Updating The Status Of The Pepco/Exelon Merger Commitments For Consumers

 

The D.C. Public Service Commission has ordered Pepco and Exelon to meet several regulatory commitments that are designed to benefit the District’s economy, infrastructure, and environment and Pepco ratepayers to ensure the companies’ merger is in the public interest (See Formal Case No. 1119, Order No. 18160).

Below, the Office provides information on its advocacy for the benefits Pepco and Exelon are obligated to provide, how OPC monitors merger compliance, along with its quarterly assessment of Pepco’s compliance with key merger commitments (as identified in Order No. 18160).

HOW IS OPC MONITORING MERGER COMPLIANCE?

Pepco and Exelon have to meet over 100 merger commitments and conditions. The Office’s staff (including attorneys, economists, and accountants) engages in quarterly meetings with Pepco to discuss its compliance with current, upcoming, and recurring merger commitments. Additionally, the Office reviews merger compliance documents as they are filed with the Commission and routinely sends formal and informal information requests to Pepco to receive status on commitments. OPC has and will continue to challenge Pepco and Exelon’s compliance with any merger commitment for which the Office believes the companies have not sufficiently met.

  • The last quarterly compliance meeting was held on September 15, 2017.
  • The next quarterly compliance meeting is tentatively scheduled for February 5, 2018.

HOW HAS OPC ADVOCATED FOR CONSUMERS IN THE EXELON-PEPCO MERGER PROCEEDING?

As a result of OPC’s advocacy in the merger case, consumers were able to reap benefits including:

  • A rate case credit that stabilizes rates from 2014-2019.
  • A one-time bill credit of $54.59.
  • An arrearage management program.
  • Debt forgiveness for debts more than 2 years old.
  • A report analyzing ways to improve the relationship between Pepco and its customers.
  • A workforce development program.
  • Over $30 million to support the development of the electric infrastructure and energy efficiency programs.
  • Annual employment and economic benefits reports.
  • A one-time contribution of $350,000 to support consumer advocacy at the federal level.
  • Stronger reliability standards with penalties for non-compliance.
  • A more efficient and effective solar interconnection process.
  • A commitment for the production of solar and wind power.
  • $5 million for the development of renewable energy projects in the District of Columbia.

 

Click Here To Learn About the Types of Merger Benefits

 

Filter by Commitment:

# Commitment Description OPC's Advocacy Status
1 Customer Benefit

¶1, Commitment to Create a Customer Investment Fund.

Exelon committed to providing a $72.8 million customer investment fund (CIF) in the District (which represents a benefit of $215.94 per Pepco distribution customer). Pepco agreed that it would not seek cost recovery of the fund in utility rates.

OPC has consistently emphasized the need for consumers to receive direct, quantifiable and tangible benefits in its litigation advocacy before the Commission regarding Pepco’s and Exelon’s proposed merger.

OPC condemned the once proposed $33.75 million CIF, stating “the absolute value of the Customer Investment Fund in the District is not sufficient enough to offset the qualitative and quantitative risks and costs of the proposed transaction” during the DC PSC merger proceeding.

 

Ongoing Customer Benefit
2 Customer Benefit

¶2, Rate Credit Commitment.

 

As part of the CIF, Exelon committed to providing $25.6 million base rate credit “which can be used as a credit to offset rate increases for Pepco customers approved by the Commission in any Pepco base rate case filed after the close of the Merger until the Customer Base Rate Credit is fully utilized.” 

See Item No. 1. In the settlement phase of the merger proceeding, OPC made clear that this commitment must be included or OPC could not be a signatory to the settlement agreement.

Ongoing Customer Benefit
3 Customer Benefit

¶5, Commitment to provide Pilot Program funding for the Commission’s Energy Grid Modernization proceeding, Formal Case No. 1130.

As part of the CIF, Exelon committed to provide $21.55 million to fund pilot programs in Formal Case No. 1130. See No. 1. Completed Customer Benefit
4 Customer Benefit

¶7a, Commitment to provide Funds to For Energy Efficiency and Conservation Programs.

As part of the CIF, Exelon committed to provide $11.25 million to fund the PSC’s Energy Efficiency and Energy Conservation Initiatives Fund See No. 1. Completed Customer Benefit
5 Customer Benefit

¶3, Commitment to provide a Residential Customer Bill Credit.

Exelon committed to funding a one-time bill credit totaling $14 million to be distributed to Pepco’s residential customers, including customers in Pepco’s Residential Aid Discount (RAD) Program. See No. 1. Completed Customer Benefit
6 Customer Benefit

¶59, Commitment to Perform

A Root Cause Analysis. 

Pepco committed to conduct a root-cause analysis of, and develop an action plan to improve, Pepco’s customer-satisfaction scores in the District of Columbia.

