Not unexpectedly Exelon CorporationEXC and Pepco HoldingsPOM filed an appeal with the Public Service Commission of the District of Columbia to reconsider their merger. This August, the commission had rejected the merger citing that it would not benefit consumers while it would make Pepco a second tier company (read: Pepco-Exelon Merger Rejected by Regulators ).
However, both the companies involved held a different view. Their contention was that this $6.8 billion merger will be beneficial for all customers across the service territories. The companies have taken note of the reasons given by the commission for rejecting the merger and are working out a way to convince regulators about the benefits it would bring.
The District of Columbia Commission has been discussing with the officials of both companies to ensure a stronger Pepco post-merger that would also lead to energy reliability in the District.
This transaction had practically stumbled at the last regulatory hurdle with other commissions having okayed the agreement. Both Exelon and Pepco Holdings, along with their customers and residents of the Mid-Atlantic states, stand to benefit from the proposed transaction. The consolidated entity will bring about economies of scale with the ability to efficiently execute long-term growth plans while creating new jobs and boosting the economy in Delaware, Maryland, New Jersey and Washington, D.C.
Merger and acquisitions are occurring at a steady pace in the utility space. In June, Wisconsin Energy Corporation completed the acquisition of Integrys Energy - forming the WEC Energy Group WEC . The new company provides electricity and natural gas to nearly 4.4 million customers in four states.
We expect to see further consolidation in the utility space following the release of the final version of the U.S. Environmental Protection Agency's Clean Power Plan. The plan calls for CO2 reduction of 28% by 2025 and 32% by 2030, from 2005 levels. Larger utilities will have more financial strength and access to capital to meet the requirements within the stipulated time.
Exelon currently has a Zacks Rank #2 (Buy). Brookfield Infrastructure Partners L.P. BIP is also a favorably ranked stock, sporting a Zacks Rank #1 (Strong Buy).
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