon would lose market share to generation plants that could provide service at "comparable costs."

Also mitigated were concerns that the wedded company would use its transmission system to "strategically frustrate" the market, Massey said. Both utilities have vowed to relinquish control of their transmission systems to "appropriate independent regional entities," he noted. The merger deal still requires the approval of the Securities and Exchange Commission, the Nuclear Regulatory Commission, the Pennsylvania Public Utility Commission and the shareholders of both utilities.

Susan Parker

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