The Commission ordered Pepco to file the analysis and action plan with the Commission by September 23, 2016.

Pepco has worked with the Office to Supplement the Root Cause Analysis Report

The Office successfully challenged Pepco’s Root Cause Analysis Report after it was filed with the Commission.

Specifically, OPC argued that the report was not a true root cause analysis of customer concern.

This is especially important as identifying issues of customer concern will help the Company respond to customers’ issues in a more incisive fashion.

 In a recent order, the Commission agreed with the Office and ordered Pepco to supplement its report to reflect the Office’s concerns and recommendations.  

Click here for Order 18843

Ongoing Customer Benefit
7 Customer Benefit

¶24, Creation of An Arrearage Management Plan.

Pepco agreed to work with the District Government and other interested stakeholders, including the National Consumer Law Center, to develop in good faith a mutually agreeable Arrearage Management Program (“AMP”) for Low Income Home Energy Assistance Program (LIHEAP) or Residential Aid Discount (RAD) qualifying customers in arrears, which would include the provision of credits or matching payments for customers who make timely payments on their current bills. OPC serves on the Arrearage Management Program working group representing the interests of consumers: After working with several stakeholders, Pepco filed the AMP proposal with the Commission on October 28, 2016. OPC filed comments on Pepco’s proposed AMP, urging the Commission to make changes to program structure, cost recovery mechanisms, and program oversight as proposed in Pepco’s AMP. The Commission approved the AMP on June 15, 2017, and established a working group with the following members: Pepco, AARP Legal Counsel for the Elderly, the Apartment and Office Building Association of Metropolitan Washington, Department of Energy & Environment, OPC and the National Consumer Law Center. The working group has met several times to help implement the AMP. Ongoing Customer Benefit
8 Customer Benefit

¶7b, Forgiveness of Residential Customer Accounts.

Pepco agreed to forgive all District of Columbia residential customer accounts receivables over two years old at the date the merger was approved.

OPC has closely monitored the arrearage forgiveness process and continues to gather information concerning the specifics of which accounts were processed and how they were chosen: In April 2016, Pepco informed the Commission that 671 District of Columbia customers received arrearage forgiveness, and the amount of the credit total was $438,710.63.

Completed Customer Benefit
9 City Benefit

¶14, Employment Commitment Regarding Union Workers.

Pepco agreed to honor its collective bargaining agreements and to use its best efforts to hire at least 102 union workers by March 23, 2018.

OPC is closely monitoring this commitment to ensure it is fully met by Pepco, however, this commitment is not scheduled to be fulfilled until March 23, 2018.

Not Satisfied City Benefit
10 City Benefit

¶13, Employment Commitment Regarding Relocation of Positions to D.C.

Pepco agreed to use its best efforts to relocate100 positions to D.C. by March 23, 2018.

OPC is closely monitoring this commitment to ensure it is fully met by Pepco, however, this commitment is not scheduled to be fulfilled until March 23, 2018.

Not Satisfied City Benefit
11 City Benefit

¶16, Commitment to submit an Annual Employment Report.

Pepco must file a report for the first five years after merger approval with the Commission, which provides information on employment levels at Pepco. The annual report must provide details on all job losses and gains. The Office reviewed the first Annual Employment Report and had no concerns to note, but continues to monitor Pepco’s compliance with its employment. Pepco filed its first Annual Employment Report on March 31, 2017. The report states that: “headcount at Pepco dropped by 8 employees, from 861 to 853, over the reporting period. A total of 51 employees were hired, with Local 1900 Operatives and Office and Clerical employees accounting for 38 (or 75%) of those hired. These headcount gains were offset by attrition and a net loss of employees due to a change in location. A total of 55 employees were lost to attrition, with 93% (51 of 55) of these employees leaving due to normal business attrition (i.e., not related to the Merger), including 49 employees who left voluntarily and 2 employees who were terminated due to rules violations. Another 4 employees were terminated as a result of the Merger (3 voluntarily and 1 involuntarily). The 49 employees who left voluntarily are comprised of 30 employees who retired, 15 employees who left for personal/family reasons, 2 employees who left due to promotion or an opportunity with a competitor, and 2 employees who passed away and were categorized as voluntarily terminated for reporting purposes. The report also states that “In 2016, in accordance with the Merger Commitments, PHI began exploring targeted development Initiatives with District stakeholders with the aim of developing the skills required of candidates for jobs at Pepco and promoting employment through the District and workforce diversity at Pepco.” The Office reviewed the first Annual Employment Report and had no concerns to note, but continues to monitor Pepco’s compliance with its employment commitments. Ongoing City Benefit
12 City Benefit

¶23, Requirement to Submit an Economic Benefit Report.

