The Public Service Commission of the District of Columbia Tuesday denied approval of the acquisition of Pepco Holdings Inc. (PHI) by Exelon Corp., with commissioners saying the combination is not in the public interest. It is the only regulatory body to oppose the merger.

In other jurisdictions, the application for the merger of PHI and Exelon has been approved, including Virginia, New Jersey, Delaware, Maryland, and at the Federal Energy Regulatory Commission (see Daily GPI, Nov. 20, 2014). The only jurisdiction to deny the application is the District of Columbia. Exelon and PHI have 30 days to ask the commission to reconsider.

“We are disappointed with the commission’s decision and believe it fails to recognize the benefits of the merger to the District of Columbia and its residents and businesses,” the companies said. “We continue to believe our proposal is in the public interest and provides direct immediate and long-term benefits to customers, enhances reliability and preserves our role as a community partner. We will review our options with respect to this decision and will respond once that process is complete.”

The commission concluded that, taken as a whole, the transaction as proposed by Exelon and PHI is not in the public interest. Among its reasons for finding against the merger, the commission said PHI’s status would be diminished as part of a larger corporate organization.

“Pepco [Holdings] will become a second-tier company in a much larger corporation whose primary interest is not in distribution, but in generation.” the commission said. “At a time of change in the energy field, Pepco’s ability to adapt will be constrained by an increased management bureaucracy. We are also concerned about the inherent conflict of interest that might inhibit our local distribution company from moving forward to embrace a cleaner and greener environment.”

Exelon announced its purchase of PHI, the parent company of the Potomac Electric Power Co. (Pepco), on April 30, 2014 (see Daily GPI, April 30, 2014), and the application seeking a change of control was filed on June 18, 2014. 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.

“The public policy of the District is that the local electric company should focus solely on providing safe, reliable and affordable distribution service to District residences, businesses and institutions. The evidence in the record is that sale and change in control proposed in the merger would move us in the opposite direction,” said Commission Chairman Betty Ann Kane.

Commissioner Joanne Doddy Fort said, “The proposed merger would diminish Pepco’s ability to directly raise issues that address the needs of District ratepayers while posing regulatory challenges for the commission and the interested parties who participate in commission proceedings.”

More than 3,000 residents, non-profits and small businesses submitted written testimony on the merger to the commission, both in support and in opposition. The commission held four community hearings in which 178 participants submitted testimony. Further, it received comments from 26 Advisory Neighborhood Commissions and several members of the D.C. Council.