Just days after winning anti-trust clearance from the Departmentof Justice (DOJ), the proposed merger of Philadelphia-based PECOEnergy Co. and Unicom Corp. of Chicago, parent of CommonwealthEdison Co., got some more good news yesterday — it sailed throughFERC with no conditions attached.

The new holding company to be created by the transaction, ExelonCorp., is on track to become the nation’s largest electric utilitywith 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 debtand preferred stock. The utilities hope to complete the merger bySeptember.

“It’s a very large merger and it’s one that’s very important tothe bulk power market in the middle of the country,” said ChairmanJames Hoecker. “The combined loads of these two utilities is some30,000 MW, which is as much as in either the New York or NewEngland ISOs.”

Both Corbin McNeill Jr. and John W. Rowe, CEOs of PECO Energyand Unicom, respectively, said they were “delighted” by theCommission’s “expeditious decision” to approve the proposed merger.Elizabeth Anne (“Betsy”) Moler, former FERC chair and now seniorvice president for federal government affairs with Unicom, lookedon from the audience as the utility marriage was endorsed. She willhead up Exelon’s Washington office when the merger is completed.

Massey noted FERC saw some red flags with the merger, but theywere mitigated after the Commission examined other factors. Forexample, “the applicants horizontal screen analysis showed thatmerger-related increases in generation concentration in theCommonwealth Edison-destination market violated the DOJ/FTCguideline thresholds in several time periods,” he said.

But upon reviewing other factors, “the analysis [showed] that itwould not be profitable for the merged company to drive up priceseven in [these] relatively concentrated markets,” If it withheldoutput to boost prices, Massey said Exelon would lose market shareto generation plants that could provide service at “comparablecosts.” This, he added, ” would not be a good strategy for themerged company.”

Also mitigated were concerns that the wedded company would useits transmission system to “strategically frustrate” the market,Massey said. Both utilities have vowed to relinquish control oftheir transmission systems to “appropriate independent regionalentities,” he noted. PECO Energy already has surrendered control ofits transmission facilities to the Pennsylvania-New Jersey-MarylandISO, while Commonwealth Edison plans to cede control of its systemto an independent transmission company (ITC), which will operate inconjunction with the Midwest ISO.

The merger deal still requires the approval of the Securitiesand Exchange Commission, the Nuclear Regulatory Commission, thePennsylvania Public Utility Commission and the shareholders of bothutilities. In Pennsylvania, a settlement has been reached withvirtually all of the intervenors. The Illinois Commerce Commissionalready has reviewed the merger.

PECO Energy is a combined electric/natural gas utility serving1.5 customers in a five-county Philadelphia region, as well as400,000 gas customers. It had revenues last year of about $5.4billion. Unicom serves 3.4 million electric customers or 70% of thepopulation in Illinois. It has annual revenues of $7 billion.

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