For each of the first five years after Merger approval, Pepco must submit an annual report to the Commission detailing the economic benefits of the merger for the District. The Office reviewed the first Annual Economic Benefit Report and had no concerns to note, but continues to monitor Pepco’s compliance with its commitments designed to improve the District’s economy. Pepco filed its first annual Economic Benefits Report on March 31, 2017. In 2016, Pepco stated it provided $16.4 million in financial benefits to District of Columbia customers. It also stated that the merger commitments that have been fulfilled have provided a total of $22.2 million in direct, indirect and induced economic value, including 84 job years and $654,200 in District of Columbia taxes. The Office reviewed the first Annual Economic Benefit Report and had no concerns to note, but continues to monitor Pepco’s compliance with its commitments designed to improve the District’s economy. Ongoing City Benefit
13 Infrastructure Benefit

¶54, Commitment to Improve Service Reliability and Quality.

Pepco committed to improving its electric system reliability in the District and is obligated to achieve acceptable Electric Quality of Service Standards (“EQSS”) performance levels from 2016 to 2020 or face certain compliance levels or penalties.

In the merger proceeding, the Office stated that “Based on the District's experience with reliability performance, the proposed transaction's impact on reliability is a central issue that the Commission must address in undertaking its public interest review.”

The Office further stated “Given the importance of reliability in the District, OPC submits that the Commission should find that the public interest requires the Joint Applicants to demonstrate that the proposed transaction will result in net benefits in terms of reliability performance.”

Ongoing Infrastructure Benefit
14 Environmental Benefit

¶128, Commitment to Solicit Offers to Purchase Renewable Energy

Exelon agreed to, within five years after the Merger close, conduct one or more requests for proposals or other competitive process to solicit offers to purchase a total of 100 megawatts of renewable energy, capacity and ancillary services.

During the merger proceeding, OPC stated, based on the Office’s review of Pepco’s and Exelon’s merger application, that ” substantial record evidence demonstrates that the proposed transaction would not leave the City and ratepayers better off and would not provide a benefit to the City's efforts to deploy renewable energy generation.”

The Commission imposed several conditions on Pepco and Exelon to provide environmental benefits.

Ongoing Environmental Benefit
15 Regulatory Benefit

¶51, Pepco and Exelon’s Promise to Appear Before the Commission.

Pepco and Exelon executives promised to “annually offer to appear publicly before the Commission to review and provide documentation concerning Pepco’s reliability, safety, and customer service performance and to answer questions about Pepco’s performance in the District of Columbia.”

Pepco and Exelon appeared before the Commission on October 1, 2018.

Completed Regulatory Benefit
17 City Benefit

¶22, Workforce Development Contributions Commitment.

In order to promote local employment and the local economy in the District, Exelon contributed $5.2 million to District workforce development programs including those administered by the Department of Employment Services (“DOES”), the University of the District of Columbia system, DC Water for green infrastructure training programs, and programs targeted to underserved communities, as directed by the District Government.

In the merger proceeding, OPC stated that “Based on the District's experience with reliability performance, the proposed transaction's impact on reliability is a central issue that the Commission must address in undertaking its public interest review.” The Office further stated, “Given the importance of reliability in the District, OPC submits that the Commission should find that the public interest requires the Joint Applicants to demonstrate that the proposed transaction will result in net benefits in terms of reliability performance.”

Completed City Benefit
18 City Benefit

¶22, Pepco’s Supplier and Workforce Diversity Report.

Pepco shall, on an annual basis for the first three years following merger approval, file a report with the Commission by April 1 explaining its efforts to promote supplier and workforce diversity.

Pepco filed its first Supplier and Workforce Diversity Report on March 31, 2017. 

The Office reviewed the first Annual Supplier and Workforce Diversity Report and had no concerns to note, but continues to monitor Pepco’s compliance with its commitments designed to promote and improve supplier and workforce diversity in the District.

Ongoing City Benefit
19 Infrastructure Benefit

¶119, Commitment to Improve the Interconnection Process. 

What is Interconnection?

Pepco has laid out the process for the District on its website.

Pepco shall reflect in its distribution system planning actual and anticipated renewable generation penetration. Beginning not later than six months after closing of the Merger, Pepco’s distribution system planning will include an analysis of the long-term effects/benefits of the addition of behind-the-meter distributed generation attached to the distribution system within the District of Columbia, including any impacts on reliability and efficiency.

Pepco will also work with PJM to evaluate any impacts that the growth in these resources may have on the stability of the distribution system in the District of Columbia.

The Office has aggressively advocated for Pepco to improve its interconnection process for consumers in Commission Formal Case No. 1050 and the merger proceeding (See item 17, above)

Completed Infrastructure Benefit
20 Infrastructure Benefit

¶119, Elimination of Fee for Level 1 Interconnection Applications. What is a Level 1 Interconnection? Pepco’s application fee for Level 1 interconnection applications (submitted by many consumers) was $100.

This Commitment required Pepco to file a request with the Commission to eliminate the $100 fee charged for Level 1 interconnection applications.

In the merger proceeding, the Office successfully advocated for Pepco and Exelon to waive the $100 fee for Level 1 interconnection applications.

This is a big win for consumers, as consumers have cited the $100 fee as a barrier to going solar. See D.C. Public Service Commission, Formal Case No. 1050, Legislative Style Hearing, July 21, 2015, Tr. 65:9-67:13.

Completed Infrastructure Benefit
21 Infrastructure Benefit

¶27, Commitment to Support DC PSC Formal Case No. 1130.

The Commission, pursuant to Order No. 17912 issued on June 12, 2015, opened Formal Case No. 1130. Pepco, as the electric distribution utility in the District of Columbia, is an active participant in this proceeding and is subject to assessment to fund costs of the Commission and the OPC incurred in this proceeding in accordance with the laws of the District of Columbia. Exelon and Pepco committed to supporting the Commission’s objectives in opening FC No. 1130 to identify technologies and policies that can modernize the District of Columbia energy delivery system for increased sustainability and to make the District of Columbia energy delivery system more reliable, efficient, cost-effective and interactive.

Pepco and Exelon also must support and facilitate the implementation of any pilot projects approved by the Commission that emerge from the Formal Case No. 1130 proceeding.

During the merger proceeding, OPC stated, based on the Office’s review of Pepco’s and Exelon’s merger application, that ”substantial record evidence demonstrates that the proposed transaction would not leave the City and ratepayers better off and would not provide a benefit to the City's efforts to deploy renewable energy generation.”

The Commission imposed several conditions on the Pepco and Exelon to provide environmental benefits.

Ongoing Infrastructure Benefit
22 Environmental Benefit

¶ 117, Commitment to Provide Funding for the Development of Renewable Energy Projects

Exelon is obligated to provide $5 million of capital to creditworthy governmental entities at market rates for the development of renewable energy projects in the District of Columbia.

During the merger proceeding, OPC stated, based on the Office’s review of Pepco’s and Exelon’s merger application, that “substantial record evidence demonstrates that the proposed transaction would not leave the City and ratepayers better off and would not provide a benefit to the City’s efforts to deploy renewable energy generation.”

The Commission imposed several conditions on the Pepco and Exelon to provide environmental benefits.

 

Ongoing Environmental Benefit
23 Regulatory Benefit

¶ 61-103, 105, Ring-Fencing Protections. 

What Is Ring-fencing?

In the merger proceeding, the Commission determined that Pepco’s cost of capital could be affected by financial losses associated with Exelon’s aging nuclear fleet “if there were no ring-fencing provisions to assure investors that the finances of Pepco and PHI were separate from the obligations of Exelon.” 

To effectuate safeguards that provide protection to ratepayers and investors from such risks, and others, the Commission has imposed several ring-fencing conditions on Exelon and PHI along with specific divestiture conditions on Exelon related to its nuclear operations.

Ring-fencing protections are important to ensure Pepco ratepayers do not pay any costs associated with Exelon’s business losses.

Ongoing Regulatory Benefit
24 Regulatory Benefit

¶ 62, Commitment to Ring-Fence.

Pepco will not incur or assume any debt, including the provision of guarantees or collateral support, related to this Merger or any future Exelon acquisition.

Ring-fencing protections are important to ensure Pepco ratepayers do not pay any costs associated with Exelon’s business losses.

Ongoing Regulatory Benefit
25 Environmental Benefit

¶113, Commitment to Support Energy Efficiency and Demand Response. 

 

What is Demand Response?

 

Exelon has agreed “to continue to support energy efficiency and demand response playing a role in the energy resource mix, with demand response services being an important tool for customers to manage energy costs. “

Exelon agreed “to continue to advocate that demand response should be reflected in markets that serve the District of Columbia.”

 

Ongoing Environmental Benefit
26 Environmental Benefit

¶116, Commitment Regarding the development of solar/renewable generation.

Exelon shall develop or assist in the development of 7MW of solar/renewable generation outside of Blue Plains by December 31, 2018.

 

During the merger proceeding, OPC stated, based on the Office’s review of Pepco’s and Exelon’s merger application, that ”substantial record evidence demonstrates that the proposed transaction would not benefit the City, would not leave ratepayers better off and would not provide a benefit to the City's efforts to deploy renewable energy generation.” 

The Commission imposed several conditions on Pepco and Exelon to provide environmental benefits.

 

Ongoing Environmental Benefit